(Reuters) – The International Monetary Fund’s board on Monday approved a second disbursement to Ghana under an aid deal and urged the government to adhere to the programme’s terms to stabilize the economy.
Ghana was one of Africa’s fastest growing economies, with exports of gold, cocoa and oil, but since 2013 its economy has endured a stubborn deficit, inflation above government forecasts, and a debt-to-GDP ratio of nearly 70 percent.
The West African country entered the $918 million programme in April and the board approved the $116.6 million disbursement after a positive first review conducted at staff level in June.
“The government should firmly continue with its fiscal consolidation efforts to fully restore macroeconomic stability and mitigate financing risk,” it said in a statement.
Controlling the wage bill is crucial for achieving expenditure controls and the government must remain committed to its domestic arrears clearance plan, it said.
Economists say the acid test of the government’s ability to adhere to the deal will rise in the run-up to a 2016 election that is likely to be closely fought between incumbent John Mahama and opposition leader Nana Akufo-Addo.
To manage its expenditure next year, the government should identify election costs as early as possible and provide for them in the 2016 budget, the board said. The government must also not exceed its wage bill target in talks with unions.
Ghana is set to issue Eurobonds of up to $1.5 billion in September as well as medium and long-term domestic securities to restructure debt and finance infrastructure projects.
The Board said while externally-oriented financing envisaged in 2015 will help reduce the pressure on the domestic debt market, the government should deepen the domestic debt market while exploring external concessionary loans.
It urged the central bank to continue its tight monetary policy stance to help bring inflation down, against the background of exchange rate volatility.