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Statement at the conclusion of IMF mission to Ghana
26 March 2010
A mission from the International Monetary Fund (IMF) led by
Peter Allum, visited Accra during March 15-26, 2010. The mission
conducted discussions for the first and second reviews under the
IMF’s Extended Credit Facility. The mission met with Finance
Minister Kwabena Duffuor, Bank of Ghana Governor Kwesi Amissah-Arthur,
other senior officials, members of the Parliamentary Finance
Committee, and representatives of the private sector, academia,
and civil society organizations.
At the end of the mission, Mr. Allum, mission chief for Ghana,
issued the following statement:
“Discussions during the mission focused on recent economic
performance, near-term challenges, and the policy framework for
2010 and the medium term. Good progress was made in identifying
the policies for completion of the first and second reviews
under the IMF’s Extended Credit Facility agreement with Ghana.
Discussions will continue on the mission’s return to Washington
on a few remaining issues ahead of a possible meeting of the
IMF’s Executive Board to complete the reviews by end-May 2010.
“The IMF estimates that the economy expanded by 3-4 percent in
2009, notwithstanding the global financial crisis, as cocoa and
gold exports remained strong. This is down from 7.3 percent in
2008, a year of highly expansionary fiscal policies that
destabilized the economy. For 2010, a modest upturn in growth to
the 4-5 percent range is projected, boosted by investments
linked to the offshore oil sector, which will come on stream in
2011.
“Inflation slowed to 14 percent in February 2010 from 20-21
percent in the first half of 2009, and a further decline to
single digits by end-2010 is projected. With a sharp downturn in
imports, the external current account recorded its smallest
deficit in five years, and the Ghanaian cedi has strengthened
against the dollar since July 2009. International reserve cover
rose to 3.0 months of imports of goods and services at end-2009,
up from 2.0 months of import cover at end-2008.
“Fiscal management remains Ghana’s main challenge. The budget
deficit was reduced to 9.7 percent of GDP in 2009, in line with
program targets. However, the deficit would have been
substantially larger, but for new domestic expenditure arrears
of about 4 percentage points of GDP (similar in magnitude to the
domestic expenditure arrears accumulated in 2008). For 2010, IMF
staff supports the government’s revised deficit target of 8
percent of GDP, and welcomes plans to further reduce the deficit
to 3-5 percent of GDP in 2011-12, buoyed by oil-related revenues
of 5 percentage points of GDP or more. Under these projections,
public debt would rise to 62 percent of GDP at end-2010 before
declining in 2011-12 as the fiscal deficit is reduced.
“There is little room for maneuver within these budget plans.
Expenditure ceilings are tight, and the majority of Ghana’s
accumulated domestic expenditure arrears equivalent to 7 percent
of GDP will be repaid only in 2011-2012. To avoid costly budget
subsidies, an early decision on the recommended electricity
tariff adjustment before the Public Utilities Regulatory
Commission is needed.
“Good progress has been made in the first year of Ghana’s
program to strengthen fiscal institutions. A consolidated Ghana
Revenue Authority (GRA) has been established, and a project to
improve budget processes and computerize Ghana’s public
financial management is underway. Progress in addressing Ghana’s
high public administration costs, which exceed levels in peer
countries, has been less rapid, and care will be needed in
implementing the new public pay structure to ensure that it does
not exceed budget provisions for staffing costs.
“Looking ahead to 2011, Ghana’s main challenges relate to its
move to oil producer status. The pending oil and gas revenue
management bill is expected to ensure that petroleum revenues
and related spending are transparently reflected in the budget.
Managing expectations regarding the likely fiscal space for new
programs and projects will also be important. Given the need to
repay expenditure arrears while also reducing the fiscal
deficit, the initial scope for spending from oil revenues could
be relatively modest.
“Last, the mission discussed the implications of the rebased
national accounts. These are expected to show an upward revision
of at least one-quarter to the estimated size of Ghana’s economy
and its per capita incomes. The mission noted that the new data
will improve some core measures of macroeconomic performance—for
example, the fiscal deficit and public debt as a share of GDP.
But the challenges in financing the fiscal deficit will remain
unchanged. Indeed, the ratio of tax collections to GDP will be
lower on the new accounts. Accordingly, the new data do not
reduce the importance of continued reduction in Ghana’s budget
deficit.”
IMF EXTERNAL RELATIONS DEPARTMENT
Public Affairs Media Relations
Phone: 202-623-7300 Phone: 202-623-7100
Fax: 202-623-6278 Fax: 202-623-6772
Statement brought to Ghanadot by Nana Otuo
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