IMF review team cites Ghana for small deviations in wage bill
The review team of the International Monetary Fund (IMF) led by Joël Toujas-Bernaté has concluded its third mission reviewing the $918 million Extended Credit Facility for Ghana.
The mission from April 27 to May 11, 2016 noted that while the implementation of the programme so far remains broadly satisfactory, most of end-December 2015 performance criteria were met, with the exceptions of small deviations in the wage bill and net domestic assets of the Bank of Ghana (BoG).
In a press release, Toujas-Bernaté wrote, “Implementation of the program so far remains broadly satisfactory. Most of end-December 2015 performance criteria were met, with the exceptions of small deviations in the wage bill and net domestic assets of Bank of Ghana (BoG). Despite the more difficult global environment, with lower commodity prices and domestic power shortages, economic growth in 2015 was close to 4 percent, slightly higher than expected. Inflation, which remains still high at 19.2 percent in March 2016, is being affected by the increase in utility tariffs, energy sector levies and transportation costs, but core inflation has started to decline in recent months.
The required fiscal adjustment is on track, with the overall cash deficit improving from 10.6 percent of GDP in 2014 to 6.7 percent of GDP in 2015, and the primary balance close to zero, from a deficit of 4.4 percent of GDP in 2014. On a commitment basis, the adjustment is stronger still reflecting larger-than-programmed repayments of arrears. The authorities have also made progress in implementing fiscal structural reforms, although at a slower pace than expected in some areas. The mission welcomes the recent adoption of several new tax laws and progress in strengthening payroll controls and addressing payroll irregularities, along with advancing public financial management reform, including in developing the Treasury Single Account. However, preparation of a new public finance management (PFM) law and an amended BoG Act has been delayed.”
“The required fiscal adjustment is on track, with the overall cash deficit improving from 10.6 percent of GDP in 2014 to 6.7 percent of GDP in 2015, and the primary balance close to zero, from a deficit of 4.4 percent of GDP in 2014. On a commitment basis, the adjustment is stronger still reflecting larger-than-programmed repayments of arrears. The authorities have also made progress in implementing fiscal structural reforms, although at a slower pace than expected in some areas. The mission welcomes the recent adoption of several new tax laws and progress in strengthening payroll controls and addressing payroll irregularities, along with advancing public financial management reform, including in developing the Treasury Single Account. However, preparation of a new public finance management (PFM) law and an amended BoG Act has been delayed,” he wrote.
The mission noted that, the increase in the BoG’s policy rate in 2015 has been instrumental in reducing exchange rate volatility.
Adding, “Building on continued progress in improving the effectiveness of its inflation targeting framework, the BoG remains committed to maintaining an appropriate monetary policy stance to bring inflation down toward its medium-term objective.
Underpinned by the recently introduced petroleum and electricity levies, a strategy is being developed to address the difficult financial situation of the state owned enterprises (SOEs) in the energy sector. This strategy will be critical to avoid additional fiscal pressures and possible spillovers on the banking system, as well as to sustain the improvement in electricity delivery achieved recently,” he said in the report.
The IMF pledged its continuous support to the Ghana government as the authorities finalize work in the coming weeks in a few areas, including on the new PFM law, the amended BoG Act and the strategy for addressing the financial situation of SOEs. Subject to this work being completed, the IMF Executive Board would be expected to consider the review during the summer after finalization of the required documentation.
The IMF, on April 3, 2015, approved the $918 million three-year Extended Credit Facility for Ghana, but classified the country as “high risk of debt distress” under a new debt sustainability analyses (DSA).
“Countries classified as high risk are allowed to borrow on non-concessionnal terms only under exceptional circumstances. This will be one of the first tests of the implementation of the new debt limits policy,” the Fund says.
After its second review of the programme in January 2016, the Executive Board of the IMF approved $114.6 million for the country after finding performance to be broadly satisfactory.
The $114.6 million brings total disbursements to about $343.7 million.
The third review also finds the implementation of the programme ‘broadly satisfactory’. The IMF Executive Board would be expected to consider the review during the summer after finalization of the required documentation, the statement said.
By Emmanuel K. Dogbevi
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