News Guide Africa

Tag: Ghana-IMF Program

  • Ghana’s crucial but complicated IMF exit strategy

    Ghana’s crucial but complicated IMF exit strategy

    By Toma Imirhe

    As Ghana approaches the rescheduled conclusion of its three-year Extended Credit Facility (ECF) programme with the International Monetary Fund (IMF) on August 16, 2026, policymakers are shifting focus from stabilization to sustainability. For the Government of Ghana and the Bank of Ghana (BoG), the challenge is no longer just meeting programme benchmarks, but ensuring that the hard-won macroeconomic gains endure beyond IMF oversight.

    The US$3 billion programme, approved in May 2023, was designed to restore macroeconomic stability following Ghana’s worst economic crisis in decades. With about US$2.8 billion already disbursed and the fifth review successfully completed, Ghana now stands at a critical inflection point of either exiting the programme with restored economic credibility or risking a reversal of the gains made through it..

    By most official accounts, Ghana’s performance under the IMF programme has been strong. The IMF itself notes that “performance under the program has been generally satisfactory,” with all quantitative targets for the fifth review met.

    Macroeconomic indicators have improved significantly. Growth has rebounded, reaching 6.0% last year, inflation has returned to single digits for the first time since 2021 – the 3.2% recorded for March is the lowest in decades – and the cedi has stabilized at below 11 to one US dollar amid rising reserves that can cover about 5.8 months of imports.. These gains reflect a combination of fiscal consolidation, tight monetary policy, and external support including debt restructuring agreements with bilateral creditors.

    The Bank of Ghana has complemented fiscal tightening with cautious monetary easing, following a period of aggressive rate hikes. According to the IMF, the central bank has “appropriately begun a cautious monetary easing cycle,” (indeed lowering its benchmark Monetary Policy Rate by 1,400 basis points from 28% to 14% over the past year),while rebuilding international reserves.

    How successful has the programme been?

    Originally scheduled to end in May 2026, the programme was extended by three months to August 16. Contrary to speculation, the extension was not due to poor performance.

    IMF Resident Representative Dr. Adrian Alter has emphasized that the extension was “purely technical” and intended to allow sufficient time to complete the final programme review.

    Specifically, the extension enables an assessment of macroeconomic data through end-2025 and the first quarter of 2026, the completion of reforms underpinning the sixth and final review and the preparation and circulation of documentation formally ending the programme for IMF Board approval.

    In essence, the additional time is designed to ensure a clean and credible exit rather than a rushed conclusion. It also allows for adjustments to programme targets particularly fiscal and monetary benchmarks to reflect evolving macroeconomic conditions while maintaining overall reform momentum.

    The likelihood of Ghana meeting all end-programme targets is high but not guaranteed.

    On the positive side, Ghana has demonstrated strong programme ownership. The IMF credits the government and its central bank with “decisively implementing ambitious corrective actions” following earlier policy slippages. Fiscal consolidation is on track, with a projected primary surplus of 1.5% of GDP by end-2026.

    However, several risks could derail full compliance.

    One is structural reform delays. While quantitative targets have largely been met, some structural reforms have experienced delays. These include public financial management improvements and state-owned enterprise (SOE) reforms. Failure to fully implement these reforms could affect the final review.

    Another is lingering uncertainties over debt restructuring. Although significant progress has been made, Ghana’s external debt restructuring is not fully complete. The IMF has warned that delays in concluding agreements with all creditors could pose risks to programme completion and post-programme sustainability.

    A third risk is external vulnerabilities. Ghana remains exposed to global commodity price volatility particularly gold and cocoa prices as well as oil import costs. A deterioration in external conditions could impact fiscal revenues and foreign exchange inflows. This has been illustrated vividly by the recent reversal of the surge in the price of gold and the sharp increase in the cost of oil imports resulting from the ongoing geo-political tensions in the Persian Gulf.

    Inevitably, there are also policy slippage risks. Election-related spending pressures or weakened fiscal discipline could undermine programme targets. The IMF has repeatedly stressed the need to “stay the course” on fiscal adjustment.

    Given these factors, Ghana is likely to meet most but possibly not all structural benchmarks, even if headline macroeconomic targets are achieved.

    By conventional IMF metrics, Ghana’s programme can be considered broadly successful.

    It has stabilized inflation and exchange rates, restored a measure of investor confidence, improved fiscal balances and rebuilt foreign exchange reserves. Perhaps most importantly, it has re-established macroeconomic credibility after the 2022 crisis and debt default.

    However, success has come at a cost. Fiscal consolidation has constrained public spending, while high interest rates have weighed on private sector credit. The domestic debt exchange programme also imposed losses on bondholders, including institutional investors such as banks, insurers, fund managers and pension funds, affecting financial sector stability.

