IMF: Can Ghana resist temptation?
The country hopes a deal can revive its stumbling economy, but it will be hard to stick to the IMF’s conditions when the 2016 elections are so close at hand.
Ghana’s woeful economic position has forced the government to seek solace from the IMF. The programme, which was finally agreed at IMF staff level on February 26 after five months of deliberation, is worth $940 million over three years.
The IMF’s support could not come soon enough. Ghana is suffering from a twin deficit: the current-account deficit is 10.5% of GDP and the fiscal deficit is 7.5%, according to data from Rand Merchant Bank. Total public debt in Ghana is C76.1 billion ($21.8 billion). That is 67.1% of GDP. The monetary side doesn’t look good either. The cedi has depreciated 31% over the last year; by December 2014 inflation had risen to 17%, before declining to 13.5%. The IMF programme should ease the pressure on government coffers and relieve the struggling currency.
“The IMF could be Ghana’s saviour. A deal will help fix the country’s short-term economic issues and hopefully pull the economy back from the edge,” says Derrick Mensah, senior analyst at African Alliance Securities in Ghana.
Huge public sector wages, fuel subsidies and low taxation rates have all come together to push out the deficit.