Press Release No. 11/200

Press Release: IMF Executive Board Completes Third and Fourth Reviews Under ECF Arrangement with Ghana and Approves US$94.3 Million Disbursement

May 27, 2011

The Executive Board of the International Monetary Fund (IMF) completed on May 25 the third and fourth reviews of Ghana’s performance under the economic program supported by the Extended Credit Facility (ECF). The completion of the reviews will enable an immediate disbursement of an amount equivalent to SDR 59.58 million (about US$94.3 million), bringing total disbursements under the arrangement to SDR 208.73million (about US$330.3 million).

In completing the reviews, the Board also approved a waiver for the non-observance of the end-December 2010 performance criteria on the overall fiscal deficit and on the net change in the stock of domestic arrears. The Board also approved a rephasing of disbursements.

The three-year ECF arrangement was approved on July 15, 2009, with access of SDR 387.45 million (about US$613.1 million or 105 percent of quota).

Following the Executive Board’s discussion on Ghana, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair issued the following statement:

“Ghana’s economy rebounded in 2010, with strong growth and external performance. International reserves increased, the currency remained broadly stable, and inflation declined to single digits. Fiscal performance, however, deteriorated with a rise in the cash deficit and accumulation of domestic arrears.

“The authorities’ 2011 economic program focuses appropriately on restoring the momentum of fiscal consolidation. The budget target for this year is ambitious and will require that a portion of Ghana’s initial oil production revenues be saved. Contingencies identified by the authorities will be important to ensure that the 2011 fiscal goals can be achieved.

“Structural fiscal reforms should be accelerated. Priorities are to reinforce tax administration under a revamped Ghana Revenue Authority, strengthen expenditure monitoring and control including through a new budget management system, and regularize Ghana’s domestic payments arrears. Adopting transparent procedures for oil revenue management, as stipulated in the Petroleum Management Act, will also be important.

“The adoption of quarterly electricity tariff reviews is an important step towards addressing risks to the budget from energy pricing. For domestic petroleum products, it will be important to avoid losses to the budget when protection provided by hedging ends.

“Ghana faces inflation risks from rising global commodity prices, robust domestic growth, and rapid liquidity expansion. The Bank of Ghana should stand ready to tighten monetary conditions, as needed. A further build up in reserve cover would be appropriate within a flexible exchange rate regime.

“Steps have been taken to address immediate vulnerabilities in the banking system. However, further steps are needed to review the appropriate extent of state involvement in the banking industry, strengthen risk management by banks, enhance supervisory capacity, enforce prudential regulations, and strengthen corporate governance, accounting standards, and creditor rights,” Mr. Shinohara said.