    Moreover, Ghana remains classified as being at risk of debt distress, despite recent improvements in its sovereign credit ratings, underscoring the fragility of the recovery.

    Preparing for life after the IMF

    Both the Government of Ghana and the Bank of Ghana are already taking steps to ensure a smooth transition out of the programme.

    One key priority is institutionalizing fiscal discipline. The 2026 budget aligns with IMF targets and introduces a strengthened fiscal responsibility framework. Sustaining primary surpluses will be critical to reducing debt levels.

    Another is the strengthening of revenue mobilization. Efforts are underway to enhance tax administration, broaden the tax base, and reduce revenue leakages. These reforms are essential to maintaining fiscal space post-IMF.

    Deepening monetary policy credibility is yet another priority. To this end, the Bank of Ghana is focusing on strengthening its independence, improving foreign exchange market operations, and reducing quasi-fiscal activities.

    The central bank, in collaboration with government itself is also working towards fully restoring financial sector stability. Recapitalization of banks and resolution of non-performing loans remain ongoing priorities, alongside reforms to state-owned financial institutions.

    Despite the progress made, Ghana faces significant challenges after exiting the IMF programme.

    Maintaining a sustainable public debt trajectory without IMF oversight will require strict adherence to fiscal rules and continued engagement with creditors. It is noteworthy that government has already resumed issuing medium germ domestic bonds (which are available to foreign investors) even before the IMF programme ends.

    The energy sector remains a major fiscal risk too, with arrears and inefficiencies threatening to derail consolidation efforts. This situation is not being helped by the ongoing spike in oil prices.

    High interest rates and limited access to credit could hinder economic growth and job creation. Although interest rates have come down significantly since mid-2025, actual lending rates are still substantially higher than inflation and low yields on government treasuries have not yet diverted investible funds into the requisite major increase in credit to the private sector.

    Perhaps most worrying of all, sustaining political commitment to difficult reforms—particularly in a potentially charged political environment—will be a major test, one that increases as the next general elections looms nearer.

    While all these risks can be addressed, at least in part, by domestic economic policy, global economic uncertainty, commodity price swings, and geopolitical tensions which could quickly reverse gains, cannot.

    Ultimately, Ghana’s exit from the IMF programme will be less about ticking the final boxes and more about maintaining discipline in a post-programme environment.

    As IMF officials have cautioned, “continued reform efforts remain essential” to sustain stability and growth.

    The three-month extension to August 2026 may appear minor, but it could prove decisive. By allowing time to consolidate reforms and complete the final review thoroughly, it enhances the credibility of Ghana’s exit.

    The real test, however, begins after the IMF leaves. Whether Ghana can sustain its recovery independently will determine if this programme is remembered as a turning point—or merely a temporary reprieve.

    SOURCE: Business Post online

     

     

     

     

     

     

     

  • Govt juggles demands of local stakeholders, IMF towards 2026 budget

    Govt juggles demands of local stakeholders, IMF towards 2026 budget

    Ministry of Finance officials, led by the Minister, Dr Cassiel Ato Forson, will this week continue the intense work they engaged in last week towards preparing a national budget for 2026.

    The budget is expected to accommodate the key concerns and aspirations of a disparate plethora of stakeholders both local and international while presenting a workable blueprint for the completion of efforts towards the restoration of macroeconomic stability and the resumption of sustained growth.

    The budget will be presented to Parliament in about a fortnight’s time although no specific date has yet been announced.

    It was revealed last week by Deputy Finance Minister, Thomas Nyarko Ampem that the 2026 budget will build on very a very impressive macroeconomic performance for 2025 in which the economy is on course to achieve a primary balance surplus of 1.4% of GDP after incurring a deficit last year, an overall fiscal deficit of just 1.5%,(compared with 5.9% on cash basis an 4.8% on commitment basis in 2024) and a significant reduction in the public debt to 44.9% of GDP, down from 61.8% at the turn of the year.

    The construction of the budget is turning out to be a veritable juggling act because of the various priorities set by various stakeholder groups.

    Ghana’s government is preparing to table its 2026 fiscal year budget against the backdrop of ongoing fiscal consolidation, energy-sector arrears, and an IMF-supported reform programme that runs through to May 2026.

    While formal details are yet to be revealed, officials have consistently signaled a package centered on revenue mobilization, disciplined spending, and structural reforms particularly in the energy and state-owned enterprise sectors aimed at locking in disinflation and stabilizing growth.

    Stakeholders, however, are pressing for a different balance: tax relief to spur private-sector activity, faster arrears clearance, and targeted measures to ease the cost-of-living burden.

    On the fiscal side, policymakers are expected to prioritize a primary surplus target consistent with IMF benchmarks, with revenue measures that broaden the tax base rather than hike headline rates.

