The IMF approved a $602.6 million loan to Ghana July 15 to help the West African nation tackle budget imbalances while preparing for the start of oil production.
The loan is the largest IMF financing package to date for an African country during the current global financial crisis.
Ghana’s 24 million people have shared Africa’s growth upswing over the past decade. Its governance and business climate ratings are among the best in sub-Saharan Africa, and its human development indicators rank in the top quarter. But, although poverty has fallen sharply, 30 percent of the population still live on less than $1.25 a day, and nearly 10 percent of the population remain undernourished.
IMF support is being provided under the Poverty Reduction and Growth Facility (PRGF). Under the PRGF-supported program, the government is targeting a substantial phased reduction of the fiscal deficit. This would cut public sector borrowing and allow Ghana to reverse the sharp deterioration in the public debt-to-GDP ratio since 2006
Economic stewardship passed to a new government in 2009. The new administration’s first priority was to address the macroeconomic imbalances caused by highly expansionary fiscal policies in 2007–08, and respond to the risks from the emerging global recession.
In June 2009, the authorities adopted new budget measures to ensure that the 2009 deficit target is met. Given the limited scope to expand public borrowing, Ghana has no scope for countercyclical fiscal policy, and the government stands ready to cut spending further if the slowing economy leads to revenue shortfalls.
For 2010, further budget savings of about 3½ percent of GDP will be needed. The government intends to meet this goal through new revenue mobilization, tight oversight over the public sector wage bill, and by avoiding energy subsidies, which have been costly in the past.
Source: BBC
Edited By: AHU – David A-O