IMF Lauds Gov’t’s Over Progress at Restoring Macro Stability

A team from the International Monetary Fund (IMF), led by Annalisa
Fedelino, has lauded efforts made by Ghana to restore macroeconomic
stability.

The team which left the country earlier this week were in town to
discuss recent economic developments and the outlook for the remainder
of the year and takes stock of performance to date under the $918
million IMF-Extended Credit Facility programme.

Ms. Fedelino in a statement at the end of the staff visit said:
“Macroeconomic stabilization is ongoing. Growth prospects remain
positive, supported by strong oil production. Investor confidence has
improved, as indicated by a successful issuance of the Eurobond in May
2018. Inflation has subsided to below 10 percent. The government has
stepped up structural reforms, particularly on public financial
management and strengthening oversight over state-owned enterprises
(SOEs).

“The government’s commitment to achieving the end-year fiscal targets
is encouraging. Available fiscal data suggest an increase in government
spending—mainly due to frontloading of capital spending and goods and
services—while revenue underperformed in the first four months of the
year.”

The discussions also focused on fiscal and monetary policies,
prospects for deepening the foreign exchange market, the outlook for
strengthening the financial sector, and SOEs.

The IMF, she said, welcomes the government’s intention to present a
balanced and comprehensive fiscal package to Parliament at the time of
the mid-year budget review in July. Such a package would help meet the
fiscal objectives and support the implementation of the government’s
development agenda.

She also said the country’s monetary policy stance remains
appropriate and inflation expected to continue to decline to the 8
percent target before the end of the year.

Responding to the gradual lowering of the monetary policy rate,
lending rates have also been inching down. Recent exchange rate
pressures are expected to be short-lived, provided that fiscal
consolidation continues. A key priority is to strengthen foreign
exchange (FX) management to help foster a deeper and more liquid FX
market, Ms. Fedelino said.

“Strengthening the resilience of the financial sector would improve
medium-term prospects for economic growth. The overall financial system
is adequately capitalized, but weaknesses in some institutions—including
high levels of nonperforming loans—can adversely impact financial
stability, hamper credit growth and investment, and create contingent
liabilities for the government. The Bank of Ghana is introducing reform
measures to address remaining financial sector weaknesses which would
help improve the availability and affordability of credit to the private
sector,” she noted.

According to her, the approval of financial recovery plans for the
energy sector SOEs is essential to put them on the path of financial
recovery.