IMF advises Ghana to use oil income cautiously

Ghana should ensure future income from newly-discovered oil improves living standards in the West African country and does not fuel inflation or upset the stable economy, the International Monetary Fund said.

London-based Tullow Oil said last month it had found up to 600 million barrels of oil in Ghana's West Cape Three Points offshore block, which is co-owned with Texas-based Anadarko Petroleum and operated by Kosmos Energy of Dallas.

Oil is expected to start flowing in two or three years. "Any resource needs to be managed carefully so as not to disturb a stable macroeconomic environment," Takatoshi Kato, the IMF's deputy managing director, said on the sidelines of an African Union summit in Accra.

In addition, Ghana needs to take care a sudden influx of oil dollars does not boost inflation, he added. The country's politicians have hailed the discovery as a boon for the West African country, whose economy relies mostly on exports of cocoa and gold.

For many African oil producers, including nearby major producers Nigeria and Equatorial Guinea, the discovery of "black gold" has exacerbated ethnic tensions and corruption and to widen the gap between rich and poor.

But careful management of oil income could enable Ghana to duck some of these problems, Mr Kato said.

"I think there needs to be sensible allocation of oil revenues between current generations and future generations," Mr Kato said.

"Fiscal revenue, generated by oil production, needs to be allocated in order to raise people's living standards," he added.

Kato was speaking on the sidelines of an African Union summit organised in Ghana's capital Accra to discuss proposals for a union government for Africa.