    Likely strategies include tighter enforcement of VAT and e-VAT systems, a continued clampdown on exemptions, and improved property rate collections through digital platforms. Selective excise adjustments on items such as alcohol, tobacco, and sugary drinks are also plausible, as are measures to strengthen customs valuation and reduce leakages at the ports.

    Officials have also hinted at keeping a lid on the wage bill’s growth while protecting core social programs, including cash transfers and essential health and education spending.

    Expenditure under the budget is expected to restrain goods-and-services outlays and prioritize capital spending with high multiplier effects, partly through Public Private Partnerships.

    A critical pillar is the energy sector: further steps to resolve legacy arrears, enforce cash waterfall mechanisms, and align tariffs with cost-recovery to prevent the re-accumulation of debt.

    Authorities are also likely to spotlight progress on domestic debt operations and external debt restructuring, framing 2026 financing around concessional inflows and a cautiously rebuilt domestic bond market.

    However, on their own part, industry groups are asking for the removal of certain taxes and levies that complicate compliance and suppress margins, a review of the VAT structure to reduce cascading, relief on import duties to lower input costs, predictable power, prompt payment of government arrears to suppliers, and targeted incentives for export-oriented processing.

    Labor unions are pressing for cost-of-living relief through upward adjustments to personal income tax thresholds to protect real wages, caution against new consumption taxes and predictable wage negotiations that reflect inflation through 2024.

    .Financial markets want a credible path to a durable primary surplus, a concrete plan to prevent re-accumulation of energy arrears, and steady progress on debt restructuring and domestic financial market normalization.

    To this end, as Finance Ministry officials crunch the numbers, they are also engaging in extensive stakeholder consultations with various business, labour and consumer groups in Ghana as well as the International Monetary Fund and other representatives of the country’s development partners.

    Last week’s stakeholders’ consultations brought together representatives over two days, from banking and non-banking financial institutions, think tanks, professional bodies, trade organizations, social partners, and other organized groups.

    Government is also engaged with the IMF because the three year Extended Credit Facility programme Ghana is undergoing does not expire until May next year and in the meantime the Fund’s Executive Board is yet to sign off on the 5th review for funds to be disbursed, and after that there is still a 6th and final review and subsequent funds disbursement on the schedule.

    Given that the IMF programme for Ghana is not set to expire until mid 2026, it is likely that the government will still be under some influence from the IMF in terms of fiscal policy and budgetary priorities.

    However, the extent of this influence will depend on the government’s willingness to comply with the IMF’s recommendations and the specific conditions set out in the program as it winds up.

    The Minister for Finance is required under Section 21 of the Public Financial Management Act, 2016 (Act 921), to prepare the annual budget in consultation with relevant stakeholders.

     

    By Toma Imirhe

  • Growth tracker: Ghana’s economy outperform forecasts as economist express optimism

    Growth tracker: Ghana’s economy outperform forecasts as economist express optimism

    Ghana’s economy has taken a sharp turn of remarkable growth in the first nine months of 2025, which has forced some Bretton Woods to revise upwards their forecasts.

    This, and other reasons have prompted economist Professor Peter Quartey to highlight that the economy could outperform growth projections by the International Monetary Fund (IMF) and the World Bank for 2025.

    The IMF, in its latest World Economic Outlook, projects a 4 percent GDP growth for Ghana by the end of 2025 slightly below the World Bank’s 4.3 percent forecast. Both institutions maintain a cautiously optimistic stance as Ghana continues to implement reforms under its economic recovery programme.

    However, according to data from the Ghana Statistical Service (GSS), which last week released the maiden edition of its Monthly Indicator of Economic Growth (MIEG), the index rose from 105.4 in July 2024 to 110.2 in July 2025 translating into about 4.5% year-on-year growth, indicating continued momentum in economic activity despite global and domestic headwinds.

    Consequently, Professor Quartey believes Ghana has the potential to exceed these targets if ongoing fiscal and structural reforms are sustained. Explaining that, while the Bretton Woods institutions often take a conservative approach to their forecasts, Ghana’s economic resilience and improving fundamentals could deliver stronger-than-expected growth outcomes.

    “Certainly the IMF and the World Bank are often cautiously optimistic; they don’t want to project such high numbers only for you not to achieve them” he said.

    “But as a country, oftentimes we have gone beyond their projections, all things being equal, and I believe we will go beyond the 4% they are projecting.”

    However, Prof. Quartey cautioned that Ghana’s pursuit of growth must not come at the cost of environmental sustainability, pointing to the growing threat of illegal mining, or galamsey.

    “Our environmental growth accounting has to be taken seriously. You can grow by 10% but if you destroy your environment, water bodies, and poison your food sources, it is not something to celebrate about.”

