May 27 (Bloomberg) -- Ghana’s target of trimming its budget deficit to 9.4 percent this year from 14.9 percent a year ago is “appropriately ambitious” and should help to ignite growth in the next two years, the International Monetary Fund said.
“We have confidence that if government sticks to the reform agenda it has laid out for itself, by 2010, 2011 growth will take off,” Arnold McIntyre, the fund’s representative in the West African nation, said in an interview in Accra today.
While Finance Minister Kwabena Duffuor’s plan to narrow the budget deficit this year is within reach, a longer-term deficit of 3 to 4 percent of gross domestic product “is appropriate,” he said. The IMF believes Ghana’s economy will expand 4.5 percent this year, below the government forecast of 5.9 percent, due to the global recession. Ghana is the world’s second-largest cocoa producer.
The inflation rate will probably start to fall in the second half of the year, McIntyre said.
“We believe it’s plateaued around 20 percent,” he said. Inflation was little changed at 20.6 percent in April.
Ghana’s foreign currency reserves have fallen to about 1.8 months of import cover, from the government’s target of three months, McIntyre said. Talks between the government and the IMF on Ghana’s request for loans were “fruitful and productive” during a two-week visit by a fund delegation to Accra this month, he added.
Talks will continue in Washington “soon,” he said, without providing details. Ghana has asked the fund for about $1 billion, after the World Bank agreed to give the country $1.2 billion in interest-free loans over three years.
