The International Monetary Fund (IMF) has indicated that Ghana’s journey to economic stability will be challenging but remains hopeful about the country’s ability to overcome current difficulties.
The IMF has advised Ghanaians to manage their expectations of the government and continue to make sacrifices as the country implements its US$3 billion loan-support program.
Following the COVID-19 pandemic, Ghana’s economy has faced challenges, leading the government to introduce several taxes and levies, including a COVID-19 Health Recovery levy, Electronic Transactions Levy (E-levy), and Sanitation and Pollution levy.
Recently, the government announced a 15 percent Value Added Tax (VAT) on residential electricity consumption and an emissions levy as part of its revenue generation efforts.
However, the announcement sparked public outrage, prompting the government to suspend the taxes for discussions with the IMF on the way forward.
During a media engagement as part of her first visit to Ghana, Ms. Kristalina Georgieva, Managing Director of the IMF, urged Ghanaians to support the government’s “painful reforms.”
She expressed optimism that Ghana’s ongoing reforms would ultimately benefit its citizens.
Recounting the experience of her country some three decades ago, Ms Georgieva said, “My own country [Bulgaria] in the 90s went through a much more severe collapse.
“Here [in Ghana], we’re talking about inflation of about 54 per cent. Inflation in Bulgaria was over 1000 per cent, and the measures to bring back macroeconomic measures were extremely painful,” she said.
She mentioned that she was in discussions with the government to ensure that the implemented policies are beneficial and aid in reducing the country’s debt levels while solidifying macroeconomic gains.
“We understand that the people in Ghana have been impacted and for the low-income household, any additional cost is a problem that is very difficult to bear. We have to look at the fiscal position of government, there are different measures that we can adopt to achieve this,” Ms Georgieva stated.
She observed that Ghana’s current economic challenges, while not dramatic, necessitated the government’s steadfast focus on implementing the loan-support program.
The IMF Managing Director emphasized that with strong economic fundamentals, sound macroeconomic policies, good governance, and minimal corruption, Ghana could achieve a resilient economy and a high standard of living.
She urged the government to prioritize reducing expenditure, increasing revenue generation, and investing more in education and infrastructure development nationwide.
“What we know is that the government cannot spend more than it generates, and it’s much better to spend money on education and infrastructure than for debt service,” Ms Georgieva said.
Ghana is currently executing a three-year US$3 billion Extended Credit Facility (ECF) program with the IMF as part of the country’s Post-COVID-19 Programme for Economic Growth (PC-PEG).
The program’s objectives include restoring macroeconomic stability and debt sustainability, enhancing resilience, and establishing a basis for more robust and inclusive growth.
To date, Ghana has received US$1.2 billion in two installments from the IMF and is slated to conduct a second review of the program’s implementation in April 2024.