News Brief No. 99/75

News Brief: IMF Completes Review and Approves US$30 Million Credit Tranche for Ghana

November 19, 1999

Shigemitsu Sugisaki, Deputy Managing Director of the International Monetary Fund (IMF), said: "The Executive Board of the IMF today completed the first review under the Enhanced Structural Adjustment Facility¹ arrangement with Ghana. As a result, Ghana will now be able to access SDR 22 million (about US$30 million) from the IMF.

"Directors commended Ghana's strong macroeconomic performance in the first half of the year, but noted that severe external shocks and policy slippages, particularly in the third quarter, were threatening the program objectives. They were encouraged by the corrective actions taken by the authorities at the beginning of September to address the situation.

"Directors regarded the overall fiscal strategy over the medium term as appropriately supportive of the authorities' efforts to improve fiscal sustainability and reduce interest costs. They observed that the proposed increase in VAT and the ongoing efforts to broaden the tax base and enhance compliance should help strengthen revenue performance in 2000 and over the medium term. Directors emphasized the need for the authorities to be selective in cutting public investment. They recommended that the authorities curtail low-priority expenditures in 2000 by following procedures in the government's medium-term expenditure framework and to put in place as soon as possible contingency measures that would allow the Ghanaian economy to better withstand the brunt of the external shock. The importance of strict expenditure control to avoid election-related spending overruns was also stressed.

"Directors highlighted the importance of exchange rate movements in cushioning the effects of terms of trade shocks and the need to maintain adequate international reserves. They urged the central bank to focus its policies on attaining its targets for net foreign assets and reserve money. They recommended the monetary authorities to rely primarily on open market operations for controlling reserve money and to raise interest rates if inflationary pressures begin to mount.

"Directors acknowledged Ghana's need for exceptional foreign assistance to help cushion the adverse effects of the external shocks on the poorest segment of the population. They emphasized the need to maintain the program on track and expressed the hope that the necessary external financial support will be forthcoming to enable Ghana to address needed expenditure in the social sectors and for poverty alleviation."