What’s the Big Deal? Ghana and IMF Close to Agreement
By admin October 20, 2014

A woman holds 03 July 2007 in Accra a waGhana says it is now close to reaching a deal with the International Monetary Fund (IMF) for a financial assistance programme which it hopes to be finalize in November announced Deputy Finance Minister Cassiel Ato Forson on Thursday. The country has been economically stagnate this past year due to self-inflicted wounds. This deal will hopefully give Ghana the kick-start it needs to get back on track and returned to its once privileged position as a favorite of international investors.

This was announced after a second round of talks Forson had with the IMF in Washington. A third and final round of talks should start in November. President John Mahama said that he hopes the expected three year programme will help facilitate a modernization of his economy which has been heavily dependent on the export of raw commodities such as gold, oil and cocoa. The IMF for it’s part was far more coy about the talk stating it had a “productive dialogue” with Forson and is making progress on identifying economic and policy changes that would be necessary for a fund supported programme.

The changes the IMF will want to make may be more drastic than the people of Ghana are willing to abide. One of the biggest cuts they’ll wish to make will target the private sector pay, which ate into 70% of government revenues in 2012. Another area of reform will need to be fuel subsidies which has severely weakened the government’s ability to collect taxes from one of its largest industries. This combined with falling commodity prices has led to a fiscal debt of 10.1% in 2013 and public deficit of over 50% of GDP.

It’s not all bad news for Ghana. The economy still experienced 7.6% growth last year, well above the Sub-Saharan African average of 5.1% and forecasted to only have a slight drop off from that figure this year. The IMF deal should reassure nervous investors who have doubts about the government’s ability to maintain fiscal discipline during an election year in 2016. Hopefully, the IMF and Ghana can come to an agreement which will make needed cuts without imposing European-style austerity measures on Ghana’s people.

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