The International Monetary Fund (IMF) has advised Ghana to remove subsidies on energy and fuel, a move that is likely to be met with resistance as it will make the commodities more expensive.
Ghana’s neighbour, Nigeria at one point removed fuel subsidies but the move was met with fierce and sometimes violent resistance.
The IMF advised that a public service audit and the scrapping of subsidies will generate monthly savings of about GH¢160 million, which are needed to protect more productive expenditure and allow for an expansion of well-targeted social programmes to help the most vulnerable groups to cope with the tighter cost of living.
In a statement on Wednesday after the conclusion of its assessment of the West African country, the international lender urged Ghana to tighten its economic policies to safeguard macroeconomic stability and keep inflation within a target band of between 5.7 and 11.7 percent.
Currently, the country’s inflation rate is 9.1 percent, slightly higher than at the beginning the year when it was 8.7 percent.
The fund says tightening policies can be done by still allowing the economy to expand at a robust pace of more than 8 percent in 2012, but notes that the main external risk will be a deeper global slowdown, with its negative impact on economic growth and the balance of payment from weaker commodity prices and foreign inflows.
“A rapid depreciation of the cedi in the first five months of this year has begun to feed into domestic prices, while adding to short term balance of payments pressures through higher cost imports,” Christina Daesking, leader of the IMF Mission on Ghana said.