    The Monthly Growth Tracker

    At the release of the maiden Monthly Indicator of Economic Growth (MIEG) July edition, the Government Statistician, Dr. Alhassan Iddrisu, highlighted that the agriculture sector was the key driver of growth, expanding by 8.0%, supported by improved crop yields and increased productivity in food staples.

    The industrial sector, however, recorded a marginal growth of 0.1%, due to challenges in energy supply and manufacturing output, while the services sector maintained moderate gains.

    MIEG, a new analytical tool designed to provide a more frequent snapshot of the country’s economic performance between quarterly GDP releases, is to serve as an early indicator of shifts in economic activity, enabling policymakers, investors, and businesses to make more timely and informed decisions.

    World Bank’s revised projection

    A fortnight ago, the World Bank projected Ghana’s economy to expand by 4.3% in 2025, as contained in the October 2025 edition of Africa’s Pulse Report, released by the Bank in Washington, D.C.

    The projection is about 0.4% more than its earlier projection of 3.9%, showing a renewed optimism about the country’s recovery trajectory.

    The WB’s revised projection is 0.1% lower than the 4.4% projection by the Government of Ghana as captured in the 2025 Budget.

    Already, Ghana’s economy has expanded by 6.3% in the second quarter of 2025, influenced by the services sector, which grew by 9.9% and contributed the most to GDP.

    The World Bank projects growth to strengthen further to 4.6% in 2026 and 4.8% in 2027, underscoring a positive medium-term outlook.

    Across the continent, Sub-Saharan Africa’s economy is expected to grow by 3.8% in 2025, up from 3.5% in 2024.

    The Bank attributed the rebound to easing inflationary pressures and a modest recovery in investment, despite persistent global headwinds.

    It noted that the number of African countries with double-digit inflation has dropped sharply from 23 in October 2022 to 10 in July 2025 reflecting progress in price stabilization.

    However, the report cautioned that downside risks remain, including trade policy uncertainty, weak investor sentiment, and shrinking access to external finance and aid.

    The World Bank expects Ghana’s inflation to close 2025 at 15.4%, a projection that contrasts with the official rate of 9.4% in September 2025, down from 21.5% a year earlier.

    The Bank’s forecast appears conservative, given the country’s recent disinflation trend.

    Nonetheless, the report expressed optimism that inflation will continue easing, dropping to 9.4% in 2026.

    The Bank of Ghana, in its latest Monetary Policy Report, also reaffirmed expectations for inflation to remain within the single-digit range by year-end.

     

    By Adnan Adams Mohammed

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

  • MoF, BoG confident in economic recovery efforts

    Ken Ofori-Atta, Dr Ernest Addison with IMF official

     

    Adnan Adams Mohammed

     

    In the wake of unsustainable debt levels, high inflation resulting in Eurobond market blackout and high policy rate stiffling business growth, some actors of the  Ghanaian economy are confident in the recovery efforts. 

     

    Their confidence is dependent on the continuous downwards trend in inflation, positive Gross Domestic Product (GDP) growth, the IMF approval of first review of Ghana’s economy in the Extended Credit Facility program. 

     

    In a Facebook post last week, a deputy finance minister jubilated the unanimous approval of Ghana’s request for debt treatment under the G-20 Common Framework, viewing it as a foundational step for the nation’s economic outlook. To this, the minister indicated confidence in Ghana’s economic recovery, highlighting recent positive developments concerning the receipt of the second tranche of the International Monetary Fund’s bailout.

     

    “I commended Ghanaians for their steadfast support of government measures and policies, particularly in addressing challenges posed by the COVID-19 pandemic and the Russia-Ukraine war”, Dr John Kumah has expressed. “I acknowledge the role played by Ghanaians in mitigating adverse impacts, expressing optimism for a brighter future.”

     

    Also, the Bank of Ghana Governor, Dr. Ernest Addison, while acknowledging the challenges ahead, expressed confidence in the ongoing economic recovery process. Stressing the importance of executing necessary structural reforms to support a more efficient functioning of the economy, ensuring long-term sustainability.

     

    Hailing the effectiveness of its efforts, the Central Bank anticipates a further easing of inflation in 2024, supported by the continued implementation of sound policies until inflation expectations are firmly anchored towards the single-digit objective. A notable improvement has been observed over the past year, with inflation dropping from around 54 percent to 23 percent by the end of 2023.

     

    In a brief statement following the completion of the First Review of the Extended Credit Facility (ECF) Programme with the International Monetary Fund (IMF) last week, Dr Addison emphasised the central bank’s commitment to monitoring domestic and external developments.

     

    Commenting on the banking sector, he reassured that, the sector remains sound, liquid, and profitable. He said the Bank of Ghana will closely monitor banks’ efforts for capital restoration, particularly in light of the impact of the Domestic Debt Exchange Programme (DDEP).

