The International Monetary Fund (IMF) Executive Board has completed the second review of Ghana’s 36-month Extended Credit Facility (ECF) Arrangement. This means an immediate release of US$360 million.
This latest disbursement brings Ghana’s total funds received under the ECF arrangement to approximately US$1.6 billion.
In a statement last Friday, the IMF commended Ghana’s overall performance under the program, noting that the country met all quantitative performance criteria for the second review and nearly all indicative targets. The IMF highlighted significant progress in debt restructuring and the advancement of key structural reforms.
The IMF lauded Ghanaian authorities for their reform initiatives, mentioning that economic growth has been more robust than anticipated, inflation has rapidly decreased from its 2022 peaks, and both fiscal and external positions have markedly improved.
The Ghanaian government received praise for its extensive debt restructuring efforts. On June 11, 2024, an agreement was reached with Ghana’s Official Creditor Committee under the G20’s Common Framework on a Memorandum of Understanding (MoU). This MoU formalized a debt treatment agreement in principle from January 2024, providing the necessary financing assurances for the second review’s completion under the ECF Arrangement. Additionally, Ghana has reached an agreement in principle with Eurobond holders on restructuring consistent with program parameters.
Ghana’s primary fiscal balance improved by over 4% of GDP last year. Looking forward, the authorities are committed to further fiscal consolidation, aiming for primary fiscal surpluses of 0.5% of GDP this year and 1.5% of GDP by 2025. These efforts are supported by reforms to enhance revenue mobilization, streamline non-essential expenditures, and expand social protection programs to mitigate the impact of fiscal adjustments on the most vulnerable populations.
The Bank of Ghana (BoG) has maintained a prudent monetary policy to sustain rapid inflation reduction and has taken measures to rebuild international reserves. The BoG has also implemented steps to preserve financial sector stability, including ensuring the banks’ recapitalization plans are carried out, while the Ministry of Finance has begun recapitalizing state-owned banks based on available resources.
The IMF stressed the importance of sustaining macroeconomic policy adjustments and reforms, especially during the upcoming electoral period, to fully restore macroeconomic stability and debt sustainability, fostering sustainable economic growth and poverty reduction.
Following the Executive Board discussion on Ghana, Deputy Managing Director Kenji Okamura stated, “Ghana’s performance under its ECF-supported reform program has been generally strong. The authorities’ strategy aimed at restoring macroeconomic stability and reducing debt vulnerabilities is paying off, with clear signs of stabilization emerging. Going forward, perseverance in macroeconomic policy adjustment and reforms is essential to fully restore macroeconomic stability and debt sustainability, while fostering a sustainable increase in economic growth and poverty reduction.”
The IMF emphasized the need for Ghana to mobilize domestic revenue, streamline public spending, and finalize comprehensive debt restructuring to achieve the fiscal objectives under the Fund-supported program. It also highlighted the importance of improving tax administration, expenditure control, and management of arrears, enhancing fiscal rules and institutions, and improving state-owned enterprises management.
The IMF noted that actions to ensure banks’ recapitalization plans and the recapitalization of state-owned banks are crucial for financial sector stability. Additionally, the IMF stressed the importance of reforms aimed at private sector development to foster inclusive growth and poverty reduction.
The IMF concluded that Ghana’s National Development Policy Framework should be adjusted to reflect the socio-economic impacts of shocks following the COVID-19 pandemic to ensure the effectiveness of policy interventions.
