Ghana banks on IMF backing for growth

Bloomberg

Ghana’s President Nana Akufo-Addo is banking on good news from the International Monetary Fund after his predecessor derailed an economic recovery plan through overspending.
As the nation awaits the
outcome of a review from the Washington-based lender, which may come as soon as Wednesday, on reforms since Ghana entered a $918 million credit programme with the lender in 2015, gross domestic product is growing at the fastest pace in more than two years, the central bank is cutting borrowing costs as inflation slows and bond yields are falling.
Ghana’s economy had a soft landing under Akufo-Addo’s New Patriotic Party, with Finance Minister Ken Ofori-Atta announcing tax cuts in March and pledging to reduce the budget deficit by more than half over the next three years. While fiscal shortfall for 2016 was almost double the initial target under the auspices of former President Mahama, his administration did the groundwork to steady inflation.
“The old administration started implementing some good policies especially with the IMF program, the currency became stable, inflation and interest rates started trending downwards,” Edem Harrison, a research analyst with Frontline Capital Advisors, said by phone from the capital, Accra. “They have continued this trend into the new administration.”
Still, after eight months some realities are now starting to show as Ofori-Atta said the government will have to cut spending due to weak revenue collection. Ghana’s budget deficit for 2016 was 9.3 percent of GDP compared with an initial target of 5.3 percent under the IMF program. The government announced in January it discovered about $1.6 billion in unplanned spending by the previous administration, startling markets and weakening the currency. The shortfall is forecast to narrow to 6.3 percent this year. The Finance Ministry said last month GDP growth may accelerate to 9.1 percent next year.