     

    Dr. Addison expects early recapitalisation to enhance banking sector resilience and facilitate effective financial intermediation, contributing to macroeconomic recovery.

     

    Consequently, the Deputy Finance Minister in his post further indicated that, the approved debt treatment sets the stage for sustained economic progress, anticipating benefits for the citizens of Ghana.

     

    He mentioned the importance of the debt treatment in confirming Ghana’s public debt on a sustainable trajectory, paving the way for further fiscal prudence and debt restructuring measures.

     

    Dr Kumah cautioned that while the decision of the Official Creditor Committee (OCC) to support the government’s efforts is commendable, more work needs to be done going forward.

     

    He outlined the next steps, including the signing of a Memorandum of Understanding (MoU) between the Government of Ghana and the OCC and ongoing negotiations on commercial debt (Eurobonds).

     

    Looking ahead, Dr Addison urged the country to prepare for the second review of the program and emphasised the critical role of structural reforms in achieving a well-functioning and sustainable economy.

     

  • Fitch hopes Ghana could escape foreign-currency debt default

     

    Adnan Adams Mohammed

     

    Ghana is likely to escape from defaulting on its foreign-currency debt this year, according to Fitch Ratings.

     

    Fitch also anticipate same for Zambia due to gradual fiscal consolidation in these nations, attributing it to financing constraints and ongoing fiscal reform efforts, often linked to International Monetary Fund (IMF) programs.

     

    This consolidation is projected to contribute to the stabilisation of government debt/GDP ratios. But, Fitch underscores the reliance on IMF programmes, noting that, the debt restructuring processes under the Common Framework for both Ghana and Zambia are susceptible to potential delays.

     

    “Challenges may persist in securing affordable access to international capital markets without credit enhancements for most Sub-Saharan African sovereigns”, Fitch indicated in its 2024 Regional Sub-Saharan African Sovereigns Outlook.

     

    Multilateral funding is identified as a crucial support for the region, with Fitch acknowledging that risks continue to lean towards the downside.

     

    Looking at the broader macroeconomic landscape in Sub-Saharan Africa for 2024, Fitch envisions stable median real GDP growth and a decrease in average inflation, albeit noting that inflation remains elevated in several sovereigns.

     

    The agency emphasised the persistent financing challenges faced by the region, reinforcing the significance of multilateral funding while acknowledging the existence of potential risks in the economic outlook.

     

    “We forecast gradual fiscal consolidation due to financing constraints and fiscal reform efforts, which, in many cases, are linked to IMF [International Monetary Fund] programmes. This consolidation will help government debt/GDP to broadly stabilise”.

     

    “We expect Ghana and Zambia to emerge from default on their foreign-currency debt in 2024, although, in both cases, the debt restructuring process under the Common Framework is vulnerable to further delays”, it added.

  • OCC to meet on Monday over “cut-off date” for Ghana’s debt restructuring

    Ken Ofori-Atta, Dr Ernest Addison with IMF official

     

    Adnan Adams Mohammed

     

    The Official Creditors Committee (OCC) are meeting on Monday January 8, 2024 to discuss the “cut-off date” for the restructuring of about US$5.4 billion of Ghana’s loans.

     

    A successful completion of the meeting is a key step needed by Ghana to secure its next tranche of funding from the International Monetary Fund. In preparation for the the meeting, the Paris Club of major creditor nations, which does not count China among its permanent members, were scheduled to convene on Friday, January 5, 2024.

     

    The meeting is again expected to focus on an agreement about a “cut-off date” – the date after which new loans from bilateral creditors will not be restructured, the sources with knowledge of the matter said. Defining this date has emerged as a stumbling block for Ghana in its debt rework.

     

    “Ghana is still about cut-off date, but creditors haven’t agreed yet,” a Reuter report quoted sources anonymously. “If the cut-off date is agreed, that means an agreement on debt restructuring is close.”

     

    However, the Reuter reported further indicated that, a spokesperson for the Paris Club declined to comment on meetings that have not yet taken place. Ghana’s finance ministry did not immediately respond to a request for comment.

     

    The bilateral lenders, including the governments of China and France who co-chair the Official Creditor Committee (OCC), hold around a quarter of Ghana’s $20 billion external debt earmarked for restructuring.

     

    Some creditors are said to prefer Dec. 31, 2022, as a cut-off date with Ghana having defaulted earlier that month, according to sources.

     

    However, others pushed for March 24, 2020, because that was when the Group of 20 introduced its debt service suspension initiative (DSSI) to help the world’s poorest countries cope with the fallout of the COVID crisis. Ghana did not participate in the DSSI.

     

    The West African country, which produces gold, cocoa, and oil, needs to come to an agreement on a debt restructuring with its official creditors to secure the IMF executive board’s approval for the next $600 million payout from a $3 billion rescue loan.

