IMF Executive Board Completes Fourth Review Under the ECF, Approves US$94.2 Million Disbursement and Program Extension; and Concludes 2017 Article IV Consultation with Ghana

  • Completion of the fourth ECF review enables the disbursement of SDR 66.42 million (about US$ 94.2 million).
  • The program 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.
  • The Executive Board also completed the 2017 Article IV Consultation with Ghana. A related press release will be issued separately.

The Executive Board of the International Monetary Fund (IMF) today completed the fourth review of the arrangement under the Extended Credit Facility (ECF). [1] Completion of the fourth ECF review enables the disbursement of SDR 66.42 million (about US$94.2 million), bringing total disbursements under the arrangement to SDR 398.52 million (about US$565.2 million), with the remainder being tied to the remaining reviews. The Board also approved Ghana’s request for waivers of non-observance of performance criteria, and modification of one performance criterion; and the extension of the arrangement by one year.

Ghana’s three-year arrangement for SDR 664.20 million (about US$918 million or 180 percent of quota at the time of approval of the arrangement) was approved on April 3, 2015 (see Press Release No.15/159). 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.

Following the Executive Board discussion, Mr. Tao Zhang, Deputy Managing Director and Acting Chair, made the following statement:

Ghana’s macroeconomic performance over the years has been mixed. Policy slippages have compounded the adverse impact of shocks and resulted in significant external and domestic imbalances. The new government has committed to macroeconomic stability, fiscal discipline, and an ambitious reform agenda. Decisive implementation of these policies and reforms would allow Ghana to reap its economic potential and achieve higher and more inclusive growth rates. These efforts will be supported by the continued implementation of the ECF program.

“The authorities have taken some encouraging steps and the economy is showing signs of recovery. As risks remain tilted to the downside, careful fiscal management will be required to achieve the 2017 program targets and reverse the unfavorable debt dynamics. Additional efforts are needed to address revenue shortfalls, while expenditure control measures should be fully enforced to contain current spending, and prevent the recurrence of domestic arrears. Ongoing fiscal consolidation and implementation of the medium-term debt management strategy will be key to further reducing domestic refinancing risks.

“Fiscal consolidation efforts will need to be anchored in wide-ranging structural fiscal reforms, so that consolidation gains can be sustained over the medium term. These include measures to broaden the tax base, and enhance tax compliance and public financial management, especially considering the large unpaid commitments accumulated in 2016.

“The authorities should tackle energy sector inefficiencies, particularly improving the management of the state-owned enterprises (SOEs). Ongoing debt restructuring efforts are helpful but are no substitute to stemming the SOEs’ ongoing financial losses and put them on a sustainable financial path.

“As inflation continues to decelerate, the Bank of Ghana (BoG) should remain vigilant in order to bring inflation back to target. The BoG should continue to strengthen the credibility of the inflation-targeting framework, which would benefit from efforts in the development of the foreign exchange market. The central bank should also continue its policy on zero financing of the government.

“The authorities have made significant progress in the implementation of the banking system roadmap, in particular through the approval of timebound recapitalization plans for banks found to be undercapitalized, and the resolution of two insolvent banks. Further steps to strengthen the supervisory and regulatory framework, reduce outstanding liquidity assistance, and buttress the microfinance sector will help build a more robust financial sector that is well positioned to support growth and promote financial inclusion.”

The Executive Board also completed the 2017 Article IV Consultation [2] with Ghana.

Ghana has shown mixed macroeconomic performance in recent years, with significant shocks being amplified by policy slippages and resulting external and domestic imbalances. Growth in 2016 was 3.5 percent, the lowest level in two decades. A recovery of growth is expected in 2017-18, owing to an increase in oil production, declining inflation, and lower imbalances with the right policy implementation.

Following a sizeable fiscal slippage in 2016, the authorities are targeting a significant fiscal consolidation in 2017, which will require sustained revenue collections and spending controls. Inflation has continued to decline and the exchange rate has been broadly stable. The external position has continued to improve, supported by strong foreign investors’ participation in the domestic debt market.

Over the medium term, both the fiscal deficit and the current account deficit are projected to decline gradually.

