The government of Ghana and the International Monetary Fund (IMF) have reached a staff-level agreement for the fourth review of the country’s Extended Credit Facility (ECF) program.
This agreement opens the door for a US$370 million payout with final approval from the IMF Executive Board.
Despite policy lapses in the run-up to the general elections in 2024, the agreement comes amid indications of economic resilience and comes after an IMF team led by Mission Chief Stéphane Roudet spent two weeks in Accra.
“IMF staff and the Ghanaian authorities have reached a staff-level agreement on the fourth review of Ghana’s economic program under the Extended Credit Facility arrangement,” Mr Roudet said in a statement released on April 15.
“Upon completion of the Executive Board review, Ghana would have access to SDR 267.5 million (about US$370 million), bringing the total IMF financial support disbursed under the arrangement since May 2023 to about US$2.355 billion.”
Ghana’s 2024 growth was greater than expected, according to the IMF, primarily because to good performance in the mining and construction industries.
With robust gold exports, higher remittances, and a better-than-expected increase in foreign reserves, external conditions also improved dramatically.
Nevertheless, a “marked deterioration” in overall program performance by the end of 2024 offset these advantages.
The Fund pointed to inflationary pressures, election-year fiscal lapses, and postponements of important reforms in the energy, financial, and fiscal domains.
“Preliminary fiscal data point to slippages in the run-up to the 2024 general elections, on account of a large accumulation of payables. Inflation exceeded programme targets. Several reforms and policy actions were delayed,” Mr Roudet noted.
The Fund recognized that in order to overcome the obstacles and restart the program, Ghana’s new leadership had subsequently taken “bold measures.”
Among these is the adoption of a 2025 budget that aims to increase the primary surplus from last year’s deficit of more than 3% of GDP to 1.5%.
To reduce spending overruns, significant improvements in public financial administration have also been implemented.
Discussions on ways to address fundamental flaws in the finance and procurement systems and boost social protection for poor persons facing inflation were held in an effort to improve monitoring and transparency.
“The authorities have enacted a 2025 budget that targets a 1½ per cent of GDP primary surplus and adopted several public financial management reforms,” Mr Roudet said. “This includes an enhanced fiscal responsibility framework and new rules to tighten expenditure commitments.”
The Bank of Ghana recently raised its policy rate, which was welcomed by the IMF, which believes that inflation can be controlled by tightening monetary policy and continuing fiscal austerity.
It is anticipated that the energy sector’s financial burden will be lessened and the accumulation of new arrears will be stopped with the return of quarterly power pricing changes along with broader reforms.
The mission also examined the status of ongoing structural reforms, with a focus on initiatives to enhance efficiency and governance in state-owned businesses in the energy, cocoa, and gold industries.
Regarding debt restructuring, Ghana’s ongoing dedication to reestablishing financial sustainability was praised by the Fund.
Bilateral agreements are in progress to operationalize the G20 Common Framework, which includes the signing of a Memorandum of Understanding with the Official Creditors Committee.
In the meantime, talks with commercial creditors are still going on while according to IMF comparability guidelines.
Throughout the tour, the IMF team spoke with senior government officials and stakeholders, including Bank of Ghana Governor Dr. Maxwell Opoku-Afari and Finance Minister Dr. Cassiel Ato Forson.
Ghana’s “continued open and constructive engagement” was appreciated by the team.
Source: newsthemegh.com