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An International Monetary Fund team, which visited Ghana last week, has issued a statement on the 2016 economic developments and the country's outlook for 2017. The team, led by Joël Toujas-Bernaté, visited Accra from February 6-10, 2017 to dialogue with the new government on its economic plans and discuss prospects for Ghana's ongoing IMF programme.

The IMF staff team reported the new government's intention to continue with the Extended Credit Facility (ECF), a $900 million lending arrangement that was approved by the IMF on April 3, 2015. However, the IMF expressed a strong need for fiscal consolidation following new information on worse-than-expected budget deficit in 2016.

"The large fiscal slippages observed last year will, indeed, require strong efforts of fiscal consolidation to support debt sustainability," said Toujas-Bernaté. "The new government’s intentions to reduce tax exemptions, improve tax compliance and review the widespread earmarking of revenues should help in this regard."

Last month, the new administration of President Nana Akufo-Addo revealed previously undisclosed debts of 7 billion cedis ($1.6 billion). The IMF said although Ghana’s economic growth of 3.6% in 2016 exceeded its target of 3.3%, the economy continues to face challenges. The overall fiscal deficit for 2016 deteriorated to an estimated 9% of GDP, instead of declining to 5.3% of GDP as envisaged under the IMF programme.

The IMF also said the government’s debt-to GDP ratio increased further to close to 74% of GDP at end-2016 mainly due to poor oil and non-oil revenue performance and large expenditure overruns.

“Significant public spending commitments that bypassed public finance management (PFM) systems were reported. We welcome the new government’s intention to conduct a full audit of outstanding obligations, its commitment to transparency and its readiness to take strong remedial actions to ensure the integrity of the PFM systems going forward,” the IMF team said.

Toujas-Bernaté commended the Bank of Ghana’s monetary policy for being instrumental in mitigating inflationary pressures in 2016. The country’s inflation rate had dropped to 15.8% in November from its 19.2% peak in March of last year. However, adequately tight monetary policy will again be important for containing possible further pressures in 2017, the IMF said. The team also noted that the central bank’s continued roll-out of the Roadmap for the banking sector will strengthen banks' balance sheets and contribute to a gradual reduction of the level of nonperforming loans.   

The mission met with Vice President Mahamudu Bawumia; Senior Minister Yaw Osafo-Maafo; Finance Minister Kenneth Ofori-Atta; Minister of Food and Agriculture Owusu Afriyie Akoto; Bank of Ghana Governor Abdul-Nashiru Issahaku; among other senior officials and development partners.

The Ghanaian officials outlined bold policies to restore fiscal discipline and debt sustainability and also to support growth and private sector development.

“We look forward to working closely with the new government in their efforts to design the required policies for restoring macroeconomic stability, high and sustainable growth and job creation,” Toujas-Bernaté and his team said.

As of September 2016, total disbursements under the IMF programme had reached $464.6 million.