Ghana is awaiting the commencement of the fourth review scheduled for the latter part of this month, after a long delay occasioned by wide fiscal slippages which occurred last year.
Position of the IMF
Unhappy with the slippages, the Fund has maintained that an extension of the Extended Credit Facility (ECF) would help Ghana meet objectives of the programme and restore macro-economic stability.
During a press briefing session in New York on July 20, 2017, Mr William Murray of the Communications Department of the Fund referred to President Nana Akufo Addo’s intention to move Ghana beyond aid and pointed out that “a successful completion of the IMF-supported programme could be instrumental in achieving this goal by restoring macroeconomic stability in Ghana.”
Mr Murray said a request for an extension of the programme was essential “for our ability to complete the review of this programme overall.”
“Given the significant fiscal slippages from last year, it will also take longer to bring debt onto a clearly declining path, which explains the need for the programme to cover performance into later next year,” the Fund stated.
In April 2015, the Ghana signed onto a $918 million credit facility agreement with the International Monetary Fund (IMF). The three-year arrangement under the Extended Credit Facility (ECF) was in support of the country’s medium-term economic reform programme.
Objectives of the IMF Programme
Under the programme, the IMF sought to support growth and help reduce poverty by restoring macroeconomic stability through an ambitious and sustained fiscal consolidation, a prudent debt management strategy with improved fiscal transparency, and an effective monetary policy framework.
Ghana’s debt and deficit situation
The total public debt for Ghana as at May 2017 reached ¢137 billion putting the debt-to-GDP ratio at 67.5 per cent. From a debt stock of GH¢9.5 billion at the end of 2008, it increased to GH¢122.3 billion at the end of 2016 (an increase of debt stock by 1,154 per cent).
The revised 2016 nominal GDP of GH¢167.3 billion, puts the public debt-to-GDP ratio at 73.1 percent of GDP.
Against a target of 5.3 per cent under the IMF programme, the fiscal deficit for 2016 was 9.3 per cent of GDP (on cash basis).
Government in the 2017 budget projected a budget deficit target of 6.5 percent for 2017 which but recently revised it downwards to 6.3 per cent.
According to economist, Dr Lord Mensah, government is confident of meeting the objectives of the programme because it is relying on the Fiscal Responsibility Law that will cap the budget deficit to a ceiling of 5 per cent from 2018.
The move will forestall expenditure overruns, attain fiscal sustainability as well as macro-economic stability.
Dr Mensah notes that if the law becomes operational,” there will be no need to have the IMF standing on our necks and forcing fiscal responsibility compliance.”
He contends that government is also conscious of the implications of an extension of the programme on its programmes and initiatives and so would rather end the programme.
Fiscal Responsibility Law
The law emanates from a proposed amendment to the Public Financial Management Act which is expected to limit the fiscal deficit to between 3 and 5 per cent of GDP from the year 2018, to ensure greater fiscal discipline. The decision to cap the deficit was taken by Cabinet in July this year. Already government, through the 2017 budget, has put a cap of 25% on its budgetary allocation to statutory funds.