Gov’t has done enough to wean off IMF – Razia Khan

Government’s ‘robust’ economic performance, among other structural reforms, has vindicated its decision not to seek an extension of the 3-year US$918million Extended Credit Facility (ECF) programme with the International Monetary Fund (IMF), Razia Khan – Standard Chartered’s Chief Economist for Africa and the Middle East, has said.

According to Ms. Khan, the strong macroeconomic performance of the past 18 months came as a surprise to everyone – including Standard Chartered, which had forecasted growth of about 6.1 percent last year only to see the economy expand to 8.5 percent.

Speaking to journalists in Accra, the Standard Chartered Chief Economist said apart from the economy growing stronger than projected, the non-oil GDP growth also recorded a significant contribution – contrary to the bank’s projection that the growth was driven by oil.

“In our reports for end of last year, we agreed that growth has surprised positively and a lot of this reflects oil and gas… we did not expect that robust performance from non-oil economy given the fiscal adjustments that were being implemented,” she said.

“I was wrong, because when you look at the actual numbers for non-oil for 2017 it’s about 4.7 percent, which far exceeded my expectations. The view that we had was just based on a general belief that in an economy that is undergoing adjustment its very unusual for that kind of robust growth to be achieved…Our growth forecast was exceeded, especially in terms of the non-oil GDP.”

She argued that a lot of structural reforms that were agreed with the Bretton Woods institution are being implemented one way or another, which reposes enough confidence in the Ghanaian economy.

What is important with the IMF programme, she said, is what Ghana actually does with it.

“The programme’s importance is for the country to see institutionisation of the reforms, and if Ghana could have done reforms like zero financing of the deficit, cap fiscal deficit over time…then the country does not need monitoring of the IMF on a consistent basis; you don’t need the stringent requirement of a funded programme because the country starts to do these things for itself,” Ms. Khan said.

Investors, she said, increasingly look out for the institutionisation of some of those requirements so that the country does not need to go for one IMF programme after the other, and for it to impose requirements the government is already pursuing. 

Giving her projection for 2018, Ms. Khan stated that the country has been fortunate because of rising oil and gas production as well as the promise of stable energy at a lower cost, which she said will provide a boost to growth.

“The outlook still looks very positive. Ghana still stands out relative to SSA peers, because there has been an important rebalancing of the economy that has supported the attempt at achieving macroeconomic stabilisation.

“Although Ghana is going through fiscal adjustments, it doesn’t mean there is going to be some tight squeeze on spending so that there is not going to be any growth,” she said.

Economic growth for 2018 is projected to reach 6.8 percent, with more that 5.4 percent of that coming from non-oil GDP growth. The deficit target is expected at 4.5 percent with inflation – which recently reached 9.6 percent – projected to end the year at 8.9 percent.