The International Monetary Fund (IMF) has stated that Ghana is making progress in its economic management but cautioned that the country will have to ride on a bumpy path to economic recovery.
The Assistant Director and Head of Fiscal Policy and Surveillance Division of the IMF, Ms Catherine Pattillo, said fiscal consolidation remained on track as the government strived to ambitiously trim its overall deficit target from 10.1 per cent in 2014 to 5.2 per cent in 2016.
Speaking to the Daily Graphic on the sidelines of an IMF/World Bank annual meeting in Washington DC, Ms Pattillo said though Ghana was making a lot of economic progress in recent times, there were still some risks that it had to overcome on the path to total recovery. “We have seen Ghana make some progress recently which has resulted in its primary balance swing into surplus and projected at 1.1 per cent of Gross Domestic Product (GDP) this year, which could help in reducing the public debt ratio,” she indicated.
Acording to her, the problems remained with developments in the oil and banking sectors coupled with fiscal tightening which could make economic conditions difficult.
“In the context of the much higher public debt level, a replay of the past spending splurges in an election year would greatly heighten the risk of a full-blown economic and financial crisis and undermine Ghana’s development progress”, Ms. Pattillo said.
Ghana saw sustained GDP growth above eight per cent on its exports of gold, cocoa and oil until 2013 but has since seen a slump partly because of lower global commodity prices and a fiscal crisis that forced the country to secure an aid deal with the IMF last year.
Challenges
Ms Pattilo said the challenge the country was facing was due to commodity price slowdown and an underperfoming revenue sector and how to meet a fiscal target that required maintaining strict control of spending, especially in the run up to the Decembber general election. “Avoiding any related spending overruns as happened in the past will be critical in the coming months,” she stated.
Ms Pattilo mentioned other constraints to include, “domestic financing, which still poses a threat to the economy.”
Deficit
Analysts say the country was on target to halve its fiscal deficit this year after its US$918 million aid deal with the IMF.
The government issued a bill to eliminate Central Bank’s financing of the budget deficit in line with the requirements of the deal but on August 2, 2016, Parliament passed an amendment to the bill, allowing financing of up to five per cent.
Ghana’s public debt eased to 63 per cent of GDP in May this year from 72 per cent at the end of 2015, while consumer inflation dropped to 16.7 per cent in July from 19 per cent in January.
Rating agency
An international rating agency Moody’s Investors Service has also affirmed Ghana’s issuer and senior unsecured rating at B3 and changed the outlook of the country’s economy to stable from negative.
The agency cited the significant fiscal deficit reduction and implementation of institutional reforms over the past year under the umbrella of the three-year IMF programme which started in April 2015 as a major factor.
It also welcomed a reduced government external liquidity risk after the successful issuance of a US$750 million Eurobond in September. This is aimed at redeeming the maturity of the remaining US$400 million October 2017 Eurobond.
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