In a significant development, the World Bank has concluded an agreement to provide Ghana with $900 million in support of the country’s ongoing reforms. This substantial financial commitment highlights the bank’s commitment to assist Ghana in its pursuit of comprehensive reforms aimed at fostering sustainable development and economic growth.
The support, which is under the Development Policy Operations (DPO) for the period 2023 to 2025, is expected to front-load the first tranche to the country by November if Ghana is able to meet prior actions and present the final document to the World Bank Executive Board by the end of October this year.
At a meeting with the World Bank Managing Director for Operations, Anna Bjerde, in Accra yesterday, the Minister of Finance, Ken Ofori-Atta, stated that the government was committed to completing all prior actions by October this year.
“I would like to personally assure you that the government has prioritised the completion of all prior actions by end of August, 2023, to ensure the first DPO in the series is presented to the World Bank Board in early October,” the Finance Minister said, adding, “we count on your support for this to happen”.
During discussions in his office and at a banquet held in her honour, Mr Ofori-Atta appealed to the World Bank to front-load the DPO amount for 2023 to $500 million.
A World Bank Mission which visited the country between June 19-23 reached the agreement on the reforms to be presented to the board in October this year.
Critical
“This is critical for the International Monetary Fund (IMF)-Supported PC-PEG, for the continuous stability of the cedi and broader macroeconomic stability,” Mr Ofori-Atta said.
He added that it was the belief of the government that with the requisite resources, the country could become “the poster child for a robust, sustainable and green post-COVID economic build-back on the continent.”
The Finance Minister stressed that given the DPO’s strong emphasis on fostering resilience to economic and climate shocks, the government was being intentional about building a low carbon and climate resilient economy.
Again, he said, the focus was to protect the poor and vulnerable against the impact of “the front-loaded fiscal consolidation under the IMF-supported PC-PEG.”
The minister said the government had also developed a strategy to strengthen the financial sector and rebuild financial institutions’ buffers as one of the policy actions under the DPO.
Improvements
Mr Ofori-Atta said the World Bank had played a critical role in Ghana’s journey to achieve macroeconomic and financial stability as well as setting the economy on a path of strong sustainable growth.
Given the significant sacrifices and strong commitment demonstrated by the government and people of Ghana to ensuring macroeconomic stability and debt sustainability, the minister said the World Bank should leverage Ghana’s example and use it as a demonstration effect by scaling up its support and interventions in the country.
For its part, the government was implementing various revenue reforms and measures targeted at increasing domestic revenue from the current tax to GDP ratio of 13 per cent to between 18 per cent and 20 per cent over the medium term.
Mr Ofori-Atta cited the completion of the domestic debt restructuring three months after the launch of the programme in December 2022; securing financing assurances from the Paris Club Official Creditor Committee (OCC) on May 12, 2022 under the G20 Common Framework and securing the approval of the three-year $3 billion PC-PEG-backed IMF Programme.
Rebound
He observed that there were clear indications that the country was coming out of its economic woes as the economic indicators were beginning to improve.
For instance, Mr Ofori-Atta said the first quarter 2023 growth rebounded to 4.2 per cent, up from three per cent in quarter one of 2022, mainly on the back of 10.1 per cent growth in services and 4.8 per cent growth in agriculture.
Again, he said, inflation had declined to 42.5 per cent in June 2023 after peaking at 54.1 per cent in December 2022.
Mr Ofori-Atta said the cedi had remained relatively stable, depreciating cumulatively by about 22 per cent year-to-date compared to a depreciation of 50 per cent in November 2022.
He also said the 91-day treasury bill rate had declined to around 20 per cent, down from 35.5 per cent at the end of 2022.
Climate finance
He stated that the country was focused on taking advantage of the Just Energy Transition Partnerships (JETP) to accelerate its transition to a low carbon economy.
“This would require non-debt financing support to decommission some of our legacy fossil fueled energy installations to make room for more investments in renewable energy,” he said.
He said in terms of enhancing social protection, the 2023 budget had already made specific provisions for doubling the Livelihood Empowerment against Poverty (LEAP) payment per beneficiary household from GH¢45 per month to GH¢90, with a progressive increase in the number of beneficiary households from the current 344,185 households.
“Coverage will be expanded to all 2.5 million extremely poor individuals by 2024.
We plan that by end September 2023, an indexation mechanism will be introduced in the LEAP Programme to prevent erosion of value over time,” he added.
He also said there had been increases in the budgetary allocation for the School Feeding Programme (SFP) to compensate for higher cost of meals and to ensure efficient management of the programme.
The Finance Minister also said more would be done to increase the school capitation grants and further expand the National Health Insurance Scheme (NHIS).
Achieving stability commendable
For her part, Ms Bjerde commended Ghana’s effort to restore macroeconomic stability, comparing the gloom on Ghana’s outlook a year ago and the progress thecountry had made since to get an IMF Board approval for the $3 billion facility.
The performance is seen in the indicators recorded in recent publications and the efforts towards the IMF Board’s review in November.
Ms Bjerde also acknowledged Mr Ofori-Atta’s strong voice in shaping the World Bank evolution, which she said, would continue to be significant to help the course of Ghana and Africa in general.