Ghana, at the end of 2012 recorded a fiscal deficit of over 12%, almost double of what was targeted for that year and the IMF expressed its concerns and worries on the matter.
It was also concerned with the widening external imbalances, and rising domestic debt, which expose the economy to risks from weaker terms of trade or reduced capital inflows.
According to the Washington-based institution, the ambitious fiscal consolidation will among other things ensure Ghana sustains its debt and build up more foreign reserves.
“Directors saw a need for more ambitious fiscal consolidation over the medium term to ensure sustainable debt dynamics, allow the buildup of official reserves, and lower the current account deficit,” the IMF said June 17, 2013 after its Executive Board of Directors assessed the Ghanaian economy.
The IMF Directors were of the view that realigning public spending from subsidies and wages to investment would also support future growth of the country’s economy.
Given the growing reliance on non-concessional financing, the IMF welcomed efforts by the Ghanaian authorities to strengthen debt management and investment planning.
The Fund says it supports the maintenance of a tight monetary stance until inflationary pressures subside and fiscal consolidation is firmly established.
The IMF Executive Directors commended the great strides Ghana has made in reducing poverty and reaching lower middle income status.
With favorable prospects for oil and gas production and a supportive business environment, the Directors said there is indication of a strong potential for sustained and inclusive growth, provided current macroeconomic vulnerabilities are addressed decisively.
By Ekow Quandzie