IMF commends Ghana’s Covid fight

Finance Minister Ken Ofori-Atta

The International Monetary Fund (IMF) has said that the government’s digitisation drive will have a significant impact on Ghana’s economy.

This comes after the Fund’s assessment of the impact of coronavirus on the Ghanaian economy, and what the government is doing to recover from the pandemic.

The IMF in a statement noted that the “authorities’ structural transformation and digitalisation agendas are critical to support the recovery.”

It opined that Ghana’s digitalisation drive would reduce corruption, enhance service delivery and boost revenue in this critical period.

“The structural transformation can be complemented by the ongoing energy sector review, diversification in tourism, and the digital transition, which has the potential to reduce corruption, boost tax revenues, and improve service delivery,” the IMF Executive Board said.

To this end, it commended the government for its efforts.

“Directors commended the Ghanaian authorities for their proactive response to the COVID-19 pandemic, which mitigated its economic impact, but contributed to a record fiscal deficit and increased public debt vulnerabilities,” the IMF said.

COVID nightmare

The statement outlined in detail, how the global coronavirus pandemic devastated Ghana’s economy in 2020.

It noted that the Ghanaian economy, which was growing at a rate of 6.5 per cent in 2019, was badly hit by the pandemic, setting it back to a growth of 0.4, a loss of 6.1 per cent, thus having a telling effect on food prices and poverty rate.

“Ghana was hit hard by the COVID-19 pandemic,” the IMF said in its assessment.

“The pandemic had a severe impact on economic activity. Growth slowed to 0.4 percent in 2020 from 6.5 percent in 2019, food prices spiked, and poverty increased. The fiscal deficit including energy and financial sector costs worsened to 15.2 percent of Gross Domestic Product (GDP), with a further 2.1 percent of GDP in additional spending financed through the accumulation of domestic arrears,” it said.

“Public debt rose to 79 percent of GDP. The current account deficit widened slightly to 3.1 percent of GDP as the decline in oil exports was partially offset by higher gold prices, resilient remittances, and weaker imports,” it added.

On the Cedi, the IMF noted that it remained stable, despite the effects due to pragmatic steps by the Bank of Ghana.

“The Ghanaian Cedi remained stable against the US dollar, partly due to central bank intervention, and gross international reserves remained at 3.2 months of imports. External and domestic financing conditions tightened considerably at the start of the pandemic, but have improved since, and Ghana successfully returned to international capital markets for a $3 billion Eurobond issuance in March 2021,” it said.

Encouraging signs

After over a year of devastation, the IMF’s assessment has commended Ghana’s economic management for “encouraging signs” towards economic recovery.

“An economic recovery is underway. Growth is expected to rebound to 4.7 percent in 2021, supported by a strong cocoa season and mining and services activity, and inflation remaining within the Bank of Ghana target,” it said.

“The current account deficit is projected to improve to 2.2 percent of GDP, supported by a pickup in oil prices, and gross international reserves are expected to remain stable. The 2021 budget envisages a fiscal deficit of 13.9 percent of GDP in 2021, including energy and financial sector costs, and a gradual medium-term fiscal adjustment which would support a decline in public debt starting in 2024,” it added.

The IMF, however, cautions that the positive outlook is subject to “significant uncertainty, including from new pandemic waves” as well as risks associated with large financing needs, which will increase public debt.

The Executive Directors also welcomed the improvements in the Anti-Money Laundering and Terrorist Financing (AML/CFT) framework that allowed Ghana to exit the FATF “grey list”.


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