The government will spend within limits to ensure it does not affront the deficit conditionality of the International Monetary Fund (IMF), Minister of State at the Ministry of Finance, Dr Mohammed Amin Adam, has said.
Ghana is to receive the first tranche of $600 million from the Fund with the remainder of the total $3 billion bailout to be spread within the next few years.
Dr Adam said the government has put measures in place to ensure fiscal discipline.
“The minister has already set up a budget implementation standing committee which I chair, and that is supposed to ensure that whatever we spend on is approved, and whatever we spend on goes through a very rigorous process of approval so that we can keep our spending within our budget”, he told Joy News.
He said: “If we will have any spending beyond the budget that will increase our deficit levels then we may not be able to meet the IMF requirement of deficit”.
“We’re supposed to record about 1.5% of primary balance and to be able to do that will require very significant fiscal discipline”, Dr Amin Adam pointed out.
He said the IMF’s condition that Ghana undergoes a front-loaded fiscal adjustment of about 5.1 percentage points, is “huge”, and “demands discipline; it demands hard work”.
“And, so, we are sensitising every sector of government including SOEs, and this is the reason why they all now are brought under the GIFMIS including the statutory funds; they’re all brought through the GIFMIS in order to give us visibility and also to ensure that we control the spending by every agent of government”.
Meanwhile, IMF MD Kristalina Georgieva has said “preserving financial sector stability is critical for the success” of Ghana’s comprehensive ECF-supported economic reform programme aimed restoring macroeconomic stability and debt sustainability.
The executive board of the IMF approved Ghana’s US$3 billion bailout request to support the country’s economic recovery on Wednesday, 17 May 2023.
In a statement, the IMF boss said: “Given the adverse impact of the domestic debt restructuring on balance sheets of financial institutions, the authorities will devise and implement a comprehensive strategy to rapidly rebuild financial institutions’ buffers and exit from temporary regulatory forbearance measures”.
She noted: “Monetary and exchange rate policies under the programme will focus on reining in inflation and rebuilding foreign reserve buffers. The Bank of Ghana will continue tightening monetary policy until inflation is on a firmly declining path and will eliminate monetary financing of the budget. The central bank will also enhance exchange rate flexibility and limit foreign exchange interventions to rebuild external buffers”.
“An ambitious structural reform agenda is being put in place to reinvigorate private sector-led growth by improving the business environment, governance, and productivity”.
Also, she said: “The combination of large external shocks and pre-existing fiscal and debt vulnerabilities precipitated a deep economic and financial crisis in Ghana”.
“In response, the authorities have launched a comprehensive reform programme to be supported by the ECF-arrangement”.
“It is focused on restoring macroeconomic stability and debt sustainability as well as implementing wide-ranging reforms to build resilience and lay the foundation for stronger and more inclusive growth”.
“Capacity development and continued support by development partners would be critical for the successful implementation of the authorities’ programme”.
She added: “Fiscal consolidation is a core element of the programme”, noting: “A substantial and front-loaded fiscal adjustment has started with the 2023 budget”.
Also, the IMF MD said: “Enhanced revenue and streamlined expenditure will be combined with policies to protect vulnerable households and create room for higher social and development spending in the medium term”.
“With a view to fostering lasting fiscal discipline, the authorities are also advancing reforms to enhance domestic revenue mobilisation, strengthen public financial management, and tackle the deep challenges in the energy and cocoa sectors”.
“The government has also launched a comprehensive debt restructuring, including both domestic and external debt, to place debt on a sustainable path. Effective collaboration by all parties involved would be critical”, she pointed out.