Stephen Odoi-Larbi
2 November 2009
Accra — In-spite of the global financial crisis, Ghana's economy is expanding at a moderate pace, says the IMF Staff Mission to the West African state.
Areas of particular strength cushioning the Ghanaian economy, according to the IMF, include cocoa, the country's number one export product, and gold exports.
Growth in these sectors was estimated to more than offset weaknesses in construction and import-related activities.
Although national accounts data were not available for the 2009 fiscal year, the mission focused on partial indicators available to them, and therefore projected a GDP growth between 4-5 percent range, which also fell in line with assumptions made by the Finance Minister, Dr. Kwabena Duffuor, earlier in the year.
"External performance has strengthened. Robust gold and cocoa exports, combined with a downturn in imports, contributed to a significant improvement in the external current account balance. Reflecting these trends and global currency development, the Ghanaian cedi has appreciated slightly against the dollar since July 2009, and net international reserves exceeded the end-September target, even excluding the new allocation of IMF Special Drawing Rights (SDRs) in September, which provided Ghana with additional international reserve cover equivalent to about US$450 million," said Mr. Allum.
The success achieved by Ghana, according to Mr. Allum, was as a result of tighter monetary policy and fiscal consolidation embarked upon. Grant receipts by the West African state were expected to fall short of budgeted levels by about 1 percent of GDP in 2009, according to the IMF, which also projected a smaller shortfall in the country's revenues.
It said through tight cash management through the fourth quarter, there were good prospects of keeping Ghana's budget deficit to 10 percent or less, down from fourteen and a half of GDP in 2008.
The IMF's mission was on a review of the Government of Ghana's economic program supported by the IMF's Poverty Reduction and Growth Facility (PRGF).
The mission met with Ghana's Vice President, John Dramani Mahama, Finance Minister Kwabena Duffuor, Bank of Ghana Governor, Kwesi Bekoe Amissah-Arthur, and other senior officials.
The mission discussed policies for managing budget and off-budget liabilities resulting from expansionary fiscal policies in earlier years.
The mission underlined the need for cost recovery, energy pricing, and rigorous cash management, to avoid incurring new arrears in the future. "Avoiding new arrears would be important to the banking sector, where a recent increase in non-performing loans has partly reflected liquidity issues associated with the timing of government payments," noted Mr. Allum.
The main policy challenge for 2010, according to the IMF, remains the need for further fiscal consolidation, to stem Ghana's rising public debt ratio, and to reduce the crowding-out of private sector credit which can result from heavy bank financing of the budget.
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