[ 2014-09-28 ]

IMF estimates growth to fall to 4.5 per cent
Accra, GNA -The International Monetary Fund (IMF)
estimates growth to decelerate to 4 .5 per cent in
2014, from 7.1 per cent in 2013, and inflation to
reach an average of around 15 per cent for the
year.
Similarly, fiscal deficit would remain high at
around 9.75 per cent of Gross Domestic Product
(GDP), driven by weak revenue performance, a large
wage bill and substantially rising cost of debt
service.

The IMF mission led by Mr Joël Toujas-Bernaté
were in Ghana to initiate discussions on a
possible programme of economic reforms that could
be supported by the Fund.

Mr Toujas-Bernaté in a statement at the end of
the mission noted that Ghana continues to face
significant domestic and external vulnerabilities
on the back of a large fiscal deficit, a slowdown
in economic growth and rising inflation.

He said the external current account deficit is
projected to narrow to 10 per cent of GDP, as
imports declined substantially due to slower
growth and a large depreciation of the currency,
while export performance remained weak.

The currency weakened sharply through August,
before recovering very recently. In September, the
issuance of a $1 billion Eurobond and the Cocoa
Board (Cocobod) successfully raising $1.7 billion
for the financing of a projected excellent cocoa
crop were positive developments. Nonetheless,
gross international reserves will remain at a low
level.

“The mission had constructive and candid
discussions with the authorities who showed an
appreciation of the risks associated with these
imbalances and vulnerabilities. The authorities
identified earlier this year a set of measures
designed to put the country back on track, while
preserving growth momentum,” he said.

He said while important, these measures have not
managed to turn the financial situation around as
a result of some implementation delays, which have
set back the objectives of putting public debt on
a more sustainable path and reducing inflation.

The authorities expressed their intent to prepare
and implement additional upfront measures building
on ongoing broad consultations.

The statement said a more ambitious and front
loaded fiscal consolidation is needed to help
place public debt on a sustainable path, and to
allow monetary policy to be more effective in
bringing down inflation, by strictly limiting
budget deficit financing by the Bank of Ghana.

It said front loaded adjustment should be realised
through reductions in Ghana’s comparatively high
public sector wage costs, the elimination of
costly and untargeted subsidies for energy and
petroleum products, and a better prioritisation of
capital spending.

On the revenue side, the statement suggested the
need for the reduction of tax exemptions and
strengthening revenue administration through a
better targeting of large taxpayers appear
necessary.

The statement said it would be important for the
country to expand well targeted social protection
programmes to mitigate the potential impact of
fiscal consolidation measures on the most
vulnerable groups of the population.

In the medium term, structural reforms and
institutional changes would be key to sustainable
fiscal consolidation and lasting expenditure
discipline.

Discussions on a possible programme that could be
supported by the IMF would continue in Washington
during the Annual Meetings.

The mission met with President John Dramani
Mahama; Vice President Kwesi Amissah-Arthur; Dr
Kwesi Botchwey, Chairman of National Development
Planning Commission; Finance Minister Seth
Terkper; Minister of Gender, Children and Social
Protection Nana Oye Lithur; Bank of Ghana Governor
Dr Kofi Wampah; other senior officials, and
representatives of the private sector, the donor
community and civil society.

Source - GNA

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