IMF support confirms govt’s fiscal consolidation efforts : Terkper

The Finance Minister, Mr Seth Terpker, has described the approval for the release of the third tranche of US$114.6 million by the International Monetary Fund (IMF) to boost Ghana’s economic stability and growth as a confirmation of the government’s frantic efforts at ensuring fiscal consolidation.

“It means that our efforts at achieving fiscal consolidation is holding and that is a boost to do even better in subsequent years,” he added.

The Executive Board of the IMF on Thursday approved the release of the funds after the board had completed the second review of Ghana’s economic performance under the programme.

This brings to US$343.7 million the money extended to Ghana under an Extended Credit Facility (ECF) arrangement with the IMF.

A statement issued by the IMF said the Executive Board also granted a waiver for the non-observance of the performance criterion regarding non-accumulation of external arrears, based on the corrective measures being taken by the Ghana Government.

It said the Executive Board also approved new programme targets for 2016.

Terkper confident
Speaking in an interview from Washington, United States of America (USA), Mr Terkper said it was also a demonstration that the programme, going into 2017, was on course.

He admitted that this year being an election year brought its challenges but noted that the government was on course to avoid any temptations that would derail the progress made so far.

Mr Terkper noted that the government was also prepared to keep in check, election year expenditures which had been part of the system over the years and which often caused serious derailments in economic policy.

"As a ministry we are satisfied about the gains made and the fact that the programme has gone through a successful second review and looking into the bright future,” he said.

He gave an assurance that “as we go into the third and subsequent reviews, we will maintain the discipline within the economy”.

The Finance Minister further mentioned the efforts the government made by clearing its statutory arrears to the tune of about GHc3.8 billion and noted that all these among other things were clear testimonies to efforts being made to reverse the challenges within the economy.

The programme
Ghana entered into a three-year arrangement with the IMF for US$918 million on April 3, 2015 that sought to restore debt sustainability and macroeconomic stability in the country to foster a return to high growth and job creation, while protecting social spending.

The statement quoted Mr Min Zhu, acting Chair and Deputy Managing Director of the IMF, as saying that, “Implementation of the ECF-supported programme by the

Ghanaian authorities continues to be broadly satisfactory, but the economic outlook remains difficult with risks tilted to the downside. It is encouraging that the government’s fiscal consolidation efforts are on track and that electricity production capacity is being gradually increased.

“The authorities should resolutely continue their fiscal consolidation efforts. With government debt continuing to increase and financing remaining a challenge, the 2016 budget rightly aims at a stronger consolidation than originally envisaged,” he said.

It said Mr Zhu stressed the need for the government to stick firmly to its policy of strict expenditure controls, by maintaining the wage bill within the budget limits, while controlling discretionary spending and protecting priority spending.

“It is also important to continue to adhere to the domestic arrears clearance plan and avoid incurring new domestic or external arrears. The authorities’ commitment to implement corrective measures if fiscal risks materialise is welcomed,” he said.

Fiscal consolidation
The statement said Mr Zhu noted that effective implementation of a wide range of ambitious reforms was needed to ensure that gains from fiscal consolidation would be sustained over the medium term,.

Such measures, it noted, included broadening the tax base, enhancing tax compliance, strengthening control of the wage bill, and enhancing public financial management, stressing that the difficult financial situation of several state-owned enterprises in the utilities sector also called for strong actions to avoid additional pressures on the budget.

“Against the backdrop of continued large financing needs and tight domestic and external financing conditions, the new medium-term debt management strategy is a welcome step to help reduce near-term financing risks, while balancing domestic and external financing in a way that will not jeopardise debt sustainability. The authorities should complement their strategy by stepping up work to deepen the domestic debt market,” Mr Zhu was quoted as having said.

Financial stability
“To help bring inflation down towards its medium-term target, the Bank of Ghana (BoG) should stand ready to further tighten monetary policy if inflationary pressures do not recede as expected. The preparation of an amended Bank of Ghana Act and BoG’s commitment to gradually deepen the foreign exchange market will help make the inflation-targeting framework more effective.

“Financial sector stability will need to be monitored closely in a context of deteriorating asset quality. The BoG should take immediate steps to increase resilience and address weaknesses in asset classification. Prompt implementation of the new banking laws currently under review by Parliament is also essential to safeguard financial sector stability,” he stated.