The International Monetary Fund (IMF) is warning of a full-blown financial crisis for Ghana if aggressive measures are not taken to check government’s rising debts.
The Fund gave the warning in its staff report sent to its Executive Board requesting it pass Ghana’s performance under the third review of the program.
According to the IMF staff, their fears are based on some tight financing conditions facing government as a result of challenges with revenue mobilization, a development that could result in some overruns in the coming weeks, as the election season approaches.
“In the context of a much higher public debt level, a replay of the past spending splurges in election years would greatly heighten the risk of a full-blown economic and financial crisis and undermine Ghana’s development progress."
The staff in its 121-page report noted that even absent such a policy slippage, heightened risk aversion and investor uncertainty as the December 2016 election approaches could yet pose a challenge. It was therefore of the view that, it will be very important for the government to sustain fiscal transparency and be ready to tighten policies aggressively as the situation warrants.
Ghana’s debts
The staff maintained that Ghana’s risk of debt distress remains high under the updated debt sustainability analysis (DSA) with two relevant debt indicators breaching the thresholds under the baseline.
However, end-2015 debt-to-GDP ratio turned out to be smaller than envisaged in the previous DSA due to larger fiscal consolidation, higher nominal GDP, and exchange rate stabilization.
With continued fiscal efforts, prudent debt management, and careful selection of projects to be financed by non-concessional loans, the debt trajectory is now projected to show a more favourable path than before.
Discrepancies with fiscal data
The staff in its report on Ghana were of the view that the inconsistencies in fiscal reporting at the end of 2015, and first half of 2016, was more of timing issues and not indicative of worsening financial position of government
Keeping track with fiscal consolidation plan
The staff was of the view that achieving this target will require enhanced revenue collection and continued strict expenditure control, in particular of the wage bill while containing discretionary spending, and there must also be strong vigilance and efforts to achieve the revised 2016 budget objective
Banking assets continue to decline
The IMF report continuous to paint a not so good picture of the banking sector when it comes to quality of their assets.
The fund maintained that The non-performing loan ratio increased to 18.8 percent in June 2016 from 11.2 percent a year earlier, reflecting the lagged impact of exchange rate depreciation and disruptions to energy supply, but also loan reclassification by some banks following an Asset Quality Review.
Banks increased provisions in response, from 5.1 to 7.9 percent of gross loans. The ratio of regulatory capital to risk-weighted assets was similar to a year earlier at 16.2 percent, although system profitability declined, with return on equity falling to 23 percent in June from 29 percent a year earlier.
Concerns with Amended Bank of Ghana Act
The staff described as unfortunate development in view of the sufficient credibility that inflation targeting framework has had to date, due to its failure to push ahead with some stick to some key amendments to the Bank of Ghana Act.
This includes one that would reduce central bank financing of government to zero, which did not muster sufficient parliamentary support. According to staff, the government has however promised to correct these shortcomings in 2017.
Source: JFM/Ghana
Disclaimer: Opinions expressed here are those of the writers and do not reflect those of Peacefmonline.com. Peacefmonline.com accepts no responsibility legal or otherwise for their accuracy of content. Please report any inappropriate content to us, and we will evaluate it as a matter of priority. |
DR. BAWUMIA HAS BEEN VINDICATED OOOO. UNINTELLIGENT AND NATION WRECKERS LIKE FIIFI KWETTEY AND JOHN MAHAMA ...HMMM \ CHANGE IS COMING... ABEN BE BOM
Is this not what Bawumia has been warning about? Undecided voters, please note that if Mahama is re-elected in December, you will really really suffer economic hardships next year to pay for his foooooooooooolish expenditure of this year. Vote wisely and vote him out.
But our president is telling the people in Yeji that NDC have built a robust economy. Am sure this is only happening in their pockets not in Ghana.
Bawumia predicted and again he has been proven right! Omane boamah and Fiffi Kwetey what do you have to say?
This government lacks fiscal discipline. That's all. How can you be making a lot of non-budgeted discretionary expenditure and expect to achieve fiscal consolidation?
Massa; any logical person will not even bother to read this IMF flatulence toxic report because for me ; I have always contended that this IMF and this World Bank including these fininacial ratings organsation are all fraudesters ; the reasons are just simple never trust what these organisations and what they tell you about your economy ; they are engaged in this sinister global wrecking of economies like Ghana behind the scenes ; use loans as a marketing tool to sell debt to counteries like Ghana and pretend and lie that their economy are doing fine rather than examing the fundamentals ; no doubt China nevers accepts any IMF report because they all manipulated to get loans cheap loans ; whilst in actual fact they conive to hand over debt to bandits like Jon Mahama to still ; the historical facts tell us that the IMF is a ***barred word*** organisation who deliberately look the other way and prescribe unachieveable targets to economies like Ghana; their precription never WORK !!!!!!!!!; remember the BREXIT economic reports on the UK turned out to be to inaccurate ;remember the great financial crash of 1987 and their reports on Wall Street -all BOGUS !!!!!!!!; recently they told us the economy was doing fine whilst Mooody's ratings gave us B plus-BOGUS ratings ; to me Ghana rating should have been D -minus because all the key economic idicators show Ghana going backwards economically ; high grearing ; huge deficit -GHC 110bn ; high interset rate-35%;high unemployment ;irrelevant projects whose pay periods range between 10 to 15 years ; whilst export commodities prices are fast falling ; so the question is WHY ARE THESE ORGANISATIONS INCLUDING IMF : WORLD BANK AND OTHERS LYING TO GHANA AND KEEPING ON LENDING US DEBT; TO ME THERE IS STRONG JON MAHAMA VIRUS OF EBOLA OF 'NOKOFIO' HAs SPREAD INTO THESE ORGANISATIONS ; BECAUSE MASA: I DON@T GET !!!!!!!!! because either we have third rate people managing our economy including this Seth Terpkor and Ato Forson or it just a delibrate attempt to WRECK THE ECONOMY OF GHANA!!!!!!!!!!!
No Wonder, we have started experiencing it already with the collapse of some banks and micro finances. What a government?
DR BAWUMIA SAID IT BAM, OYIWA NDC LIARS CHANGE IS COMING
Bawumia Bawumia Bawumia Bawumia Bawumia must be respected by all of us. He is not only intelligent brilliant, but he is also a prophet. May God forgive the NDC people who insulted him.