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Weekly Insights – Ghana – 30/06/2017 – Nimed Capital Limited

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THOUGHT OF THE WEEK

The Government Request IMF Aid Deal Extension

The Government has requested that the IMF push back the end date of its 3-year aid program, from April 2018 to December 2018. The Extended Credit Facility (ECF) for Ghana in an amount of US$918 million in support of medium-term economic reform program set by the previous government.

The program’s Key Performance Indicators (KPI) aim at restoring debt sustainability and macroeconomic stability to foster a return to high growth and job creation, while protecting social spending. Achieving these key fiscal objectives requires a strict containment of expenditure and structural reforms to strengthen public finances, as well as the improvement of budget transparency.

There has been some success in meeting these indicators set by the IMF, notably restoring the effectiveness of the inflation targeting framework to help bring inflation back into single digit territory before the completion of the program. This well help preserve the stability of the financial sector.

However, it has become clear that the some of the objectives of the program may not be achieved to satisfactory standard by the completion date of April 2018, thus an extension is required for the government to meet the fiscal targets. The request also aims at getting the deal to be revised to include more funding and new targets for fiscal consolidation in restoring macro-economic stability.

A prudent debt management strategy and monitoring of these indicators would be necessary to achieve the goal of reducing poverty and restoring macro-economic stability.

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