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Razia Khan calls for law to back IMF reforms

By: Emmanuel Bruce
Razia Khan
Razia Khan

THE Chief Economist for the Standard Chartered Bank, Ms Razia Khan, has advised the government to institutionalise some of the reforms and measures that were introduced under its external credit facility programme with the International Monetary Fund (IMF).

In order to sustain and consolidate the gains that have so far been made under the ongoing programme, she said it was important for the government to institutionalise some of the reforms and back it by legislature.

“If measures such as the zero deficit financing from the Bank of Ghana and the cap on fiscal deficit are adopted as legislation, then the country will not need the monitoring of the IMF on a consistent basis,” she explained.

Addressing the media in Accra on the country’s economy, Ms Khan said what investors were looking out for was the sustainability of the gains that had so far been made under the programme; something she said could only be possible if the country institutionalise some of the reforms.

She said what was important under an IMF programme was what the country actually did with the measures adopted under the programme after its completion.

“When Ghana went for the IMF programme, alongside the performance criteria, there were many structural benchmarks that were been requested by the IMF. The country had fiscal issues and experienced some balance of payment difficulty and the extended credit facility was aimed at stabilising the external side of the economy,” she noted.

The IMF in April 2015 approved a three-year Extended Credit Facility (ECF) for Ghana for an amount of US$918 million in support of the country’s medium-term economic reform programme.

The programme was aimed at restoring debt sustainability and macroeconomic stability to foster a return to high growth and job creation, while protecting social spending.

After its completion, the programme was extended further by a year and set to run till December 2018.

Almost four years after the implementation of the programme, the country’s macro-economic environment has improved and stabilised, with inflation and budget deficit being on a downward trend.

Significant benefits
The economist pointed out that the IMF programme brought significant benefits to the country as investors began to see the country differently due to the programme.

“They saw a country that was not only reforming but creating an environment for the IMF to manage it very stringently and what these investors expect now is the institutionalisation of some of these requirements under the programme,” she stated.

“The country needs to get its fiscal deficit under control and so far its decision to make the five per cent deficit of GDP cap as a legislation is good because when it becomes part of the law, then you wouldn’t need to go from one IMF programme to another in order to control your deficit,” she added.

She said the IMF programme was what the country needed due to the fiscal imbalances, adding that the country had so far performed well under the programme and now had to build on it.

Growth exceeded expectation
Ms Khan also admitted that the growth in the Ghanaian economy in 2017 exceeded its expectation, especially with the non-oil GDP which grew by 4.7 per cent.

“In terms of our own focus and expectations, Ghana was going through a very significant macro-economic rebalancing and very significant fiscal adjustments; and normally when fiscal targets are marked by expenditure having to be cut because of revenue shortfalls, the thinking will be that growth will be quiet moderate so the headline growth in the economy really surprised us,” she stated.

“We did not expect such a robust performance from the non-oil economy, given the fiscal adjustment that was underway. For any economy that is undergoing adjustments, it was very unusual to see that kind of robust growth,” she added.

Economic outlook
Touching on the economic outlook for the country, she said Ghana stood tall among its peers in the sub-Saharan region due to the rebalancing of the economy and the efforts in sustaining macro-economic stabilisation.

She said the rising oil and gas production and the promise of more stable energy at a lower cost would provide additional boost for growth.

“Although the country is going through fiscal adjustments, it doesn’t necessarily mean there is going to be such a tight squeeze in spending that there is not going to be any growth,” she stated.

On the non-oil GDP, she said the major drivers would be inflation, which reduced to 9.6 per cent last month, and the extension of credit to the private sector, which would come as a result of the recapitalisation of the banks.