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IMF wary of Ghana economic frailties


ACCRA – THE International Monetary Fund (IMF) warned short-term vulnerabilities would impact badly on Ghana’s economy.

According to the Breton Woods Institution, which the government is courting for a possible bailout, current vulnerabilities have put Ghana’s transformation agenda at risk.

It explained, “Short-term vulnerabilities have risen significantly, amid high fiscal and current account deficits. The international reserve position has weakened alongside mounting public debt.

“High interest rates, and a depreciating currency have begun to weaken private sector activity, and spreads on Ghana’s Eurobonds have risen above those of regional peers,” the latest IMF Staff Report has said. The report is based on their recent visit, and engagements with key managers of the Ghanaian economy in the country,” IMF stated.

The IMF Staff Report is conducted as part of Article IV Consultation.

The latest report is based on information available to the team at the time of discussions.

Christina Daseking led the IMF mission to Ghana culminating in a report completed in late April.

Madam Daseking and her team noted with concern that economic growth was slowing from previously high levels.

Following estimated GDP growth of 5½ percent in 2013, Staff projects a further deceleration to 4,75 percent in 2014. Driven by the depreciation and administered price increases, inflation reached 13,5 percent at end 2013 and 14,5 percent in March. Monetary policy was tightened, as the fiscal consolidation target was missed.

“Despite significant policy efforts, the 2013 fiscal (cash) deficit reached an estimated 10.9 percent of GDP, versus a target of 9 percent.

“In the absence of additional measures, the 2014 deficit is projected at 10¼ percent of GDP, with consolidation made more difficult by slower growth. To address rising inflation, the monetary policy rate was raised to 18 percent, and reserve requirements were tightened.Current vulnerabilities put Ghana’s transformation agenda at risk, IMF stated.

“The government’s objectives of economic diversification, shared growth and job creation, and macroeconomic stability rely on the reallocation of resources from current to capital spending.

“Yet, high twin deficits and large interest payments on rising public debt are crowding out priority expenditure and private sector activity,” Daseking observed.

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