IMF hails Ghana for effective management of Covid-19

The International Monitory Fund has lauded Ghana for its effective management of the novel coronavirus. The Bretton wood institution says Ghana’s good management, supported by a strong policy response, has led to the early rebound of the country’s economy.

It, however, noted that “deeper, and more equitable, fiscal effort is needed to address the debt vulnerabilities exacerbated by the pandemic.”

This was disclosed by the International Monetary Fund (IMF) mission, led by Carlo Sdralevich, following consultations between April 28 and May 12, 2021 through virtual meetings.

A statement issued by Mr Sdralevich noted: “Ghana has managed very effectively the COVID-19 outbreak in the country, and thus succeeded in protecting lives.”

Impact of Covid

The impact of the pandemic on the economy, the statement noted, had been severe, slowing Real GDP growth to 0.4 per cent in 2020, from 6.5 per cent in 2019. This is due to lower activity in the extractive industries and a collapse in hospitality and retail services, including the informal sector that especially employs female workers.

Inflation, it added, spiked to double digit because of food price pressures, before falling to 8.5 per cent in April 2021.

According to the IMF, “Policy interventions in 2020 were also critical to safeguard livelihoods and paved the way for a faster rebound of economic activity.”

It said “Real GDP growth is projected at 4.8 per cent in 2021, driven by a rebound in mining and services.”

“Inflation is expected to remain around the central bank’s target of 8 per cent by end-2021. The CARES program has the potential to be transformative and inclusive for the Ghanaian economy, buttressed by its emphasis on SMEs and digitalization as well as leveraging the AfCFTA.

Rebound

The IMF, however, said “the 2021 budget’s recent policy pivot towards fiscal consolidation is an important step in the right direction and a difficult one in a pandemic.”

It called on the government to deepen fiscal consolidation and anchor it around debt and debt service reduction to create space for social, health, and development spending.

“Given the social and equity implications, fiscal consolidation should rely more on progressive revenue and spending measures, while guaranteeing fiscal support to the most vulnerable and social safety nets,” it said.

“Despite progress in rationalizing power generation, the financial viability of the energy sector affects people’s daily life and will remain a drag on productivity and a driver of public debt if not addressed decisively. Improving efficiency and collections remains a priority to achieve substantial savings.

“The planned audits of COVID-19 emergency spending and of arrears accumulated in 2020—in addition to routine budgetary reporting practices—are welcome as they will help account for the increase of spending and its effectiveness, and provide lessons to improve the robustness of Public Financial Management systems,” it added.