Executive Board Assessment [3] 

Executive Directors agreed with the thrust of the staff appraisal. They commended the corrective actions taken by the new government to bring the program back on track following the large fiscal slippages in 2016. However, Directors noted that Ghana faces long‑standing challenges, including exposure to external shocks, budget rigidities, and economic inefficiencies, which have amplified the impact of past policy slippages on domestic and external imbalances. They emphasized that strong implementation of program policies and reforms is critical to address the risks and secure macroeconomic stability. Directors also cautioned about program implementation risks given the revenue underperformance that occurred in the first half of the year, and urged the authorities to expeditiously adopt corrective measures, as needed, to preserve the program targets.

Directors emphasized the need for prudent fiscal adjustment and welcomed the targeted efforts being made to reverse the debt dynamics and reduce financing needs. They underscored that efforts are needed to address revenue shortfalls, while enforcing expenditure control measures to contain current spending and prevent the recurrence of domestic arrears accumulation. Directors stressed that credible fiscal consolidation and implementation of the medium‑term debt management strategy will be key to further reducing domestic refinancing risks.

Directors welcomed the wide‑ranging reforms in revenue administration and public financial management, noting that these will be essential to make consolidation gains sustainable over the medium term and create fiscal space for priority spending programs. Addressing the shortcomings in spending controls will be essential to deliver lasting adjustment and anchor the credibility of government’s budget policies.

Directors emphasized the need to tackle energy sector inefficiencies, particularly improving the management of the state‑owned enterprises (SOEs). They also advised that ongoing debt restructuring efforts are helpful but are no substitute to stemming the SOEs’ financial losses.

Directors welcomed the deceleration in inflation and encouraged the Bank of Ghana (BoG) to remain vigilant and take action to bring it back to target. They also called for measures to further strengthen the credibility of the inflation targeting framework, which would benefit from efforts in the development of the foreign exchange market and continuation of BoG’s policy on zero financing of the government.

Directors commended the progress made in the strengthening the banking system, in particular through the approval of timebound recapitalization plans for undercapitalized banks and the recent resolution of two insolvent banks. They called for further steps to strengthen the supervisory and regulatory framework to address liquidity risks and rising levels of NPLs. Directors also encouraged action to further strengthen the AML/CFT framework.

Directors emphasized that wide‑ranging structural reforms remain important for achieving higher and inclusive growth. They highlighted that the reform effort should include further enhancing the business environment, improving infrastructure, including tackling the inefficiencies in the energy sector, and improving access to finance. It is expected that the next Article IV consultation with Ghana will take place in accordance with the Executive Board Decision on consultation cycles for members with Fund arrangement.

Table 1. Ghana: Selected Economic and Financial Indicators, 2014–22
2014 2015 2016 2017 2018 2019 2020 2021 2022
Prog. Est. Prog. Proj. Proj. Proj. Proj. Proj. Proj.
(Annual percentage change; unless otherwise indicated)
National accounts and prices
GDP at constant prices 4.0 3.8 3.3 3.5 7.4 5.9 8.9 5.9 5.1 5.2 5.4
Non-oil GDP 4.0 4.0 3.7 4.8 4.5 4.0 5.0 6.0 6.0 6.0 6.0
Oil and gas GDP 4.5 0.9 -2.4 -16.9 57.0 42.5 64.9 5.5 -3.1 -2.7 -1.7
Real GDP per capita 1.4 1.2 0.8 0.9 4.7 3.3 6.1 3.3 2.5 2.6 2.7
GDP deflator 16.7 16.4 15.3 18.1 10.1 14.2 9.6 9.1 7.4 6.3 6.3
Consumer price index (annual average) 15.5 17.2 17.1 17.5 10.0 11.8 9.0 7.0 6.0 6.0 6.0
Consumer price index (end of period) 17.0 17.7 13.5 15.4 8.0 10.0 8.0 6.0 6.0 6.0 6.0
Consumer price index (excl. food, end of

period)

