The Executive Board of the International Monetary Fund (IMF) on Wednesday approved Ghana’s request for a $3 billion loan-support programme. The approval would lead to an ‘immediate’ disbursement of US$600 million to support the Government’s three-year Post COVID-19 Programme for Economic Growth (PC-PEG) to restore macroeconomic stability and debt sustainability. This comes after 10 months of meetings and negotiations between Ghanaian authorities, the Fund and other stakeholders, including creditors, after an official announcement of going to the Fund in July 2022. The Government reached a Staff-Level Agreement (SLA) with IMF in December 2022, concluded a Domestic Debt Exchange Programme (DDEP) in February 2023 and gained external creditors financing assurance last Friday. That paved way for the Board’s consideration and approval of the loan-support programme, which occurred on Wednesday. A press release by IMF copied to the Ghana News Agency after the approval stated that: ‘The Executive Board’s decision will enable an immediate disbursement to Ghana equivalent to SDR 451.4 million (about US$600 million). It noted that securing a timely debt restructuring agreement with Ghana’s external creditors will be essential for the successful implementation of the new Extended Credit Facility programme. ‘With a view of fostering lasting fiscal discipline, the authorities are also advancing reforms to enhance domestic revenue mobilisation, strengthen public financial management, and tackle the deep challenges in the energy and cocoa sectors,’ Ms Kristalina Georgieva, Managing Director, IMF said. On the impact of DDEP on balance sheets of financial institutions, she said that authorities would devise and implement a comprehensive strategy to rapidly rebuild financial institutions’ buffers and exit from temporary regulatory forbearance measures. Policies under the programme would also focus on ‘reining in inflation and rebuilding foreign reserves buffers,’ as the Bank of Ghana enhances exchange rate flexibility, while limiting its foreign exchange interventions. The loan-support programme is to provide balance of payment funding as part of a broader effort to quicken Ghana’s recovery from an economic crisis, induced by a pandemic, Russia-Ukraine war and internal structural problems. It would assist Ghana in implementing its homegrown policies that would restore macroeconomic stability and ensure debt sustainability, while protecting the most vulnerable parts of its population. It would also help create the conditions for inclusive and sustainable growth and job creation, help to alleviate the exchange rate pressures and depreciating currency, and provide a catalytic effect on additional sources of financing. In implementing the loan-support programme, the Fund said structural reforms would be introduced to underpin the fiscal strategy and ensure a durable consolidation, including developing a medium-term plan to generate additional revenue and advancing reforms to bolster tax compliance. This, the Fund said would help create space for growth-enhancing measures and social spending. The reforms would also strengthen public expenditure commitment controls, improve fiscal transparency (including the reporting and monitoring of arrears) and the management of public enterprises, and tackle structural challenges in the energy and cocoa sectors. On social protection for the vulnerable in the course of implementing the programme, the Fund said that it would seek to boost social spending to improve socioeconomic outcomes and help promote inclusive growth. The Fund, however, noted that the social spending measures must be adequate, efficient, and financed sustainably to achieve such outcomes, of which they stood ready to assist the Government. Some Economists and financial institutions, including the World Bank have indicated that IMF loan-support programme would not be the ultimate panacea to Ghana’s economic crisis. However, they are of the view that it would give Ghana the needed policy credibility, capital market confidence, and help with the short-term economic management. On this issue, Pierre Frank Laporte, World Bank Country Director, Africa, in an interview in February this year said the Fund’s loan-support programme would help Ghana to renegotiate some of its debts with creditors, guarantee more loans, and give the country an economic framework that would help shore up its reserves. While admitting that the confidence in the economy would grow under the IMF programme, Dr Patrick Asuming, an Economist said: ‘We must cut waste and get the government to spend within its means.’ ‘We have to ensure that all those free taxes that we give to our government officials, we take them off,’ Dr Asuming, a Senior Lecturer, University of Ghana Business School (UGBS), said. Until the recent economic hardship, Ghana, Africa’s second largest gold producer, was described by the IMF as the fastest growing economy in Sub-Saharan Africa. However, the economic fortunes of the West African country with a population of about 31 billion started to change when the COVID-19 pandemic affected the economy, resulting in an economic crisis. At the peak of the economic hardship, there were a series of calls by citizens and people in academia, as well as economic and financial professional bodies for the Government to act swiftly to avert any worst situation. To register their displeasure to the Government about the surging inflation, hikes in food and transport and other economic woes, hundreds staged a protest in Accra, the regional capital in the early parts of July 2022. At the time, a Ghana News Agency report disclosed that walking long distances to various locations, including work, riding bicycles, and parking private vehicles to join commercial ones (trotro) had become the routine of many citizens. The President, Nana Addo Dankwa Akufo-Addo, assured Ghanaians that the Government would work hard to ‘revive and revitalise the economy and put our nation back on the path of rapid economic growth.’
Source: Ghana News Agency