The Executive Board of the International Monetary Fund (IMF), has approved the disburse-ment of US$116.6 million to Ghana.
This was after the board met to review the country’s performance under the programme.
A statement issued by the IMF yesterday said it had completed the first review of Ghana’s economic performance under the programme supported by an extended credit facility (ECF) arrangement.
“Completion of the review enables the disbursement of US$116.6 million, bringing total disbursements under the arrangement to about US$233.1 million,” the statement said.
In completing the review, the statement said the Executive Board also granted waivers for the nonobservance of performance criteria regarding gross credit to government, and non-accumulation of external arrears, based on their minor and temporary nature and the corrective measures put in place by the authorities.
The board also approved the authorities’ request for modifications of performance criteria, the statement said.
Ghana’s three-year arrangement for about US$918 million or 180 per cent of quota was approved on April 3, 2015.
It aims to restore debt sustainability and macroeconomic stability in the country to foster a return to high growth and job creation, while protecting social spending.
Commenting, Min Zhu, Acting Chair and Deputy Managing Director, said: “Implementation of the ECF-supported programme by the Ghanaian authorities has been broadly satisfactory, despite an unfavourable economic environment.”
In particular, he said the government’s fiscal consolidation efforts were on track and it was encouraging that the government decided to liberalise the prices of fuel products, which bodes well for expenditure control, eliminating the need for fuel subsidies and the incurrence of arrears.
Mr. Zhu said: “The government should firmly continue with its fiscal consolidation efforts to fully restore macro-economic stability and mitigate financing risk.”
In this regard, he said it was crucial to continue the policy of controlling the wage bill by adhering to the net hiring freeze, excluding for health care and education, while further implementing the payroll clean-up plan.
“The government should continue to adhere to the domestic arrears clearance plan and avoid incurring any new arrears. Implementing structural reforms to strengthen expenditure control will support these efforts,” Mr. Zhu said.
At the same time, he said the government should use the resulting fiscal space to enhance its social protection programmes to mitigate the potential impact of the fiscal consolidation on the poor.
Mr. Zhu said to avoid the risk of fiscal overruns in connection with next year’s election, it was imperative to identify the full cost related to the elections as early as possible and provision for it in the 2016 budget, while ensuring that the fiscal targets would be achieved.
He said it was also important that the ongoing wage negotiations result in a wage agreement consistent with the medium-term wage bill envelope.
He said further enhancing revenue performance would also be key for continued fiscal consolidation.
Mr. Zhu said the government’s medium-term debt management strategy was a welcome step to help reduce near-term financing risks, and added that, the externally-oriented financing envisaged in 2015 would help reduce the pressure on the domestic debt market.
However, he said the government should complement this strategy by striving to deepen the domestic debt market, as well as by seeking to borrow externally on concessional terms as much as possible.
“The monetary policy stance will have to remain tight to help bring inflation down, against the background of exchange rate volatility,” he said.
Mr. Zhu said the Bank of Ghana (BoG) should stand ready to tighten monetary policy further if inflationary pressures do not recede as expected.
“The decision to introduce new liquidity management instruments is encouraging, as it will improve monetary policy transmission and make the inflation targeting framework more effective,” he said.
Moreover, Mr. Zhu said prompt implementation of two new banking laws currently under review by Parliament will help safeguard financial sector stability.
By Times Reporter