     

    This is because the Washington-based lender needs financing assurances that debt relief is being provided by bilateral creditors in accordance with the IMF programme.

     

    Ghana, faced with a deep economic crisis has seen inflation and the government’s debt servicing costs spiral, asked a year ago for a bilateral debt restructuring under the Common Framework, a process set up during the COVID-19 pandemic by the G20 leading economies.

     

    It is also in talks with overseas bondholders to restructure its more than $13 billion in international debt. Holders of the bonds include major global asset managers such as BlackRock, PIMCO, Vontobel, AllianceBernstein and Neuberger Berman.

  • GIPC optimistic of IMF’s role in Ghana’s economic recovery

    Adnan Adams Mohammed

     

    The Ghana Investment Promotion Centre (GIPC) has expressed optimism regarding Ghana’s economic prospects despite the ongoing cost of living crisis and inflationary pressures.

     

    The Center has called on the economic managers to leverage on the benefits of the International Monetary Fund (IMF) program to restore, reform, and recalibrate Ghana’s economic fortunes.

     

     

    Despite recounting the sluggish rebound of the global economy but remained confident that Ghana could overcome its current challenges. GIPC top official acknowledged that, in the immediate post-IMF era of 2017, Ghana achieved an average annual growth rate of about 7%. During that time, the country was widely recognized for its sound financial management and policy innovation, earning commendation from international observers.

     

    “While we currently face hurdles in terms of the cost of living crisis and inflationary pressures on food, fuel, and finance, we must not forget that Ghana has demonstrated its resilience before,” Yaw Amoateng Afriyie, the Deputy CEO of GIPC said while addressing audience comprising economists, policymakers, and industry experts, at a recent Financial Economics Seminar held in Accra.

     

     

    “The foundations of our economic growth and stability remain intact, and it is crucial that we utilize the benefits of the IMF program to navigate through these challenging times,’ he said

     

    Mr. Afriyie further emphasized that Ghana, under the leadership of President Nana Akufo-Addo, had taken significant strides to create an enabling environment for business and investment.

     

    He reiterated the GIPC’s continues to work towards attracting both domestic and foreign investments by streamlining procedures, improving infrastructure, and ensuring policy consistency.

     

    “We firmly believe that there is no better place to do business than here in Ghana,” Afriyie declared.

     

  • Ghana to get US$6.2bn from multilaterals to rebuild economy

     

    Adnan Adams Mohammed

     

     

    The government is expecting to receive a total of US$6.2 billion from its multilateral agencies to support the rebuilding of the collapsed economy.

     

    These supports coming from the International Monetary Fund, World Bank and AfDB in the next three years will support the economic reformation programme of the debt-riddened West Africa’s once promising economy.

     

    The embattled Finance Minister disclosed when he updated Ghanaians on the economy at a news briefing, last weekend.

     

    “US$2 billion will hit Ghana’s account by the end of 2023”, Ken Ofori-Atta said. “Our commitment to these reforms is matched by our relentless pursuit of innovation and strengthened partnerships.”

     

    Mr Ofori-Atta said: “Backed by the renewed drive for reforms, the government is working towards securing significant support from our multilateral partners”.

     

    “Altogether, and including the IMF funds, World Bank and AfDB support, we expect multilateral support of about US$2.0 billion for 2023 and US$6.2 billion between 2023 and 2026”, he explained.

     

    “We expect the World Bank to provide a total support of US$1.6 billion while the AfDB provides a total support of US$200 million over the programme period”, he added.

     

    Also, he said: “We expect to mobilise catalytic funding of US$30 million in 2023 and US$330 million between 2023 and 2026 from bilateral creditors”.

     

    US$3bn IMF deal ‘not end to our current challenges, the real work has just begun’– Ofori-Atta warns

     

    At the same briefing, Mr Ofori-Atta warned that the US$3-billion-three-year IMF programme secured by Ghana is not the end to the country’s economic woes.

     

    Rather, he said it marks the beginning for taking tough decisions to reset the economy on track.

     

    Mr Ofori-Atta said: “We have an ambitious agenda reform”, but caveated: “Let me state clearly that securing an IMF programme is not an end to our current challenges though it has significantly paved the way for the implementation of an ambitious and well-thought-out programme of reform for our economy and country”.

     

    “In fact”, he noted, “the real work of adjustment, realignment, and the path to steady economic growth has just begun”.

     

    “Let us brace ourselves for the needed reform, especially in expenditure control, non-arrears accumulation, revenue growth, ECG revenue collection, and energy sector reforms in order to rebuild the walls of the republic with urgency”, Mr Ofori-Atta said.

     

    He explained that the Post Covid-19 for Economic Growth reform programme now supported by a three-year extended credit facility with the IMF, “is built on clear targets and strong policy and structural measures”.

