Ghana must ensure fiscal discipline – IMF

Ghana’s longstanding challenges can only be resolved through ambitious and sustained reforms in key policy areas, going beyond the central government to encompass the broader public sector, the IMF mission to Ghana has said.

Speaking at a press conference at the end of a two-week visit to Ghana, the IMF Mission Chief, Annalisa Fedelino, said more needed to be done to restore macro-economic stability and anchor confidence.

The mission’s discussions focused on recent economic and policy development, and the outlook for 2017 and the medium-term, including prospects for restoring high economic growth and job creation.

It also discussed the parameters of the programme, consistent with restoring macroeconomic stability.

“In our view, the immediate priority is to ensure fiscal discipline by bringing down the budget deficit to a level required to place public debt on a clearly declining path. “Continued fiscal consolidation would also facilitate ongoing disinflation and anchor confidence,” she said.

Government has committed to achieve the budget deficit of 6.5 per cent announced in the 2017 budget through a step up in revenue collection.

Annalisa said the significant unpaid commitments incurred in 2016, and weaknesses in the financial position of state-owned enterprises in the utility sector, could undermine fiscal adjustment, and add to spending and public debt.

She called for the need to bring fiscal discipline to SOEs, especially those in the utility sector. She said economic prospects in 2017 were encouraging, as economic growth was expected to pick up, inflation was declining, and prospects for a significant increase in net international reserves, boosted by recent sizable exchange inflows.

Ms Fedelino said the IMF would continue to support the Ghanaian authorities’ policies aiming at macro-economic stabilization and enhancing the growth potential of the economy.

Finance Minister, Ken Ofori-Atta, said government was taking pragmatic steps to achieve macro-economic targets and policy outcomes outline in the budget. He said both the IMF and government were working hard to address the challenges of the economy, especially ensuring debt sustainability anchored on the reduction in fiscal deficit.

“I think with the fund as a partner, we will manage that exit in a way in which we won’t compromise growth and private sector development, but at the same time never take our eyes off the general issues of macro-economic stability, fiscal and debt sustainability,” he said.

Mr. Ofori-Atta said government would continue to be creative, while it pursued fiscal consolidation by embarking on growth enhancing initiatives in agriculture, industry and services sector in order to accelerate growth. Besides, the private sector, a key driver of growth, will be provided with the incentives to spur growth, but to reduce poverty.

“We are optimistic that growth will rebound, and rather strongly against the general belief that fiscal consolidation will lead to declining growth,” he added.

The Minister also said Ghana was committed to ending its programme with the IMF as scheduled in April 2018, adding that there would be no extension.