Macroeconomic Stability for Competitiveness and Growth Credit

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This program document proposes a Macroeconomic Stability for Competitiveness and Growth (MSCG1) Development Policy Financing (DPF) Program operation. The MSCG1 is first in a series of three DPF operations and combines an IDA Credit of 106.7 million (US$150 million equivalent) and a Policy-Based Guarantee (PBG) in the amount of up to the equivalent of US$400 million to cover a securities issuance of up to US$1.0 billion by the Republic of Ghana. The operation will build upon the achievements of the previous series of Development Policy Operations (DPO), completed in 2012, with closure of the Eighth Poverty Reduction Support Grant (PRSG-8). The operation complements the macroeconomic stabilization program undertaken by the government and supported by the IMF. The program went to the IMF Board on April 03, 2015 and the success of the program is crucial to reinforcing macroeconomic resilience, sustaining broad-based growth and ensuring that institutional reforms endure. These objectives are also supported by a number of programs currently being implemented by the World Bank and Ghana’s other development partners. Maintaining a stable macroeconomic framework will be vital to Ghana’s development strategy, but recent events have demonstrated the economy’s vulnerability to both external and domestic shocks. Moreover, fiscal discipline may become increasingly difficult to sustain, as spending pressures are likely to intensify during the run-up to the 2016 elections. In addition, the current power crisis has increased the cost of production for firms and the continuation of the energy-rationing regime could undermine medium-term growth. Finally, special interests that benefit from the public sector’s status quo may resist efforts to level the playing field in government contracting and other critical areas, which will require policymakers to maintain a steadfast commitment to the structural reform agenda.