Tuesday, December 12, 2017
Economic recovery threatens by huge public debt, says IMF
This assessment is from two IMF missions to the country in November and December to conduct Article IV consultations and review performance under the Staff Monitored Program (SMP).
Economic growth is projected at 3%, and inflation, according to the IMF, has reversed its rising trend as a result of the stabilization of the dalasi and a gradual decrease in food prices. With the gradual return of fiscal discipline under the Barrow administration and coupled with external financial support, the dalasi has remained stable since April, according to the Fund. Foreign reserves have recovered strongly.
By 2020, the growth rate is projected to be 5% "assuming continued good policy implementation and a significant expansion of electricity supply, expansion of irrigation and commercial farming, investment in tourism and trade sectors and continued infrastructure investment."
The IMF considers the Staff Monitored Program to be on course and "encouraging but more progress is needed." Interest rates are down in part because of the drastic reduction in government's net domestic borrowing.
The IMF mission reports have strongly hinted at the need for the government to exercise prudence in conducting due diligence procedures when it comes to its public investment programs. We have little doubt that recent procurement missteps that brought the entire procurement process into disrepute has raised equal concerns among our development partners. "Careful evaluation and prioritization of investment projects within the due diligence procedures of the Investment Implementation Task Force will be crucial" in restoring faith in the public procurement system.
Reform of parastatals, especially NAWEC, is a critical because of the fiscal risks they pose in contributing to the high public debt. The flexible exchange rate regime, according to the IMF, should be maintained by the Central Bank in order to continue rebuilding of external reserves and safeguarding the stability of the financial sector.