As the nation awaits the outcome of a review from the Washington-based lender, which may come as soon as next week, on reforms since Ghana entered a $918 million credit program with the lender in 2015, gross domestic product (GDP) 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 the new administration, 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 during the preceding administration, it did much of the groundwork to steady inflation and boost growth.
“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 stated from the capital, Accra. “They have continued this trend into the new administration.”
The Finance Ministry said last month GDP growth may accelerate to 9.1% next year, from a projected 6.3 percent in 2017. Many of the government’s revenue and growth estimates in the March budget are based on projections of increased oil production and lower-than-expected crude prices could erode some of these gains. The world’s second-biggest cocoa producer may also not enjoy the full benefit of its largest crop in six years as a global oversupply has caused London prices to drop by more than a third in the past year.
The IMF will consider an extension of its program with Ghana when its board reviews the country’s progress on reforms at a meeting on Wednesday, the lender said by email. The nation is set to complete the program in December 2018, eight months later than planned, and has no intention to extend it further, according to Finance Minister Ofori-Atta.
“The hole in the budget and the missed program targets for end-2016 only emphasize the need for the IMF program extension to sustain investor confidence,” Courage Martey, an Accra-based economist at Databank Group, said by phone.