The International Monetary Fund (IMF) has passed a vote of confidence in Ghana’s economy, forecasting that the current pains of stabilising the economy will begin to yield good fruits next year.
The Deputy Managing Director of the IMF, Mr Min Zhu, told the media in Accra yesterday that Ghana’s performance under the Extended Credit Facility (ECF) – a programme to help stabilise the economy – remained on track, with a strong commitment from the government to continue to achieve the targets.
“After our second review which ended about two weeks ago, we have seen that Ghana is on track regarding its programme with the fund.
“We welcome the strong commitment of the government and its determination to manage debts and bring down the fiscal deficit,” Mr Zhu stated.
Interaction with stakeholders
His interaction with the media was part of his two-day official visit to the country, during which he held discussions with different segments of the economy, including civil society, eminent economists, representatives from the private sector and people in authority.
Mr Zhu also held discussions with President John Dramani Mahama, Vice-President Kwesi Amissah-Arthur, as well as the economic management team.
The IMF deputy chief said the ECF programme with Ghana, which will make about $918 million current account support to the country, had been implemented for barely a year and, therefore, was at a stage of stabilising the macroeconomic fundamentals such as inflation and interest rates (the cost of capital) which were necessary to launch the real benefits to all sectors of the economy, especially the private sector.
In the fund’s analysis, the high debt-to-gross domestic product (GDP) ratio of about 70 per cent was at the core of the challenges facing the economy, as it had led to high interest rates and inflation.
Therefore, resolving the fiscal deficit and bringing down debt levels would feed into ensuring a lower cost of capital and inflation which would benefit the private sector and the general society.
“The debt is at the core of the matter. So fiscal discipline and consolidation are important. If we are able to bring down the debt, we will have the other indicators coming down. We have to do this now so that the private sector can benefit next year,” Mr Zhu stated.
Dealing with risks
There are, however, risks confronting the economy, which include the weak performance of the world economy, weakening prices of primary commodities, as well as financial market volatilities.
With Ghana’s high debt levels, it can no longer raise expensive capital from the international financial market. It, therefore, has to look internally for funds to support the budget.
Further consolidation (tightening) was, hence, required to anchor the gains the country was making and push the debt levels down, something Mr Zhu said the fund would work closely with the Ghanaian authorities to achieve.
He said blessed with falling crude oil prices on the international market, it was opportune for Ghana to cut its utility subsidies, while raking in more revenue through measures such as the recent petroleum levies.
The IMF believes these are appropriate measures that could create room for the private sector to function better in the coming year.
Mr Zhu lauded the commitment and determination of President Mahama and the economic management team to reduce fiscal deficit and achieve results under the programme, saying, “I commend the authorities for going for a three-year programme across an election year.”