...Ghana’s economic growth, additional measures adopted to watchdog (budget) oil revenue shortfall, priority is to restore debt sustainability by sustained fiscal consolidation etc.
IMF staff team in Ghana reached agreement with the government on a new economic reform program that would be supported by an IMF loan of about $940 million. The loan will receive final approval in early April to back a program aimed at boosting ECONOMIC GROWTH and tightening FISCAL DISCIPLINE.
It would therefore be "a must" obligation for Ghana to implement its reform program under a three-year Extended Credit Facility (ECF) arrangement from the IMF, which is still subject to approval by the IMF’s management and Executive Board. One of the priorities of Ghana’s program is to restore debt sustainability ("stop borrowing here and there around the globe for nothing!") through a sustained fiscal consolidation.
The Offshore oil production in Ghana which streamed in 2010, and slumped in world oil prices since 2014 has resulted in a shortfall of budget revenue of about 2 to 3 percent of GDP. And under its new program, the government of Ghana has however acted very little or less to buttress the 2015 budget with additional measures to lower spending ceilings and draw from an oil stabilisation fund, to offset the budget’s oil revenue shortfall arising from the recent slump in world oil prices.
Ghana "was" one of Africa's frontier emerging markets, having entered the global capital market for the first time in 2007 September. Its past wealth lay in gold and cocoa commodities that remained in high demand and helped the country economically.
According to an IMF statement, Ghana’s economic growth rate is expected to slow for a fourth consecutive year in 2015 to almost 4 percent on the back of a severe energy crisis and the budget-tightening measures. However, growth topped 9 percent in 2011 but had been followed by three difficult years characterised by slowing activity, accelerating inflation, BORROWING AIMLESSLY, MISUSING FUNDS, RISING DEBT LEVELS and financial vulnerabilities.
In 2014 economic growth reached its lowest level in many years amid high interest rates, a fast depreciating currency, low aggregate demand, and a deepening energy crisis. Inflation reached over 17 percent, well above the central bank’s inflation target. Large fiscal deficits caused by a "ballooning" wage bill, poorly targeted energy subsidies, and commodity price shocks pushed government debt and financing costs to very high levels. The main priority of the IMF program is to restore debt sustainability through a sustained fiscal consolidation, and to support growth with adequate capital spending and a reduction in financing costs. The program rests on three pillars.*Restraining and prioritising public expenditure with a transparency in budget process *Increasing and monitoring tax collection and lastly *Strengthening the effectiveness of the central bank monetary policy.
The program explicitly accommodates for the expansion and the safeguard of priority spending, in particular social protection programs. Ghana’s growth is however expected to rebound over the medium term on account of an improved macroeconomic environment and cost effective solutions to address the energy crisis. Inflation should therefore decelerate substantially, while then, the stronger fiscal consolidation will pave its way to stabilise the debt ratio to GDP. The external current account deficit is thereby projected to decline and together with increased donor support, will then contribute to start rebuilding reserves. ? Ghana will need an urgent "better budget transparency" as a strong key elements of its reforms to improving transparency in the budget process to prioritise spending, enhancing revenue mobilisation and strengthening fiscal institutions, including the review of possible fiscal rules. Reviewing fiscal rules has been a discussions between Ghana government authorities and the Ghanaian civil society, which is concerned about fiscal transparency in the budget process.
To strengthen its control on the wage bill and address payroll irregularities, IMF advised the government to detect and remove ghost workers, to secure and unify payroll databases and to sanction those responsible for fraud. In addition, exercise strict control on new intake and the reduction in the number of public service agencies which will also further help contain the wage bill. Tax administration reforms are expected to be made immediately and also review the existing tax exemptions with a view to reducing them. IMF is seriously warning the Public debt management to be strengthened to ensure that financing needs and payment obligations are met at the lowest possible cost to control debt risk.
We (as government) must know and don't have to forget that IMF is not "a father Christmas" they don't give gifts for free.
FRANCIS TAWIAH (Duisburg - Germany)
