IMF Welcomes Ghana’s 2015 Budget

SETH-TERKPERThe International Monetary Fund (IMF) has welcomed Ghana’s 2015 budget which targets reducing fiscal deficit by 3.5 percentage point of Gross Domestic Product.

The budget includes some important measures meant to increase revenues, to eliminate distortive and inefficient energy subsidies, and to contain growth in Ghana’s comparatively high public wage bill.

At the same time, the budget allows for maintaining public investment above 5 per cent of GDP as well as increasing social protection spending targeted at the most vulnerable.

A statement issued by the International Monetary Fund (IMF) mission, led by Mr. Joël Toujas-Bernaté, who visited Ghana from November 6 to 20, 2014, to discuss the authorities’ economic and financial program and its possible financial support by the IMF said with projected arrears repayments of 1.2 percent of GDP next year, the cash deficit would be equivalent to 6.5 per cent of GDP in 2015, down from 9.5 per cent in 2014.

The mission met with President John Dramani Mahama; Vice-President Kwesi Amissah-Arthur; Dr. Kwesi Botchwey, Chairman of the National Development Planning Commission; Finance Minister Seth Terkper; Bank of Ghana Governor Kofi Wampah; the Finance Committee of Parliament, other senior officials and representatives of the private sector, the donor community and civil society.

It said the authorities would continue to work on their economic and financial programme to address domestic and external vulnerabilities.

“The authorities and the mission made significant progress towards reaching understandings on strengthening macroeconomic policies, including on a medium-term fiscal path consistent with ensuring debt sustainability and reducing the external current account deficit,” it said.

The mission also welcomed the government’s aim to implement structural reforms to underpin a sustained consolidation towards a fiscal deficit objective of 3.5 percent of GDP by 2017.

The reforms, it said, would include strengthening public finance management, reducing tax exemptions, enhancing tax administration and reviewing the earmarking of revenues for statutory funds.

“Efforts to clean up the payroll and enhance its management have been initiated and should be pursued swiftly. These efforts, together with the implementation of appropriate pay and hiring policies, will help further control the wage bill which has been a significant source of fiscal risk,” it said.

The statement said “Taken together, these fiscal measures, combined with sound debt management and actions to further boost the effectiveness of the Bank of Ghana’s inflation targeting framework should help restore macroeconomic stability.

“The IMF team would continue to support the authorities as they work in the coming weeks in several areas, including taking concrete steps in cleaning up the payroll, finalise the remaining details of their medium-term reforms and to seek external financing assurances from bilateral donors and international institutions.

“Once this work is completed, a financial arrangement to support Ghana’s economic programme would be agreed at staff level before being proposed for the IMF Executive Board’s consideration,” the statement added.

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