The International Monetary Fund’s board approved Wednesday a third disbursement of $114.6 million under Ghana’s three-year aid programme, urging the government to further tighten fiscal controls to curb rising public debt, the Fund said.
Ghana, a major exporter of cocoa, gold and oil, entered the $918 million financial assistance programme in April, with the aim of restoring economic stability and boosting job growth.
The West African nation was once one of the continent’s strongest performers but slumping global commodity prices and a fiscal crisis which drove its debt-to-GDP ratio to more than 70 percent have put a brake on economic growth.
Wednesday’s approval followed a successful second staff level review in November, although concerns remained about the country’s financial management and rising inflation, the Fund said in a statement.
“..it is essential that the government sticks firmly to its policy of strict expenditure controls, by maintaining the wage bill within the budget limits, while controlling discretionary spending,” an IMF statement said late Wednesday.
“It is also important to continue to adhere to the domestic arrears clearance plan and avoid incurring new domestic or external arrears,” it added.
Ghana’s annual consumer inflation has been consistently above the government’s target in the past year, forcing the central bank to announce increases in its benchmark policy rate which stood at 26 percent in November, from 21 percent in February.
End-of-year inflation was 17.7 percent, compared with the 13.7 percent projected in a revised budget presented in July.
“To help bring inflation down towards its medium-term target, Bank of Ghana should stand ready to further tighten monetary policy if inflationary pressures do not recede as expected,” the statement said.
Ghana is yet to fully resolve a three-year electricity crisis that has crippled industries and made the government unpopular ahead of general elections later this year.
Washington sources told Reuters earlier the board was concerned about the power crisis and called on the government to resolve it urgently.
Wednesday’s approval brings total disbursements for Ghana to $343.7 million under the program, which ends next year.