The Executive Board of the International Monetary Fund (IMF) today completed the sixth and final review of Ghana's economic performance under a Poverty Reduction and Growth Facility (PRGF) arrangement.

Following completion of the review a final loan equivalent to SDR 26.4 million (about US$39 million) will become available to Ghana before the arrangement expires on October 31, 2006.

The Executive Board also approved Ghana's request for waiver for the nonobservance of the quantitative performance criterion on the net domestic assets of the Bank of Ghana for end-June 2006.

Ghana's three-year PRGF arrangement was approved on May 9, 2003 for SDR 184.5 million (about US$272.7 million).

Following the Executive Board's discussion on Ghana, Mr. Takatoshi Kato, Deputy Managing Director and Acting Chair, made the following statement:

"Economic performance continued to improve in Ghana during the first half of 2006, supported by strong macroeconomic policy implementation and a favorable external environment. Growth is relatively strong, inflation is falling, and the external position has strengthened considerably, allowing a buildup of international reserves that provides a cushion against shocks. Ghana's program implementation during the PRGF-supported program has been satisfactory.

"Fiscal policy appears on course in 2006 to deliver the targeted reductions in the ratio of domestic debt to GDP. The fiscal consolidation that has occurred during the PRGF-supported program has resulted in a significant reduction in domestic debt service and allowed the crowding-in of private sector investment through continuing declines in interest rates, while increasing poverty-related spending.

"Monetary policy is expected to remain firm, geared toward achieving single-digit inflation. Ghana has made important strides in financial sector reforms, including eliminating the secondary reserve requirement for banks. These reforms will help make the banking system more efficient, and encourage financial deepening and growth of private sector credit.

"Further structural reforms are needed to support efficiency and growth prospects. As part of the agenda to strengthen transparency and economic governance, recent improvements in fiscal reporting and public expenditure management will contribute to the efficient use of resources—including those from debt relief—in line with the government's poverty reduction strategy. While the recent move to monthly review of petroleum product prices should improve the financial and operational performance of the Tema Oil Refinery, the authorities should execute, in the near future, their plan to divest a majority of government shares in the refinery.

"The government's economic strategy is now focused on accelerating growth, in the context of a relatively stable macroeconomic framework. Looking forward, the main challenge for Ghana is to find the necessary resources to undertake the investment plan, while preserving debt sustainability. The authorities have indicated they will exercise great caution in contracting new loans, particularly given the risks to the medium-term outlook and continuing vulnerability to shocks." Mr. Kato said.

The PRGF is the IMF's concessional facility for low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners and articulated in the Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that PRGF-supported programs are consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5½-year grace period on principal payments.