IMF Mission asks Ghana to reduce fiscal deficits

The International Monetary Fund (IMF) Mission to Ghana, has asked the Ghanaian authorities to strive to reduce fiscal deficits and associated public borrowing, to sustain and build on the favourable trends in inflation and macro-economic stability. The fiscal deficit in the first half of 2010 was 5.3 per cent of projected gross domestic product, slightly above the ceiling under government's IMF- supported programme. "Updated projections for the second half of 2010 indicate that the gap relative to the programme targets will widen, reflecting new expenditure commitments and shortfalls in some revenues categories," Mr Peter Allum, Mission Chief told journalists at a press briefing in Accra. He said contrary to programme goals, new arrears to contractors on public wages would be incurred in 2010. "Looking ahead to 2011 and the medium term, a first estimate, before taking into account potential policy responses, shows substantially larger budget deficits and public borrowing than envisaged under the programme supported by the Extended Credit Facility," Mr Allum added. Finance Minister Dr Kwabena Duffuor told the Consultative Group Meeting, last week that the deficit would hit eight per cent of GDP at the end of the year and marginally up from a target of 7.5 per cent. "The IMF team called for the adoption of contingency fiscal plans to limit fiscal slippages in 2010." Mr Allum called for the strengthening of public expenditure management systems, ensure sustained cost-recovery pricing of energy and other products, and reinforce overall fiscal performance to enable government resolve the arrears problem. Discussions during the two-week mission focused on recent economic performance, key macro-economic challenges, and the government's policy framework.