23.9 23.3 17.8 20.2 10.5 13.1 8.0 6.0 6.0 6.0 6.0
(Percent of GDP)
Gross capital formation1 18.8 16.7 22.5 14.5 23.2 13.7 14.7 15.8 17.0 18.2 18.2
Government 5.7 5.2 3.1 4.9 2.9 3.2 3.3 3.5 3.7 3.8 3.9
Private 12.3 10.7 18.7 8.9 19.7 9.9 10.9 11.9 12.9 14.0 14.0
National savings 9.3 9.0 16.1 7.8 17.1 7.9 9.2 10.7 12.3 13.6 13.9
Government -5.3 -0.2 -0.7 -4.0 0.9 -1.3 -0.5 0.2 0.6 0.9 1.1
Private2 14.6 9.2 16.8 11.8 16.2 9.2 9.7 10.5 11.6 12.8 12.8
Foreign savings -9.5 -7.7 -6.4 -6.7 -6.1 -5.8 -5.4 -5.0 -4.7 -4.5 -4.3
Central government budget (cash basis)
Revenue 18.4 19.6 19.4 17.3 19.2 18.9 18.6 19.0 19.1 18.9 18.7
Expenditure 28.5 26.6 24.6 26.6 22.7 25.2 22.4 22.2 22.1 21.8 21.6
Overall balance3 -10.1 -7.0 -5.2 -9.3 -3.5 -6.3 -3.8 -3.2 -3.1 -2.9 -2.8
Primary balance3 0.0 -0.4 1.1 -2.4 2.2 0.2 2.2 2.2 2.0 1.8 1.6
Net domestic financing 7.8 1.8 3.7 8.6 2.3 6.2 3.6 3.2 2.7 2.3 1.9
Central government debt (gross) 70.2 72.2 67.7 73.4 63.6 70.5 66.1 62.8 60.1 57.6 55.1
Domestic debt 31.0 28.5 27.9 32.1 26.0 32.5 30.8 29.8 29.1 28.4 27.2
External debt 39.1 43.7 39.8 41.3 37.7 38.0 35.3 33.0 30.9 29.2 27.8
(Annual percentage change; unless otherwise indicated)
Money and credit
Credit to the private sector 41.8 31.7 7.4 9.1 14.2 11.0 14.5 19.9 20.5 17.3 20.2
Broad money (M2+) 36.8 23.3 14.4 24.8 15.1 22.7 15.9 19.2 21.0 16.4 16.5
Velocity (GDP/M2+, end of period) 3.1 3.0 2.9 2.9 3.0 2.9 2.7 2.6 2.5
Base money 30.2 24.2 14.7 29.6 15.7 26.3 19.2 17.5 18.3 16.9 14.9
Banks’ lending rate (weighted average,

percent)

29.0 27.5 31.7
Policy rate (in percent, end of period) 21.0 26.0 25.5
(Percent of GDP)
External sector
Current account balance -9.5 -7.7 -6.4 -6.7 -6.1 -5.8 -5.4 -5.0 -4.7 -4.5 -4.3
Gross international reserves (millions of US$) 4,349 4,403 5,140 4,862 5,976 5,783 6,319 6,797 7,483 8,145 8,765
In months of prospective imports of goods

and services

2.5 2.6 2.7 2.6 2.9 3.0 3.1 3.2 3.3 3.3 3.4
Total donor support (millions of US$) 1,092 1,411 844 778 637 977 755 763 407 183 133
In percent of GDP 2.8 3.8 2.0 1.8 1.4 2.1 1.5 1.4 0.7 0.3 0.2
Memorandum items:
Nominal GDP (millions of GHc) 113,343 136,957 166,768 167,315 197,136 202,389 241,549 279,328 315,464 352,989 395,193
Nominal GDP (millions of US$) 38,774 36,893 42,638 42,778 45,464 49,226 52,863 56,415 60,449 65,127
GDP per capita (US$) 1,479 1,372 1,551 1,551 1,648 1,608 1,697 1,777 1,850 1,932 2,030
Sources: Ghanaian authorities; and Fund staff estimates and projections.
1 Historical expenditure side GDP series was revised in 2017 by the Ghana Statistical Services.
2 Including public enterprises.
3 Excludes discrepancy.

[1] The ECF is a lending arrangement that provides sustained program engagement over the medium to long term in case of protracted balance of payments problems. For more details, see http://www.imf.org/external/np/exr/facts/scf.htm .

[2] Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[3] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm .

Source IMF Press Release

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