The International Monetary Fund (IMF) has expressed satisfaction with Ghana’s performance on its programme with the fund, saying: “Implementation of the programme has so far been satisfactory, with all end-August 2015 performance criteria met.” An IMF team, led by Mr Joel Toujas-Bernate, was in the country for two weeks for its second review of Ghana’s financial and economic programme under the Extended Credit Facility (ECF) programme which seeks to stabilise the economy and restore fiscal credibility.
Under the programme, Ghana has some bitter pills it must swallow in order to maintain tight fiscal discipline, without sacrificing growth. The fund is giving the country over $940 million to support its current account which is necessary for stabilising the local currency.
The IMF team also held discussions with authorities, including the President, Mr John Dramani Mahama; the Finance Minister, Mr Seth Terkper; the Governor of the Bank of Ghana, Dr Henry Kofi Wampah; senior officials of government and the donor community. The discussions focused on the medium-term outlook and policies needed to restore debt sustainability, macroeconomic stability and a return to high growth and job creation, while protecting the poor.
The IMF said in a statement after its mission, which was extended by two days, that in spite of a difficult global environment, economic outcomes had been broad as anticipated, with growth estimated at around four per cent during the first half of the year and inflation around 17 per cent. Under the IMF programme, fiscal deficit, which is how much expenditure can go past revenue generated locally, is expected to decline to 7.3 per cent of Gross Domestic Product (GDP) at the end of 2015, down from 10.2 per cent in 2014.
The IMF also acknowledged progress in implementing fiscal structural reforms, although at a slower pace than expected in some areas.
Minister of Finance
Mr Terkper said the IMF commendation was in acknowledgement of various reforms happening in the management of the public sector payroll. Those included the successful implementation of the first phase of the Ghana Integrated Financial Management Information System, with funds ready for the second phase which would incorporate a human resource (HR) management system to augment the electronic payroll, he explained.
The government has also initiated moves to pass a new public financial management bill into law which will combine and revamp the Financial Administration Act and its regulations and the Loans Act of 1970. The Steering Committee on the PFM reforms met last Monday to discuss the bill. Payroll irregularities also border on a higher-than-expected wage bill for next year.
Although the government negotiated for a 10 per cent wage increase for public sector workers, slightly above what it had budgeted for, the IMF team acknowledged the increase with the government, given the global economic challenges that were affecting emerging economies such as Ghana. To that end, the IMF team stated: “The budget will also face additional spending needs from the (one-off) costs related to next year’s elections and a nominal wage bill increase now projected to be slightly higher than envisaged under the programme.”
Reforms pay off
Mr Terkper said fortunately reforms by the Ghana Revenue Authority, including the introduction of the Single Window Clearing process at the ports of entry, were helping to rake in more revenue. The Minister of Finance insisted that such reforms were very important for the country to consolidate itself as a middle-income country. There is also a new revenue administration bill which has been tabled before Parliament as part of efforts to revamp the country’s fiscal laws and bring them in line with modern trends.
Mr Terkper was upbeat about the country’s prospects going into 2016 and beyond when it would produce more oil, with additional gas resources to increase power generation which should enable the economy to perform better than the last couple of years.
The oil and gas company, Eni, which is operating Ghana’s Sankofa fields, is expected to produce more gas for the Atuabo Gas plant to power more thermal plants.
The OCTP Sankofa gas project, operated by Eni and Vitol, is expected to start the production of some 45,000 barrels of crude oil daily from the last quarter of 2016 and some 170 million cubic feet of gas daily by 2018. The Tweneboa Enyera and Ntomme (TEN) field will also start producing from the middle of next year, which all combine to make the economic outlook brighter. Already, the Ghana Statistical Service (GSS) has been announcing growth in the economy in the last two quarters, which has led it to project a higher end-of-year growth rate in GDP. However, the IMF insisted that looking ahead, and given the high level of public debt and financing constraints, the planned fiscal adjustment under the programme would be strengthened in 2016.
It, however, projected that a nominal wage bill increase was now projected to be slightly higher than envisaged under the programme, while earmarking of revenue for statutory funds continued to reduce budgetary flexibility. “Recognising these challenges, the authorities, after discussions with the mission, prepared a package of revenue and spending measures for the 2016 budget to bring the fiscal deficit down to 5.3 per cent of GDP next year, instead of 5.8 per cent envisaged in the programme. Steps to contain losses in state-owned enterprises will also be particularly important to prevent additional fiscal pressures,” the statement added.
It is worthy to note that the government, as part of debt management reforms it started this year, has given the signal it will not guarantee loans for SoEs again but allow them to borrow on their own balance sheet. This is expected to rein in large public debts, although the levels have stabilised in recent months.
According to the IMF, further fiscal adjustment, along with tight monetary policy, should help to restore macroeconomic stability. That, it said, together with the recent build-up of foreign exchange reserves, could also contribute to reducing the volatility of the cedi. The IMF Executive Board is tentatively expected to consider the review by the end of the year after finalisation of the required documentation.