## 1ghaea2019001

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### Impact of the 2018 GDP Rebase
- Ghana’s GDP was revised in September 2018, with the new base year 2013.
- The rebase increased 2017 nominal GDP by 25 percent.
- Sectoral adjustments (2017, relative to old series):
  - Agriculture: increased by 44 percent.
  - Industry: increased by 62 percent.
  - Examples of drivers:
    - Registered crops increased from 12 to 27 in the 2013 base year.
    - Integrated Business Establishment Survey establishments increased from 27,000 to 90,000 in the 2013 base year.
    - Inclusion of Sankofa and TEN fields in mining and quarrying; increased electricity transmission and distribution coverage.
- Macroeconomic ratio impacts (Before / After / Diff., in percent of GDP):
  - Debt: 71.8 / 57.3 / -14.5
  - Fiscal Deficit: 6.0 / 4.7 / -1.3
  - Tax Revenue: 17.5 / 13.9 / -3.6
  - Capital Expenditure: 3.1 / 2.5 / -0.6
- Implications:
  - Headline debt and deficit metrics improved, but revenue ratio declined, placing Ghana among lower tax collectors relative to peers.
  - Government capital expenditures decreased in percent-of-GDP terms.
  - Indicators invariant to GDP (e.g., debt service-to-revenue) remained unchanged, leaving high debt-servicing pressures in absolute terms.
  - Policy priorities: maintain fiscal discipline, improve revenue mobilization, and manage contingent liabilities to secure debt sustainability.

### Financial sector fragilities and clean-up
- Asset Quality Review and shortfalls:
  - AQR (finalized March 2017) identified nine undercapitalized banks with an aggregate capital shortfall of about 1.6 percent of GDP.
  - Regulatory minimum capital adequacy ratio: 10 percent.
- Bank resolutions and bridge bank:
  - Two banks closed by September 2017; five resolved in August 2018 with assets/liabilities transferred to Consolidated Bank Ghana (CBG).
  - Special resolution bonds issued: GHc 7.6 billion (two tranches) and GHc 1.5 billion (January 2019 tranche).
  - CBG equity injection: GHc 450.
  - Monetization of a first tranche of GHc 3.2 billion by BoG to meet CBG liquidity needs.
- Financial sector costs (GHc million):
  - Banking sector costs: 10,250 (2018), 1,500 (2019)
  - GCB resolution bonds (UT, Capital Bank): 2,200
  - CBG resolution bond (UniBank et al), first tranche: 3,200
  - CBG resolution bond (UniBank et al), second tranche: 4,400
  - CBG resolution bond (Heritage, Premium): 1,500
  - SDIs costs: 4,000
  - MFI clean-up: 1,000
  - Savings and Loans and Finance Houses clean-up: 3,000
  - Total costs: 10,250 (2018), 5,500 (2019)
  - Memorandum items:
    - Total costs (in percent of GDP): 3.4 (2018), 1.6 (2019)
    - Nominal GDP (GHc million): 299,099 (2018), 347,239 (2019)
  - Note: Excluding potential recoveries.
- Recapitalization and schemes:
  - Minimum paid-up capital increased from GHc 120 million to GHc 400 million by end-2018.
  - As of end-2018, 16 banks met the new minimum on a stand-alone basis; six banks merged into three groups.
  - Ghana Amalgamated Trust (GAT) envisaged to raise private funds; use of government guarantees in the scheme may pose fiscal risks upon maturity of the bonds.
- Regulatory strengthening:
  - Capital Requirements Directive (July 2018) to align with Basel II/III; introduction of IFRS 9 (effective 2018); enhanced risk-based supervision; envisaged Pillar 2 capital framework and new liquidity requirements.
  - Directives on Corporate Governance and Cyber and Information Security; guideline on prevention of money laundering and terrorism financing; draft requirements on fitness and propriety.
- SDIs and sector clean-up:
  - BoG and World Bank analysis identified many MFIs and rural banks warranting prompt intervention.
  - Clean-up of savings and loans companies and finance houses underway; government funding mobilized for resolution costs.

