After marathon negotiations with both domestic and international creditors, Ghana has finally secured the International Monetary Fund (IMF) Executive Board approval for the release of $3 billion in tranches to stabilise the national economy, which is in ruins after being wreaked by Covid-19 and other international shocks.
The government completed the last hurdle after the Executive Board of the Breton Woods Institution unanimously approved Ghana’s program at its meeting yesterday, May 17, 2023.
Our sources close to the meeting in Washington confirmed at 17>00 GMT the approval of the financing support for the next three years.
According to information we gathered around the corridors of the IMF at press time last night, work was in place to sign the deal, following the green light given by the Executive Board.
It will be recalled that the finance minister led his ministry to hold a ‘kenkey party’ to celebrate Ghana’s exit from the previous IMF deal signed by former President Mahama.
It is, however, not known whether the ministry would organise another feast to celebrate the approval of this deal.
Though an official release was expected in the evening of yesterday to confirm the details of the board meeting, the IMF announced on Tuesday that a virtual press conference would be held today to provide journalists with insights into the outcome of the Executive Board meeting, concerning the deal.
The press conference will enable journalists and stakeholders to engage with the panel of experts and gain a deeper understanding of the IMF’s perspective on Ghana’s economic situation and the proposed assistance.
The press briefing will feature key participants like Stephane Roudet, the IMF Mission Chief for Ghana; Ken Ofori-Atta, Ghana’s Minister of Finance; Ernest Addison, Governor of the Bank of Ghana and Tatiana Mossot, Senior Communications Officer at the IMF.
Stephane Roudet, the IMF Mission Chief for Ghana, will provide an expert analysis of the country’s economic performance, outlining the conditions and policy measures associated with the Extended Credit Facility Arrangement (ECF).
The IMF Executive Board approved, on May 17, 2023 an SDR 2.242 billion (about US$3 billion) 36-month ECF arrangement for Ghana. This decision enabled an immediate disbursement equivalent to SDR 451.4 million (about US$600 million).
The rest is expected to be disbursed in tranches every six months, following program reviews approved by the IMF Executive Board.
The government has laid out a number of policy objectives to reach Ghana’s economic program, which includes large and front loaded measures to bring public finances back on a sustainable path.
According to the government, this will be done through mobilising more domestic revenue and improving the efficiency of public spending.
Importantly, the program does and will continue to include efforts to protect the vulnerable. The 2023 budget has, for example, doubled the benefits of the existing targeted cash transfer program, the Living Empowerment Against Poverty (LEAP) and boosted the allocations towards the School Feeding program.
Secondly, is to support the fiscal adjustment and enhance resilience to shocks, structural reforms will be implemented in the areas of tax policy, revenue administration, and public financial management, as well as to address weaknesses in the energy and cocoa sectors.
Third, the government is taking steps to bring inflation under control, for example, with the Bank of Ghana raising interest rates and eliminating monetary financing of the budget. A flexible exchange rate policy will help rebuild international reserves.
Fourth, measures to preserve financial stability are very central to the program and finally, reforms are envisaged to encourage private investment, growth and job creation.
Ghana has been facing severe economic and financial crisis, with a debt burden assessed as unsustainable.
According to the government and the IMF, a combination of pre-existing vulnerabilities and external shocks, such as the COVID-19 pandemic and Russia’s war in Ukraine, have resulted in acute financing pressures, a depreciating cedi, declining international reserves, slowing economic activity and high inflation.