The International Monetary Fund (IMF) has warned that if government fails to swiftly address the country’s ongoing power crisis to delay the energy sector reforms, growth may be even lower than projected this year and not rebound as quickly as expected thereafter.
According to the IMF, the deceleration in growth in 2015 may also weaken Ghana’s financial sector and lead to an increase in Non-Performing Loans (NPLs).
The slow growth might also affect government’s ability to support private sector activity and continue to provide budget financing, it indicated.
The warning was contained in the Fund’s report on its bailout arrangement with Ghana’s Government for a total of $918 million over a three-year period which was signed by Christine Lagarde, Managing Director of the IMF.
Commenting further on Ghana’s short and medium-term economic outlook, which it said was subject to substantial risks, it indicated: “Moreover, with exports dominated by commodities, Ghana remains exposed to terms of trade shocks. A further decline in oil prices would also have a substantial negative fiscal impact in the medium term.
“Changes in global financial conditions could increase financing costs as concessional resources are drying up for Ghana,” it noted.
However, the Fund added that if government quickly regains credibility in fiscal discipline and monetary policy, it may lead to rapid decline in domestic interest rates and restoration of investors’ confidence, noting that a stronger rebound in commodity prices over the medium term, including oil, would accelerate some development projects.
The emergence of large fiscal and external imbalances in recent years, as well as energy crisis, has put Ghana’s previous positive prospects at risk.
While the onset of oil production in 2011 was expected to support the development of public infrastructure and alleviate fiscal imbalances, a ballooning wage bill and overruns in current expenditure more than offset high revenue and led to double digit fiscal deficits.
Companies are presently laying off workers as a result of the power crisis, but government has failed to address the challenges after several promises.
Source: Daily Guide
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