MORE HARDSHIP AHEAD OF GHANAIANS -IMF refutes Mahama’s promise of ‘Better Days Ahead’

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Created on Monday, 03 March 2014 00:00

MORE HARDSHIP AHEAD OF GHANAIANS -IMF refutes Mahama’s promise of ‘Better Days Ahead’

Contrary to the assurances of ‘better days ahead’ of the nation, given by President John Dramani in his State of the Nation Address, the International Monetary Fund has sent out a strong warning that the country is still not out of the woods yet with respect to the current economic hardship foisted on the people.

According to the IMF, the coming months will witness further continuous upward jumps in the prices of goods and services, adding that economic growth might suffer as well.

The warning was contained in a statement issued by a mission from the IMF, led by Christina Daseking, which visited the country between February 12-25, 2014, to conduct discussions for the 2014 Article IV consultation. The mission met with Vice-President Amissah-Arthur, Finance Minister Terkper, Bank of Ghana Governor Wampah, members of parliament, representatives of the private sector, think tanks, civil society, and other government officials.

The statement called on the Mahama-led NDC government to quickly put in place effective measures to address the short term vulnerabilities in the economy. But it looks like the IMF mission was not even confident of the ability of the Mahama government to deliver the goods.

“The weakening growth momentum and inflationary pressures are expected to continue into 2014, calling 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,” the statement added.

According to the IMF mission, “Ghana’s economy slowed down on the back of sizable external and fiscal imbalances and energy disruptions in the first half of the year. 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, the mission noted that revenue shortfalls, overruns in the wage bill, and rising interest costs pushed the 2013 deficit to 10.9 per cent of GDP, versus a target of 9 percent, adding that 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, according to the MIF, led to a widening of the current account deficit to 13 percent of GDP and to further pressure on international reserves, adding that 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.

“The success of the government’s ambitious transformation agenda is contingent on restoring macroeconomic stability. While welcoming measures already taken and announced in the budget, the mission stressed that additional fiscal savings are required to address short-term vulnerabilities, contain rising public debt levels, and reduce interest rates. This will be essential to stabilize the economy and support private sector development, growth, and employment creation over the medium term,” the statement disclosed.

According to the IMF mission, the “structural reforms to ensure lasting expenditure discipline are key to sustainable fiscal consolidation,” expressing support for the plans to regain control over the wage bill, helped by their efforts to strengthen public financial management.

The mission suggested accessing additional options that bring predictability to wage developments and contribute to sustainable fiscal consolidation.

On the revenue side, according to the statement, 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.

“In discussions with the Bank of Ghana, the mission welcomed the tightening of the monetary policy stance to defend the inflation target. With regard to the new foreign exchange regulations, the mission agreed with the Bank of Ghana that these measures alone will not resolve the underlying pressures in the foreign exchange market. It recommended a review of the measures after an appropriate evaluation period to assess their effectiveness and mitigate any unintended consequences,” the statement added.

Source: thestatesmanonline