IMF completes 2021 Article IV consultation in Ghana

Ghana has been commended by the International Monetary Fund (IMF) for taking significant steps to address its debt vulnerabilities exacerbated by the COVID-19 pandemic. The completion of the 2021 Article IV consultation revealed that Ghana's pivot towards fiscal consolidation in its budget is seen as a crucial move in the right direction despite the challenges posed by the ongoing pandemic. Courage Kingsley Martey, Senior Economist at Databank Group, shed light on the key highlights of Ghana's efforts and the areas that still require attention. The IMF's call for deeper and more equitable fiscal efforts to tackle the country's mounting debt was emphasized as critical. Martey highlighted the importance of reducing budget digitalization, particularly in interest payments. He urged for measures to lower borrowing costs and enhance revenue administration to plug loopholes and improve tax compliance. The need for equitable revenue mobilization through a balance between consumption and progressive direct taxes was also stressed. The IMF's projection of a 4% real GDP growth this year, driven by the mining and services sectors, aligned closely with the government's growth forecast. Martey noted the potential for the mining and services sectors to rebound, especially in trade, which contracted significantly in the previous year. As the country aims to revive economic growth, the focus on these key sectors is crucial. Looking ahead to the upcoming Monetary Policy Committee (MPC) meeting, Martey anticipated that the Bank of Ghana would maintain its interest rates at 14.5%. Despite a decline in inflation rates, uncertainties due to potential increases in taxes and export prices suggest a cautious approach. The authorities are expected to monitor developments closely before making any adjustments in the following months. Overall, Ghana's proactive measures and policy responses have positioned the country on a path towards economic recovery and debt sustainability amidst the challenges posed by the pandemic.