IMF Praises Ghana

Directors of the International Monetary Fund (IMF) have expressed support for Ghana's structural reform efforts and welcomed the progress being made in a number of areas.

According to the fund's annual report for 1995 obtained yesterday, the directors "welcomed the progress being made on the divestiture programme which provided a clear signal of the government's commitment to enhancing the private sector's role in economic development". They expressed satisfaction that the operating costs of the Ghana Cocoa Board had been contained, that strong price incentives had been provided to cocoa farmers, and that the domestic marketing of cocoa had been liberalised. The report said "the flexible exchange rate policy acted as a safety valve against weakness in policy implementation and in order to avoid undue losses of foreign exchange.

But they also observed that "the currency depreciation over the years may well have led to inflationary expectations and that greater exchange rate stability could contribute to greater price stability." They agreed that the first priority was to strengthen fiscal policies particularly aimed at macro-economic sector. The report said external assistance to Ghana was expected to remain relatively high through the medium term. "Directors emphasised the importance of structural reforms and domestic resource mobilisation as key elements in diversifying economic activity and achieving external viability."

The report said because of slippages in the government's Economic Recovery Programme (ERP) during recent years and consequent macro-economic deterioration, the government adopted policies in 1993 to restore financial discipline and improve the country's external position. It noted that most programme benchmarks were, however, not met, although real Gross Domestic Product (GDP) growth exceeded targets rising by five per cent in 1993 largely because of good harvest and strong growth in mining output. "The Programme's slippage was due to higher-than expected expenditures, shortfall in revenue from petroleum excise duties and exchange rate changes that affected prices. "In addition, budgetary receipts from petroleum taxes, sales taxes and cocoa exports fell short of targeted levels, as a result of the overall deficit in 1993 was 2.5 per cent of GDP".

The report said intensified collection and administrative improvements, nonetheless, contributed to a health increase in both personal and company income tax receipts. Moreover, the government was able to contain its wage bill despite mounting pressures from trade union, while development spending was also kept within the budgeted limit, and structural reform continued to progress. Referring to the economy's performance in 1993, the report said liquidity in the banking system expanded sharply because of lending by the Central Bank, reduction in the public's holdings of currency relative to deposits and a run down of bank's reserves. It said despite these actions broad money grew by 27 per cent, driven by a strong increase in private sector credit. Consumer prices also rose by 28 per cent, that double the 1992 rate.