IMF Urges Ghana To Address Short-term Vulnerabilities
The International Monetary Fund (IMF) has called on the Ghanian Government to take urgent steps in tackling short-term vulnerabilities in the interest of the country’s economy.
This was contained in a report signed by Christina Daseking, Head of IMF Mission, which visited Accra between Feb. 12 and 25, to conduct discussions for the 2014 Article IV consultation.
Daseking said the team held discussions with critical economic stakeholders in the country during the visit.
The IMF official said that additional fiscal savings were vital to address short-term vulnerabilities, contain rising public debt levels, and reduce interest rates.
She said that urgent steps were needed to address macro-economic imbalances, to tackle the weakening growth momentum and inflationary pressures on the economy.
According to her, the success of the government’s ambitious transformation agenda will be largely contingent on restoration of macro-economic stability.
“Ghana’s economy slowed down on the back of sizable external and fiscal imbalances and energy disruptions in the first half of 2013.
“ Based on data for the first three quarters of 2013, the mission estimates a five and half per cent growth which is well below the levels of recent years,’’ she said
Daseking said that revenue shortfalls, overruns in the wage bill, and rising interest costs pushed the 2013 deficit to 10.9 percent of GDP.
She said the overrun would have been higher in the absence of significant revenue measures, fuel subsidies, large increases in utility prices, and compression of other expenditure.
“The large fiscal deficit combined with a weaker external environment, led to a widening of the current account deficit to 13 per cent of GDP and further pressured foreign reserves,’’ Daseking said.
The IMF official said the consequent weakening of the cedi and large administered price increases contributed to inflation rising above the end-year target range to 13.5 per cent.
“The weakening growth momentum and inflationary pressures are expected to continue into 2014; this calls for urgent measures to address macro-economic imbalances.
“ The fiscal deficit target of 8.5 percent of GDP is risky; this, combined with a weak outlook for gold prices, will also keep the current account deficit at high levels,’’ she said.
Daseking said the mission welcomed the authorities’ decision to tighten the monetary policy stance, to defend the inflation target.
She said the mission recommended a review of the policy after an appropriate evaluation period to assess its effectiveness.