The International Monetary Fund (IMF) has raised concerns that the upcoming general elections in December 2024 could potentially threaten the progress achieved under its program with Ghana.
According to the IMF, “the medium-term outlook remains favourable but subject to downside risks—including those related to the upcoming general elections”.
It added that “keeping the domestic revenue mobilization agenda on track and tightening expenditure commitment controls is critical to avoid policy slippages ahead of the December 2024 general elections”.
Following the approval of Ghana’s second program review and the disbursement of $360 million, the IMF emphasized in a statement the importance of the government adhering to the program’s objectives.
It underscored the necessity of maintaining sustainable growth and reducing poverty through consistent implementation.
Additionally, the IMF highlighted the critical need to uphold macroeconomic policy adjustments and reforms to achieve lasting stability and debt sustainability.
“These efforts should be supported by continued progress in improving tax administration, strengthening expenditure control and management of arrears, enhancing fiscal rules and institutions”, the IMF advised.
Ghana’s Performance under the IMF Programme
The IMF however stated that despite the elections related concerns, “Ghana’s performance under the programme has been generally strong, both in terms of meeting the quantitative objectives (for example on budgetary performance), and also in implementing structural reforms”.
The statement emphasized that the reforms aim to enhance economic resilience, achieve sustained improvements in public finances, and establish the groundwork for robust and inclusive growth.
“The authorities have so far demonstrated a strong commitment to the programme objectives, and we welcome Finance Minister Adam’s signaling of the government’s continued commitment to the policies under the programme”.
The Deputy Managing Director of the IMF, Gita Gopinath, commended the government and the Bank of Ghana for their decisive actions in controlling inflation and strengthening foreign reserve buffers.
However, she emphasized the importance of maintaining a suitably tight monetary policy and improving exchange rate flexibility.
Does the IMF see signs of success under the Programme?
Despite a challenging global economic climate, the IMF noted that Ghana’s reforms are yielding positive results, with indications of economic stabilization becoming evident.
The IMF also highlighted that growth has shown greater resilience than originally anticipated, and inflation is decreasing significantly from its peak in 2022.
Furthermore, the IMF pointed out improvements in fiscal and external positions, underscored by the growth in the Bank of Ghana’s international reserves.
Debt Restructuring and the IMF Programme
The IMF applauded Ghana for providing the financing assurances necessary for the second review under the ECF Arrangement to be completed.
“The authorities have also recently reached an agreement in principle with representatives of Eurobond holders on a restructuring consistent with program parameters, subject to confirmation on comparability of treatment by the OCC”.
Background
In May 2023, Ghana entered into an IMF program aimed at bolstering the country’s post-COVID economic recovery.
The program focuses on three main objectives:
Firstly, implementing substantial and front-loaded measures to restore fiscal sustainability. This involves increasing domestic revenue mobilization and enhancing the efficiency of public spending, with a strong emphasis on safeguarding vulnerable groups.
Secondly, undertaking ambitious structural reforms to support fiscal adjustments and strengthen resilience against economic shocks. These reforms target tax policies, revenue administration, and public financial management, alongside addressing weaknesses in the energy and cocoa sectors.
Thirdly, implementing measures to curb inflation, including raising interest rates by the Bank of Ghana and discontinuing monetary financing of the budget. A flexible exchange rate policy aims to rebuild international reserves.
These efforts require continued improvements in tax administration, stricter control over expenditures and arrears management, enhancement of fiscal rules and institutions, and better management of state-owned enterprises. Strengthening targeted social protection programs is crucial to mitigate the impact of fiscal adjustments on vulnerable populations.