The International Monetary Fund is urging the government of Ghana to carry on with the financial sector clean up to improve its credit rating.
The advice comes as the country ends its Extended Credit Facility agreement with the Briton Wood institution this year.
A statement on the eighth review of the facility by the IMF Executive Board on Wednesday lauded Ghana for the recent clean up in its banking sector which cost the state about 13 billion cedis.
The Bank of Ghana reduced the number of banks from 33 to 23 after a recapitalization exercise which set the minimum capital requirement at 400 million cedis.
“The authorities deserve praise for strengthening the banking sector and for resolving nine banks. Completing the financial sector clean-up, as planned, will support the provision of adequate and affordable credit to the economy,” Mr. Tao Zhang, Deputy Managing Director and Acting Chair said in the statement.
“The authorities have achieved significant macroeconomic gains over the course of the ECF-supported program, with rising growth, single digit inflation, fiscal consolidation, and banking sector clean-up. Continued macroeconomic adjustment should underpin these improvements, as the 2020 elections approach.”
Ghana’s three-year arrangement with the IMF was approved on April 3, 2015 with a total of about US$925.9 million being disbursed to the government. It was extended for additional year on August 30, 2017 which ends on April 2, 2019.
The arrangement aimed 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 IMF noted that as a sign of government’s commitment to fiscal consolidation, fiscal targets were met in 2018.
“Sustained fiscal discipline is needed to reduce financing needs and anchor debt dynamics,” the statement observed. Government was also charged to strengthen effort to ensure tax compliance in the wake of the numerous tax exemptions.
“Debt management has improved, though reliance on foreign investors has increased Ghana’s exposure to market sentiment and exchange rate risk. Debt collateralization and revenue monetization should be limited to avoid encumbering revenues. Planned infrastructure projects should be transparently managed, be consistent with debt sustainability, and ensure value for money,” it analysed.