The International Monetary Fund (IMF) has urged Ghanaian authorities to address the short-term vulnerablities of the country's economy to ensure its optimal performance. PANA reports that the call was contained in a statement on Wednesday following an IMF delegation's visit to the West African country.
The mission, led by Ms. Christina Daseking, visited Accra 12-25 February, 2014, to conduct the 2014 Article IV consultation discussions with the Ghanaian authorities.
The statement said that the delegation met with Vice-President Amissah-Arthur, Finance Minister Terkper, Bank of Ghana Governor Wampah, other senior officials, members of parliament, and representatives of the private sector, think tanks, and civil society.
It quoted Ms. Daseking as saying: 'Ghana’s economy slowed down on the back of sizeable external and fiscal imbalances and energy disruptions in the first half of the year.'
She stated: 'Based on data for the first three quarters of 2013, the mission estimates growth of 5½ percent, well below the levels of recent years. On the fiscal side, revenue shortfalls, overruns in the wage bill, and rising interest costs pushed the 2013 deficit to 10.9 percent of GDP, versus a target of 9 percent.
'The overrun would have been higher in the absence of significant revenue measures, the elimination of fuel subsidies, large increases in utility prices, and compression of other expenditure.
'The large fiscal deficit combined with a weaker external environment, led to a widening of the current account deficit to 13 percent of GDP and to further pressure on international reserves.
'The consequent weakening of the cedi together with large administered price increases contributed to inflation rising above the end-year target range to 13.5 percent,' she noted.
The IMF official also said: 'The weakening growth momentum and inflationary pressures are expected to continue into 2014', and called for urgent measures to address macroeconomic imbalances.
'In the absence of further measures, the mission sees the fiscal deficit target of 8.5 percent of GDP at risk. This, combined with a weak outlook for gold prices, would also keep the current account deficit at high levels,' Ms. Daseking added.
She also said that, 'the success of the government’s ambitious transformation agenda is contingent on restoring macroeconomic stability'.
She, however, welcomed measures already taken and announced in the budget, stressing that additional fiscal savings are required to address short-term vulnerabilities, contain rising public debt levels, and reduce interest rates.
According to her: 'This will be essential to stabilize the economy and support private sector development, growth, and employment creation over the medium term.'
Ms. Daseking said: 'Structural reforms to ensure lasting expenditure discipline are key to sustainable fiscal consolidation and the mission supported the authorities’ plans to regain control over the wage bill, helped by their efforts to strengthen public financial management.'
She noted that the mission also suggested assessing additional options that bring predictability to wage developments and contribute to sustainable fiscal consolidation.
On revenue, she added that there was agreement on the need to strengthen tax administration focused on increased compliance.
The mission also called for a thorough review of the tax regime, to phase out exemptions and expand the base.