Ghana Needs More Ambitious Fiscal Reduction Plan, IMF SaysMoses Mozart Dzawu and Pauline Bax
Ghana needs a more ambitious plan to reduce its budget deficit and keep debt under control as economic prospects remain at risk, the International Monetary Fund said.
The government of the West African nation may need to cut its wage bill or scrap energy and fuel subsidies to help narrow the fiscal shortfall, which may reach about 9.75 percent of gross domestic product this year, the Washington-based lender said in an e-mailed statement today.
Ghana last month approached the IMF for help in containing an economic crisis that’s caused the currrency to plunge 28 percent against the dollar this year, the worst performer in Africa, pushing inflation to 16 percent. Talks on a possible aid program, which began last week in the capital, Accra, will continue in Washington during the IMF’s annual meetings, the lender said.
“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,” Joël Toujas-Bernaté, who led the IMF’s talks with the government, said in the statement. “These vulnerabilities are putting Ghana’s medium-term prospects at risk.”
Economic growth in Ghana, West Africa’s second-largest economy after Nigeria, is set to slow to about 4.5 percent this year from 7.1 percent in 2013, while inflation will probably average 15 percent. The current-account deficit will probably narrow to about 10 percent of GDP.
Wages for civil servants account for almost 70 percent of government tax revenue, according to the government. While it’s not clear yet whether Ghana will agree to a loan or technical assistance from the IMF, President John Dramani Mahama said in an interview on Sept. 21 that a fiscal injection will be useful to help bolster foreign-currency reserves.
The cedi rose 0.9 percent to 3.25 per dollar as of 2:46 p.m. in Accra.