20101001
africanews

The International Monetary Fund urged Ghana to improve its fiscal performance to avoid an unsustainable build up of public debt through increased foreign borrowing. IMF mission chief to Ghana, Peter Allum said initial estimates for 2011 and the medium term showed "substantially larger budget deficits and public borrowing than envisaged under the (IMF) program."

The IMF approved a $602.6 million loan program for the West African country in July 2009 to ease financial strains caused by the global economic slowdown.

Allum said widening in Ghana's budget deficit reflected a costly public sector pay regime and the rise in external borrowing to finance infrastructure projects.

Ghana, which is due to join the club of commercial oil supplies by the end of this year, sealed nearly $13 billion in loans from two Chinese banks earlier this month to finance oil and gas infrastructure and agricultural development.

"Discussions focused on the impact that higher deficits and higher borrowing would have on Ghana's rising public debt stock, and on the importance of tailoring spending plans to projected revenues, which oil incomes will increase only modestly in the coming years," Allum said.

He said talks were continuing on options for reducing projected deficits by limiting spending growth and strengthening domestic revenue.

Government data is expected to show a "substantial" upward revision in the size of Ghana's economy and per capita incomes, he added.

"These data will be important to provide a more reliable assessment of recent economic performance, and better gauge Ghana's fiscal and debt management situation and challenges," Allum said.

He said Ghana's financial performance in its power sector had improved since mid-2010 increases in electricity tariffs and by savings in power supply costs due to gas deliveries via pipeline from Nigeria.

"While power tariffs are now at or close to cost-recovery levels, the proposed quarterly review of power tariffs will be important to avoid the emergence of new subsidy costs," he noted.