June 23, 2015Jerome Kuseh, CA

Results of IMF Review will be Crucial for Ghana

by Jerome Kuseh

Finance Minister, Seth Terkper, is hoping for a favourable review
Finance Minister, Seth Terkper, is hoping for a favourable review

An IMF team has started the review of Ghana’s economy as part of the conditions for the continuation of the Extended Credit Facility programme. The finance minister, Seth Terkper, announced the arrival of the team via Twitter and stated that the review would begin on Wednesday, June 17. The team is expected to end their review on June 30.

The results of this review would be crucial for the country. The first tranche of US$114m was received in April and a positive outcome from this review is necessary for the disbursement of the remaining US$800m.

But even more important than accessing the rest of the facility is the signal that an adverse outcome of the review would give to the market. The country intends to issue a 1 billion dollar Eurobond and an adverse review may make this more difficult.

Confidence in the Ghanaian economy is low because of low gold and oil prices, continuing power crisis, inflation of 16.9%, a public debt to GDP of about 70%, growth rate of only 4% and the possibility of fiscal indiscipline in an upcoming election in 2016. The international press has keenly followed and reported Ghana’s fall from grace. The bad press is adding to investor uneasiness.

It is within this context that the IMF review is so important. The EU has only recently resumed budgetary support to the country. The government is performing  a review of public sector payment and has recently deregulated the petroleum sector. Agitations from organised labour and the recent floods that left over 100 people dead may complicate government’s plans on public sector spending.

With 7 days to go until the end of the review, I can only hope that the confidence of the finance minister is not misplaced and the economy would be saved from a further significant shock.

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