IMF completes 5th Review under ECF Arrangement for Ghana

Accra , Dec 15, GNA - The International Monetary Fund (IMF) has completed the fifth review of Ghana’s economic performance under a programme supported by the Extended Credit Facility (ECF), approving an amount of US$91.55 million disbursement for Ghana.

The Fund in a statement issued on Wednesday said the approval of the US$91.55 million, equivalent to Special Drawing Rights (SDR) 59.58 million, brings the total disbursements under the arrangement to about US$412.28 million (SDR 268.31 million).

The Fund’s Executive Board also approved a modification of a performance criterion related to Ghana’s non-concessional borrowing limit to provide additional room for scaled-up infrastructure investment.

The three-year ECF arrangement was approved on July 15, 2009, with access equivalent to SDR 387.45 million (about US$595.35 million or 105 per cent of quota).

The Executive Board’s Acting Chair, Mr. Naoyuki Shinohara, said: “Ghana’s economy has improved significantly since the start of the government’s Fund-supported programme in 2009.

“The fiscal and external current account imbalances have been greatly reduced, growth has strengthened, inflation has declined to single digits, and international reserves have recovered.”

He said fiscal challenges ahead include further revenue mobilization, containing current spending, and improving spending efficiency to create space for critical infrastructure investments.

“The 2012 budget is consistent with making progress in these areas”, he noted.

“Monetary policy implementation has been consistent with the authorities’ inflation target, and the Bank of Ghana should stand ready to adjust policy rates as signs of rising price pressures emerge,” Mr Shinohara said.

He said while the country’s debt sustainability analysis suggested scope for higher non-concessional borrowing, and some of the planned projects promise significant returns, a further strengthening of debt management and project appraisal capacities was critical to keep the debt burden manageable.

“While energy pricing has improved, decisive action is needed to tackle the re-emergence of costly and poorly targeted subsidies on petroleum products. Following an initial increase, maintenance of prices at cost-recovery levels will be essential.

“Monetary policy implementation has been consistent with the authorities’ inflation target, and the Bank of Ghana should stand ready..To manage liquidity effectively, the Bank of Ghana should continue refining its policies and communication on foreign exchange market interventions.

“Financial sector reforms should focus on making further progress on enhancing supervisory capacity, strengthening banks’ risk management, resolving vulnerable institutions and addressing deficiencies in Ghana’s Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime,” Mr. Shinohara added.