Adnan Adams Mohammed
The International Monetary Fund (IMF), in renewed effort to progress the stalled negotiation towards reaching a deal with Ghana has indicated that, the focus of support might shift from Balance of Payment to ensuring fiscal stability.
According to the fund, it is possible to change the terms of support request of the government to better suited terms that solves the current challenge the economy faces. It thereby indicated that increasing revenue mobilisation is critical for debt sustainability while safeguarding social spending.
The Fund has noted that, although it is premature to comment on the final form the financing programme for Ghana will take, In its latest Frequently Asked Questions (FAQ), said the Executive Board will decide the level of access (credit amount) and the final programme design. It further reiterated that the goal of the government’s economic programme, which would be supported by IMF financing, is to restore macroeconomic stability and ensure debt sustainability, support the credibility of government policies, restore confidence in the central bank’s ability to manage inflation and rebuild foreign exchange reserve buffers to make the economy more resilient to shocks.
“Specifically, in the fiscal sector, an important policy objective would be to increase revenues, critical for debt sustainability while safeguarding spending on health, education, and social protections”, the Fund posited.
A staff team, led by Stéphane Roudet, mission chief for Ghana, is visiting Accra from December1 to 13, 2022, to continue discussions with the authorities on the country’s post-COVID programme for economic growth and associated policies and reforms that could be supported by a new IMF lending arrangement.
Ahead of the visit, Mr Roudet said: “We have had productive discussions with the Ghanaian authorities over the last few months and look forward to our engagement in Accra”.
“Our objective for this visit is to make further progress toward reaching agreement on policies and reforms that could be supported by an IMF lending arrangement”.
“The IMF remains fully committed to help Ghana restore macroeconomic stability, bring relief to Ghanaians in this time of crisis, and lay the foundation for more inclusive growth.”
In Ghana’s 2023 budget, Finance Minister Ken Ofori-Atta said the government and the IMF have agreed on programme objectives, a preliminary fiscal adjustment path, debt strategy and financing required for an extended credit facility programme to be in line with the government’s Post-COVID-19 programme for Economic Growth (PC-PEG).
The PC-PEG is the government’s blueprint to restore macroeconomic stability, promote debt sustainability, sustain economic recovery and support structural reforms.
Updating the house on the negotiations so far, Mr Ofori-Atta said: “Mr. Speaker, since the government announced its engagement with the International Monetary Fund for a supported programme on July 1, 2022, we have made “substantial progress”.
The Fund, he said, has assured the government of its “strong commitment and support in these difficult times”.
On whether Ghana needs debt restructuring, the Fund said when an IMF member country requests financing, the Fund assesses whether the country’s policies are consistent with debt sustainability.
This assessment is based on a Debt Sustainability Assessment (DSA) conducted jointly by the IMF and World Bank to determine whether the government is able to meet all its current and future payment obligations.
The last DSA published in the 2021 Article IV Staff Report concluded that: “Public debt was sustainable conditional on a rigorous and credible implementation of the authorities’ medium-term consolidation plan to put debt on a declining trajectory and ensure continued market access.
In their recent 2023 budget statement, the government assessed the public debt as unsustainable over the medium term. In this regard, the government has announced its intention to conduct a debt operation to ensure debt sustainability.
The Fund said “we welcome the authorities’ intentions to implement policies that will ensure the sustainability of public finances. However, the nature of engagements and debt operations between Ghana and its creditors are sovereign decisions”.
