Ghana IMF Program – The Risk Of Fiscal Consolidation Without Strong Fiscal Policy Rules


Following macroeconomic challenges resulting from poor fiscal and monetary policy management and their associated effects of large deficits, inflation, higher interest rates, depreciation of the local currency and low economic growth; the Government of Ghana requested a three-year arrangement under the Extended Credit Facility (ECF) covering the period of 2015–17, in an amount of SDR 664.20 million (180 percent of Ghana’s quota) to support its new economic reform program. This translates to US$918 million. The IMF has approved the request and has already started disbursing money to the government. Currently on a mission to Ghana, IMF staff are evaluating Ghana’s economic performance and to establish the extent to which the government is complying with the terms of the Facility. In this commentary, Ghana’s poor fiscal management record of the recent past has been examined, the relevance of the IMF program for regaining lost fiscal credibility; and the attainment and sustainability of fiscal consolidation in the face of administrative measures rather than legally binding fiscal and debt rules. 

Challenges of Fiscal Management in Ghana

Ghana over the years has demonstrated higher capacity to spend as demonstrated by higher rates of budget execution (See Figure 1 below); reflecting better levels of absorptive capacity. This also implies on the face value that increasing public spending would have positive impact on the capital base of the economy. But as it is already well known, the bulk of the annual budget is committed to compensation for employees, goods and services, interest payments; with an insignificant proportion for capital spending.