The Deputy Managing Director of the International Monetary Fund (IMF), Mr. John Lipsky, has observed that legislators and policy makers are faced with the challenge of explaining to Ghanaians that unless the country's fiscal affairs are managed carefully, oil revenues will not be able to make a real difference to growth, job creation, and living standards.

He has therefore challenged the legislators to ensure Ghana's future, by encouraging a rich and active debate on the merits of sound budgeting, and the best ways to use Ghana's prospective oil wealth wisely.

"That is likely to be the central economic policy challenge for Ghana for sometime to come," he said.

He noted that the country was faced with the problem of weighing the short term cost of fiscal adjustment, against the long term gains that can come from oil financed investments, as other countries with the natural resource have been able to manage their economic policies with an eye on the longer term.

The IMF Deputy Chief said unless Ghana can mobilise more revenue and contain recurrent spending costs better, a fiscal deficit of the magnitude that Ghana has been recording recently, would absorb all of Ghana's future oil revenues, leaving nothing for increasing capital spending. Addressing Parliament yesterday, on what the IMF was doing for its African members like Ghana, the deputy MD said, as the world crisis widened in 2009, Ghana turned to the IMF for financial support.

He said the three year economic program between the IMF and Ghana, centered on fiscal adjustment, and on reforms to budget management, to prepare Ghana for the transition to oil producer status.

According to him, an assessment conducted by the fund in October 2009, was positive in that management of spending had been tightened, helping to reduce deficit, and tighter monetary conditions have helped to stabilize the exchange rate, so that the cedi does not depreciate.

Mr. Lipsky quickly added that not everything was rosy, because deficit was far too high and public debt still rising. Large scale borrowing is keeping interest rates high, which means more out of pocket costs for repayment.

He added that sound finances were needed so that future oil revenue can underpin an expanded public investment program that is needed to boost economic growth.

The deputy MD mentioned that the conditions on their financial arrangements had been made more flexible, with a goal to focus IMF conditionality on reforms that are critical to economic success, while ensuring that countries have the opportunity to follow policy approaches that are appropriate for their circumstances.

"We want to work with our members to explore a variety of options for economic reforms that will generate real progress."

The visiting IMF boss maintained that in order to relieve concerns about whether countries would be able to ride out the global financial crisis, the fund approved a general allocation of special drawing rights, which pumped $250 billion into the world economy.

Ghana's share was $450 million, which boosted its gross international reserves by about 25%. "A reserve cushion, you know, is very important to maintain confidence in a country's ability to meet its external financial obligations," he said.

The members of the house asked him some few questions bordering on the IMF and its implications for Ghana.

The Minority Leader, Osei Kyei Mensah Bonsu, in a brief remark, said the country was very grateful, especially for the low interest rate it has been enjoying.