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Ghana: Statement at the Conclusion of an IMF Staff Visit

A staff team from the International Monetary Fund (IMF), led by Christina Daseking, visited Accra during the week of August 29, 2011. The discussions with the authorities focused on recent economic policy performance and challenges for 2012. The mission met with President John Evans Atta-Mills, Finance Minister Kwabena Duffuor, Bank of Ghana Governor Kwesi Amissah-Arthur, and other senior officials, as well as representatives from civil society and the private sector. The mission would like to thank the Ghanaian authorities for their excellent cooperation and warm hospitality.

At the end of the mission, Ms. Daseking issued the following statement:

“Ghana’s economy has recovered strongly since the start of the IMF-supported program in 2009. Economic growth is expected to exceed 13 percent this year, boosted by the start of oil production as well as strong activity in other sectors of the economy. Inflation is now firmly in single digits, and the cedi has remained broadly stable against the dollar, underpinned by an improved external position.

“A preliminary assessment of fiscal performance during the first half of the year shows strong improvements in tax revenues over the same period in 2010. It suggests that full-year fiscal targets are achievable with continued control over expenditures. The government has also cleared a sizeable part of its previous arrears, which had contributed to high non-performing loans in the banking sector. To avoid a reemergence of arrears, it will be important to continue strengthening public expenditure management systems; ensure that energy and other regulated prices are set at cost-recovery levels; and keep the overall spending envelope at a sustainable level.

“Prospects of a major scaling up of infrastructure investment will place an even higher premium on expenditure restraint in other areas. A large financing package has been secured on nonconcessional terms, and it is important to assess carefully the costs and benefits of the financial arrangement and underlying projects. IMF staff has offered to work closely with the government on assessing the projects’ impact on macroeconomic stability and the sustainability of public debt. This assessment will also hinge on the government’s policy commitments in other areas, both in the 2012 budget and the medium term.

“Discussions with the Bank of Ghana focused on the challenges of maintaining low inflation, in the context of sizeable foreign currency inflows. The mission encouraged the Bank of Ghana to further build up its foreign reserve buffer, while carefully managing the impact on domestic liquidity and allowing some adjustments in the exchange rate in response to market forces. Going forward, close coordination between fiscal and monetary policy will remain important to avoid a reemergence of high inflation and an associated erosion of real incomes, which particularly harms the poor.

“An IMF team is expected to return to Ghana in the fall of 2011 to conduct discussions for the fifth review of Ghana’s IMF-supported program under the Extended Credit Facility.”

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