August 8, 2014 / 10:59 PM / 4 years ago

Ghana seeks talks with IMF to win endorsement for reforms

WASHINGTON (Reuters) - Ghana’s government is seeking talks with the International Monetary Fund to win endorsement for its own fiscal reform program rather than because it needs a bailout, Foreign Minister Hanna Tetteh told Reuters on Friday.

Those talks will give a stamp of international credibility to the government’s reform plan in advance of the issuance of a third Eurobond worth $1.5 billion, Tetteh said.

“We don’t want to go for an IMF bailout. What we want to do, and what we are going to do, is to open consultations with the IMF,” she said in an interview on the fringes of a U.S.-Africa summit that brought dozens of leaders to Washington.

Her comments clarified the reasons behind the government’s long-awaited announcement last week that it was opening talks with the Fund in a bid to redress a worsening fiscal position.

The West African state’s challenges include rising inflation, a stubborn budget deficit, weak import cover and a local currency, the cedi, that has slumped around 40 percent this year.

These factors have tarnished the economic image of Ghana, a country whose political stability and years of rapid GDP growth on the back of exports of cocoa, gold and oil made it the envy of emerging markets in Africa and beyond.

The fiscal troubles stem from a confluence of factors beyond its control including a slump in global commodity prices and the accidental severing of a key gas pipeline, Tetteh said.

She acknowledged the government should have planned better for a program of public sector wage rises that caused the deficit to balloon in 2012 to nearly double the government’s initial estimate.

The government has already taken tough measures to stabilize its economy including slashing subsidies on fuel and utilities, raising value added tax and moving to freeze civil service wages but it needed IMF backing to satisfy markets, Tetteh said.

We want to “open consultations and to discuss with them the measures that we are putting in place, to get them to work with us to understand what we are trying to do and take on board whatever impact they have in terms of how we can make our program more effective,” she said.

Tetteh gave no hint of what additional policy steps the government would discuss with the Fund. The IMF said in a statement on Friday it would send a team to Ghana in early September to initiate discussions on a program.

Editing by Matthew Mpoke Bigg and David Gregorio

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