ACCRA (Reuters) - The International Monetary Fund has approved final disbursement of $178.74 million under its current three-year pact with Ghana, but warned steps needed to be taken to fend off risks to macroeconomic stability.
The currency of the world's second largest cocoa producer has been under pressure this year, declining more than 17 percent since January on persistent demand for dollars by local firms hungry for imports to fuel the growing economy.
'A rapid depreciation of the cedi is fuelling inflation and reserve cover has fallen below comfortable levels,' the Fund's deputy managing director Naoyuki Shinohara said in a statement on Friday.
'Furthermore, spending overruns at the end of 2011, large public wage increases and re-emergence of energy subsidies have created the need for corrective actions to achieve fiscal targets,' it said.
The latest tranche is part of the IMF's Extended Credit Facility with Ghana, which was launched in July 2009 and gave the country access to a total $581.3 million funding.
The country will hold presidential and parliamentary elections in December and many fear the government's earlier efforts to stabilise the economy may be jeopardised by election-year demands, especially for public sector wage increases.
The Fund called on the authorities to step up fiscal reforms, prioritising tax administration and public financial management. It also noted that Bank of Ghana's monetary policy has so far been slow in addressing the cedi depreciation and associated inflation risks.
Year-on-year inflation rose for a third time to 9.4 percent in June but remains within the government's single digit target.
'Loose conditions have now been tightened and will need to remain tight to preserve the credibility of the inflation-targeting regime,' the statement said.
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