The International Monetary Fund (IMF) has warned that the persistent imbalance between fiscal and monetary policies remains a threat to Ghana’s economic development.
According to Managing Director Kristalina Georgieva, the misalignment has resulted in fiscal dominance that does not bode well for the country.
“With great difficulty” she retorted when asked on Citi TV‘s Point of View by host, Bernard Avle on how the situation could be resolved.
Kristalina Georgieva emphasized the need for a policy framework to address this misalignment and enhance coordination between the government and the Central Bank as the two entities responsible for implementing policies.
In an exclusive interview, she stressed the importance of striking a balance to improve key macroeconomic indicators.
“From the beginning of the spike in inflation, my message was that it’s like driving a car with monetary policy on the break. Fiscal policy should not press the accelerator -then we are in for a crash I recognize that it is very difficult for finance authorities because they have to build buffers for the next shock to come. How do you do that? By having a medium-term anchor for your fiscal plans. You don’t have to adjust today but over time.”
The IMF boss also advocated for the establishment of a fiscal council to safeguard macroeconomic stability and ensure prudent management of government fiscal policy in Ghana.
She suggested an independent and reputable fiscal council to advise the government on avoiding excessive spending.
“We do need to have anchors and then stick to that. Yes, the two notes of caution. One, we do need to have anchors and then stick to them. For Ghana, what we are proposing is 55% net present value debt to GDP and 18% max the share of debt service into government revenues. Anchor your situation in a clear, stable manner.
“And two, we recommend that Ghana takes a very serious look at how the fiscal situation in the future can be stable. So we don’t go up and down again. And we are recommending fiscal council, reputable people, independent, able to say objectively this line of spending, yes and this one, no”, she added.