     

    “Over the medium term, the economic growth-backed IMF programme seeks to promote a credible fiscal consolidation programme anchored by strong domestic revenue mobilisation and high spending efficiency”, indicated Mr Ofori-Atta.

     

    Ghana has already received the first tranche of $600 million on 19 May 2023 right after the Fund’s executive board approved the deal.

     

     

  • Ghana’s Deficit: Enforcing strict adherence to PFMA is the way forward

     

    Adnan Adams Mohammed

     

    Public concerns heightened on how Ghana government could prudently manage its high budget and fiscal deficit.

     

    Ghana’s budget deficit has been consistently high, ending 2022 with a gap of about 9.0% of Gross Domestic Product.

     

    To this, a former Finance Minister has advised the government to tighten the rules of the Public Financial Management Act to cut the country’s budget deficit significantly. The finance expert wants the government to adopt a comprehensive approach to managing the country’s finances to reduce the high fiscal deficit.

     

    “Enforcing the Public Financial Management Law is key to addressing all these financial infractions”,  Seth Terkper posited in an interview last week.

     

    Although, the government is taking some extra measures to limit the amount of debt that can be incurred by any administration, it has proposed a debt target as part of fiscal reforms under the IMF programme.

     

    But Mr. Terkper believes that enforcement of the PMF Law will be the game changer.

     

    “As we continue, I would like to know from government documents if it is a memorandum of economic or financial policy. I’m saying that we do have the provisions; they’re already in the Public Financial Management Act which was passed in 2016 (Act 921) and the budget responsibility Act which you mentioned is an extract from the PFMA”.

     

    “So there’s the need for tightening the rules”, he added.

     

    He further stated the Public Financial Management Law is to regulate the financial management of the public sector by vigorously ensuring that all rules and regulations are adhered to.

     

    “The debt is from borrowing and the borrowing is from your deficit and the deficit is from revenue minus expenditure and this is the purpose of the Public Financial Management Act; to cover this in one loop which you know amended the financial administration act.

     

    Already, as part of measures to meet the dictates of the International Monetary Fund vis-a-vis the recently-approved US$3 billion bailout, government is expected to prioritize fiscal adjustments to ensure it meets the performance criteria for the disbursement of the other loan tranches.

     

    In this regard, President Nana Akufo-Addo has admitted that Ghana’s fiscal deficit is “way above” the five per cent ceiling set by the fiscal responsibility law, indicating that there was a need to bring it down, as he pledges his government’s commitment to cutting expenditure.

     

     

    The Fund has already indicated that, Ghana government will be under pressure to cut down its expenditure following the approval of the country’s US$3 billion deal.

     

    “Rationalisation of our expenditure is something that we have given the assurance [about],” President Akufo-Addo said while speaking at the Qatar-Africa Economic Forum in Doha. “Domestic revenue mobilisation is absolutely critical for us, and, already, we are seeing signs.”

     

    Also, he said: “We have a fiscal responsibility law in Ghana that has pegged our fiscal deficit at five per cent but, already, we are way above that,” noting, “and the sooner we can bring that to more acceptable levels, the better for us.”

     

    In an interview last week, the IMF Representative in Ghana, Dr. Leandro Medina posited that; “On the fiscals there is quite a sizeable adjustment in the 2023 budget and what we expect in the duration of the program, on the structural transformation, it has to do with the reforms and measures that improve the business climate and the growth of private sector”,

     

    “So, there are a lot of reforms within the context of the program that look at what you can do within these three years to ensure that there is a strong foundation in growth and that is the effect of that structural transformation”, he added.

     

    The Fund has also justified the adoption of three mobilization measures as well as the increase in utility costs as Ghana attempts to fix its balance of payment problems.

     

    Despite criticisms, the Excise Duty, Growth and Sustainability, and Income Tax Amendment laws aim to generate GHS4 billion for the country each year have been passed.

     

    These, along with the expected tariff increases in June, are deemed crucial components of the country’s US$ 3 billion, three-year Extended Credit Facility with the IMF.

     

    Dr. Leandro Medina, argued in favour of adjustments in the face other tough economic conditions.

     

    “The revenue measures that have been passed between December and April are part of the prior actions. It’s very important to mobilize revenue. Revenue to GDP in Ghana is very low as compared to other countries. Ghana is making a huge effort to increase revenue, and this will be done mainly by increasing the tax base. What is important to say is that this is a large and front load fiscal consolidation”, he added.

  • IEA takes on govt for snubbing fiscal adjustment but pursuing debt restructuring as advised by IMF

    Adnan Adams Mohammed

     

    The Institute of Economic Affairs (IEA) is dismayed at the snobbish attitude of government towards  the fiscal adjustment advice from the International Monetary Fund (IMF) in order to reach a debt sustainability level.

