IMF Tells BoG Home Truths

By Ernest KISSIEDU

The International Monetary Fund (IMF) has challenged the Bank of Ghana to remain vigilant and bring inflation back to target.

This, according to Fund, will help increase the country's earnings from foreign exchange market.

"As inflation continues to decelerate, the Bank of Ghana (BoG) should remain vigilant in order to bring inflation back to target. The BoG should continue to strengthen the credibility of the inflation-targeting framework, which would benefit from efforts in the development of the foreign exchange market. The central bank should also continue its policy on zero financing of the government," IMF Deputy Managing Director, Mr. Tao Zhang noted at an Executive Board meeting last week.

Mr. Tao Zhang, who doubles as Acting Chair of the board, believes the authorities have made significant progress in the implementation of the banking system roadmap, in particular through the approval of time bound recapitalization plans for banks found to be undercapitalized, and the resolution of two insolvent banks.

Further steps to strengthen the supervisory and regulatory framework, reduce outstanding liquidity assistance, and buttress the microfinance sector will help build a more robust financial sector that is well-positioned to support growth and promote financial inclusion, he said.

Mr. Tao Zhang added that, "The authorities should tackle energy sector inefficiencies, particularly improving the management of the state-owned enterprises (SOEs). Ongoing debt restructuring efforts are helpful but are no substitute to stemming the SOEs' ongoing financial losses and put them on a sustainable financial path."

Meanwhile, the IMF Executive Board has approved the disbursement of SDR 66.42 million (about US$ 94.2 million) to help restore debt sustainability and macroeconomic stability in Ghana.

This completes the fourth review of the Extended Credit Facility (ECF) which brings total disbursements under the arrangement to SDR 398.52 million (about US$565.2 million), with the remainder being tied to the remaining reviews.

The review is aimed at fostering a return to high growth and job creation, while protecting social spending.

The Board also approved Ghana's request for waivers of non-observance of performance criteria, and modification of one performance criterion; and the extension of the arrangement by one year.

Ghana's three-year arrangement for SDR 664.20 million (about US$918 million or 180 percent of quota at the time of approval of the arrangement) was approved on April 3, 2015.

According to IMF Deputy Managing Director, Ghana's macroeconomic performance over the years has been mixed; adding that policy slippages have compounded the adverse impact of shocks and resulted in significant external and domestic imbalances.

"The new government has committed to macroeconomic stability, fiscal discipline, and an ambitious reform agenda. Decisive implementation of these policies and reforms would allow Ghana to reap its economic potential and achieve higher and more inclusive growth rates. These efforts will be supported by the continued implementation of the ECF programme," he disclosed.

Mr. Tao Zhang is convinced that the authorities have taken some encouraging steps and the economy is showing signs of recovery.

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