The Executive Board of the International Monetary Fund (IMF) today completed the sixth and seventh reviews of Ghana’s performance under the program supported by the Extended Credit facility (ECF). In completing the reviews, the Executive Board approved waivers for nonobservance of three performance criteria: the net change in domestic arrears for end-December 2011, the fiscal balance target for end-March 2012, and the floor on net international reserves for end-March 2012.
The Executive Board’s decision will allow for the final disbursement of an amount equivalent to SDR 119.14 million (about US$178.74 million), bringing total disbursements under the arrangement to an amount equivalent to SDR 387.45 million (about US$581.28 million). The Executive Board also approved the government’s request of an extension of the program by about two weeks until July 31, 2012 for making the final disbursement. Ghana’s current three-year ECF arrangement was approved on July 15, 2009.
Following the Executive Board’s decision on Ghana, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, issued the following statement:
‘Ghana’s economic performance was strong last year and medium-term growth prospects remain favorable, but short-term risks to macroeconomic stability have risen. A rapid depreciation of the cedi is fuelling inflation and reserve cover has fallen below comfortable levels. Furthermore, spending overruns at the end of 2011, large public wage increases, and reemergence of energy subsidies have created the need for corrective actions to achieve fiscal targets.
‘The authorities’ 2012 economic program focuses appropriately on measures to preserve hard-won stabilization gains. On the fiscal side, this implies greater revenue mobilization and expenditure restraint. In particular, savings identified by the pension and payroll audits must be realized and spending pressures in the run up to elections need to be resisted.
‘The authorities will need to accelerate their ongoing efforts to complete the fiscal reform agenda. Priority areas include tax administration and public financial management. In addition, given Ghana’s increasing reliance on nonconcessional financing, it is critical to develop a robust and transparent framework for public investment prioritization and debt management.
‘Monetary policy has reacted slowly to the sharp cedi depreciation and the associated inflation risks. Loose conditions have now been tightened and will need to remain tight to preserve the credibility of the inflation-targeting regime. The authorities should stand ready to raise the policy rate further, if needed, and manage liquidity tightly, while restoring foreign exchange reserves to more comfortable levels.
‘Financial sector reforms continue to be a priority. The authorities should sustain their efforts to strengthen the legal and regulatory framework and improve supervisory capacity. It will also be important to continue to address long-standing deficiencies in Ghana’s AML/CFT regime,” Mr. Shinohara added.