     

    The  government is only focusing its attention on the debt restructuring with less concentration on the fiscal adjustment, yet, both were advised by IMF, the Institute alarmed.

     

    Although the government has managed to force it way through to complete the Domestic Debt Exchange Programme, but IEA fears the government’s attempt to close it ears on any advise for it to cut down expenditure (especially on its appointees and unnecessary projects), could prolong the commitment and assurance of the Paris Club and G-20 Members to give an assurance for a debt restructuring.

     

    “I look at the language that the IMF is using in their communique. The IMF is saying that there should be a combination of fiscal adjustment and debt restructuring to get to the sustainability level. But it looks like our government is not prepared to do much of the fiscal adjustment which CSOs have made concrete proposals”, Director of Research at IEA, Dr. John Kwakye juxtaposed. “Such deliberate neglect for fiscal adjustments is the bane of the economy.”

     

    He added that a debt restructuring with fiscal discipline would not result in sustainable debt management and thereby advised government to implement the numerous fiscal adjustment proposals made by CSOs to help revive the economy.

     

    “This government since last year when it started negotiating with the Staff of IMF, keeps telling Ghanaians they are very close. But if you examine the situation carefully the date keeps changing”.

     

    Dr. Kwakye suggested that one of the reasons for the delay could be the signals sent by government, on the Finance Minister’s refusal to embark on fiscal adjustment.

     

    Meanwhile, IMF’s Africa Department Director, Abebe Selassie, has padded Ghana government at the back as he believe Ghana has taken the tough economic decisions needed to win a rescue package from the Fund.

     

    In a space of four months, the government has increased taxes and imposed losses on domestic investors, in attempt to meet IMF demands for the $3 billion loan. Currently on an informal talks with bilateral lenders, though it has dragged on.

     

    Ghana has “done all of the prior actions that were expected of them for the program,” Selassie said in an interview. “They’ve done a really, really difficult domestic debt restructuring exercise. The country now needs to get the resources required to support reserves.”

     

    Bilateral lenders, including China, are now expected to set up a committee to start formal negotiations with Ghana in the next few days. First on the committee’s agenda will be a written commitment to provide relief to the West African nation, paving the way for the loan from the IMF.

     

    “Provided we have the financing assurances, we would go to the board very quickly after that,” Selassie said. “So within the next three, four weeks. That’s the key hurdle for us.”

     

    The talks are taking place under the Group of 20’s so-called Common Framework, which expands the Paris Club of sovereign creditors to include China and other nations. Just under a third of Ghana’s bilateral debt, $1.9 billion, is owed to China. That is just a fraction of the nation’s 575.7 billion cedis ($50 billion) of public debt at the end of November.

     

    Five days after a surprise interest rate hike to a record 29.5% on March 27, parliament passed a bill to raise an additional 4 billion cedis ($353 million) in revenue this year. That was after a previous 250 basis points increase in value added tax to 15%.

     

    The fiscal measures and restructuring of cedi-denominated liabilities will help the West African economy lower its public debt to 71% of gross domestic product by 2028, Finance Minister Ken Ofori-Atta said in a presentation Thursday. The IMF has said it needs be on track to drop to 55% by that year to qualify for support. Before the government’s interventions, it had been projected to reach 109%.

     

    “There’ll be burden-sharing all around,” Ofori-Atta said. “If you join us in this, you really will help us build a robust economy and come back and be able to resume our partnership with you and the markets.”

     

    The adjustments and latest tax increases are taking a heavy toll on Ghanaians. Millions, like Esther Annan, a street vendor in the capital, Accra, have seen their living standards drop as inflation soars.

     

    The mother of six took out a micro loan to fund her cloth and bed-linen business in January but has now missed weekly payments after local demand dried up and interest rates soared.

     

    “I play cat-and-mouse games with the lenders because there is no money to pay them,” she said. “The interest on the loans has become so high.”

     

    Local lenders, which were the most exposed to the domestic debt, are now expected to skew credit to sectors that can readily pay while those needing it most miss out, said Richmond Atuahene, an analyst at Salman Partners and Financial Consult Ltd. in Accra.

     

    The latest tax increases are “an additional cost and if industry can no longer bear it, it will be compelled to cut costs, including labor and output,” said Humphrey Kwesi Ayim-Darke, president of the Association of Ghana Industries. “Small and medium-sized companies, manufacturing and agriculture are going to be hardest hit because of their high risk premium historically.”

     

    A slowdown in credit growth and an expected drop in consumer spending could decelerate economic expansion this year, according to three economists surveyed by Bloomberg.

     

    “The downside risks to the government’s 2.8% real GDP growth target for this year have increased on the back of the tightened monetary policy stance,” Mark Bohlund, a senior credit research analyst with REDD Intelligence, said.