On September 28, 2016 the Executive Board of the International Monetary Fund (IMF) completed the third review of Ghana’s economic performance under the program supported by an Extended Credit Facility (ECF) arrangement.[1] Completion of the review enables the disbursement of SDR 83.025 million (about US$116.2 million), bringing total disbursements under the arrangement to SDR 332.1 million (about US$464.6 million).

During the review, adjustments were made to the program to ensure that it remains on track and to enhance its prospects of success. In this context, the Executive Board also granted waivers, including for minor deviations in a few program targets.

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’s discussion on Ghana, Mr. Tao Zhang, Acting Chair and Deputy Managing Director, said:

“Implementation of the ECF-supported program by the Ghanaian authorities continues to be broadly satisfactory, but the economic outlook remains challenging. There has been progress in stabilizing the macroeconomic situation and reducing financial imbalances, but fiscal risks remain elevated.

“The authorities are continuing their fiscal consolidation program and aim to strengthen policy and reform implementation. Further efforts are needed to address revenue shortfalls, while expenditure control measures should be fully enforced to contain the wage bill and other current spending. The government is projected to run a primary surplus this year, which, along with the stability of the cedi, should contribute to a marked decline in the debt-to-GDP ratio. Ongoing fiscal consolidation and implementation of the medium-term debt management strategy will be key to further reducing domestic refinancing risks in 2017. The authorities will need to remain cautious in accessing external market financing with due consideration to costs and debt sustainability.

“To ensure that the gains from fiscal consolidation are sustained over the medium term, the government needs to continue its efforts to effectively implement a wide range of ambitious reforms. These include measures to broaden the tax base and enhance tax compliance, strengthen control of the wage bill, and enhance public financial management (PFM). In this regard, the recently adopted PFM legislation is an improvement over previous laws. Steps taken to address SOEs financial problems are welcome, but more work is needed to reduce risks to the economy, the financial sector, and the government budget from their underperformance.

“The Bank of Ghana (BoG) should maintain a tight monetary policy stance to bring inflation back to target. Recent amendments to the BoG Act have introduced some improvements to central bank governance, but continued scope for central bank financing of the government and government influence on central bank operations remain significant shortcomings. The authorities’ committment to maintaining zero BoG financing of the government under the program and to introducing additional amendments to the BoG Act in 2017 are welcome.

“Full and timely implementation of the BoG’s roadmap for the banking system is essential to address financial sector risks. Although the adoption of the two new banking sector laws strengthens the authorities’ toolkit, the new legislation warrants further improvements to enable the authorities to effectively safeguard financial stability.”