### Fiscal structural reforms, PFM, and fiscal rules
- Structural benchmarks and information systems:
  - Met: Integration of payment, personnel (HRMIS) and budget (GIFMS) systems in education sector by end-August; publication (with delay) of Fiscal Risk Statement.
  - Unmet/delayed: TSA September benchmark (176 MDAs accounts remaining); GIFMIS and HRMIS end-December benchmarks not fully met (GIFMIS: 4 out of 58 IGF entities remain outside; HRMIS covers about 80 percent of payroll).
  - Rollout of TSA and GIFMIS tracked under World Bank PFM reform project.
- PFM Act implementation:
  - Implementing regulations with Legislative Committee of Parliament (prior action); approval on lapse-of-time basis by early April.
- Fiscal Responsibility Act, 2018 (982):
  - Limits overall fiscal deficit on a cash basis to 5 percent of GDP.
  - Mandates a positive primary balance.
  - Covers central and local governments, autonomous agencies, and statutory bodies.
  - Allows suspension for force majeure, severe shocks (including commodity price shocks), and periods when GDP growth rate is one percent or below.
  - If rules missed by more than one percentage point, Parliament may pass a vote of censure on the Finance Minister.
- Fiscal council:
  - Seven-member fiscal council appointed by the President; staff recommended delinking council terms from the President’s term to support independence.
- Financing strategy and debt management:
  - Authorities to adhere to ECF debt limits for new external borrowing post-program.
  - Government plans to issue a Eurobond in H1 2019 of up to US$3 billion (US$2 billion for budget financing; US$1 billion for liability management).
  - Staff recommended using part of Eurobond proceeds to buy back maturing domestic securities held by foreign investors.
  - Plans to monetize future gold royalty revenues from 2020 up to US$500 million.
  - GETFund authorized to borrow up to US$500 million (three years) backed by earmarked sales tax; authorities assured borrowing would not exceed US$250 million.
  - Staff cautioned against excessive debt collateralization and revenue monetization.
  - Debt management actions: publish 2019 Annual Borrowing Plan by end-Q1 2019; revamp joint bookrunner system; accept higher auction yields; strengthen MOF-BoG coordination through EPCC.
- Large off-balance SPV transaction (Sinohydro arrangement):
  - Sinohydro to provide US$2 billion infrastructure in exchange for refined bauxite; first phase US$646 million (10 projects).
  - Key terms: tenor 15 years; grace 3 years; repayment 12 years; interest = 6 months US Libor + 2.80 p.a.; management fee 0.7 percent flat; commitment fee 0.5 percent p.a.; Sinosure premium one-off 7 percent flat.
  - Collateral: GIADC offshore escrow account required to hold amounts sufficient to cover upcoming two instalments; funds for “exclusive benefit of Sinohydro.”
  - Staff preliminary concerns: committing future bauxite receivables and escrow arrangements limit GoG discretion; GoG estimate: bauxite resources can potentially deliver over US$500 billion, but GIADC capability to produce sufficient refined bauxite will take considerable effort and time.
  - Context data: Ghana produces around 1.5 million of tons of bauxite per year; exports ~US$50 million in 2017 (0.3 percent of total exports); bauxite price around $45 per ton; VALCO produces around 200,000 tons per year; aluminum price dropped from US$2,300 per ton to around US$1,970 per ton since mid-2018.

### Energy sector, SOEs, and fiscal risks
- SOE and energy sector concerns:
  - Energy sector SOEs continue to pose significant fiscal risks due to inefficiencies, weak governance, and inadequate tariffs.
  - SOEs and financial sector related fiscal costs projected to total some 10 percent of GDP over 2017-19.
  - Electricity sector SOEs (ECG, GridCo, VRA) have generated negative average return on equity since 2014.
  - Supplier payment delays: suppliers to ECG may wait over a year to be paid.
  - ECG collection time increased to over 200 days.
  - Electricity tariff cuts in March 2018 (up to 30 percent) worsened financial problems.
  - Gas off-take agreement for Cape Three Points requires Ghana to make monthly payments equivalent to 0.7 percent of GDP annually; planned pipeline not in place.
- Recent developments and reform measures:
  - On March 1, 2019, a private concessionaire took over ECG distribution and collection under a twenty-year concession.
  - Some concession “conditions precedent” converted to “conditions post”; regulated tariff expected by July 1, 2019.
  - Authorities working with World Bank on Energy Sector Recovery Program (ESRP); plan to reduce intra-SOE and government payables after external audit completion.
- Cocobod:
  - Cocobod faces estimated financing gap of GHc 1 billion (0.3 percent of GDP) in the current crop year.
  - Staff view: adjust producer prices to reflect international cocoa prices and provide farmer income support via explicit budget transfers.
  - Cocobod pursuing cost savings; staff view those may be temporary.

### Monetary policy, FX operations, and central bank safeguards
- BoG FX operations framework:
  - BoG preparing an internal FX intervention policy (prior action) to support reserve accumulation and dampen excess volatility.
  - BoG issued market conduct guidelines (published February 25, 2019).
  - BoG moving away from trading at the reference rate and revised reference rate calculation to exclude BoG trades.
  - Objective: develop a deeper, more efficient FX market.
- Net international reserves (NIR) and buffers:
  - Authorities maintained NIR at end-December 2018 level (prior action).
  - Planned Eurobond expected to help rebuild buffers: projecting NIR of US$4.5 billion by year-end relative to about US$3.2 billion at the beginning of the program in April 2015.
- Monetary stance:
  - Relatively tight monetary stance appropriate to address underlying inflation pressures.
  - Inflation continued to decline, slower than anticipated.
  - MPC cautioned on easing MPR given possible cedi depreciation pass-through and weak non-resident demand for domestic government bonds.
- Safeguards and ELA:
  - Progress on safeguards mixed; MoU on monetary financing extended until end of program to help anchor disinflation.
  - Delays in fully enforcing BoG’s ELA framework for collateralization of liquidity assistance have implications for BoG balance sheet.
  - BoG to secure repayment from going concern banks and recover amounts from receiverships.

### Program performance, targets, and selected indicators
- Programme implementation through end-December 2018:
  - At end-June 2018: 3 out of 9 PCs missed (NIR, wage bill, primary fiscal balance).
  - At end-December 2018: 2 out of 9 PCs missed (NIR and wage bill).
  - Continuous PC on gross credit to the government by BoG was not observed.
- Missed target drivers:
  - Wage bill overruns from Education and Health allowances; government absorbed additional teachers and nurses.
  - Primary fiscal balance missed end-June due to revenue shortfalls and expenditure overruns; met at end-December after Mid-Year Budget Review measures.
  - BoG credit to government miss due to valuation effects and CBG bond monetization in November 2018.
  - NIR missed by US$825 million at end-June and by US$1,413 million at end-December 2018; causes included higher-than-projected outflows (~US$1 billion) and lower sovereign bond receipts (actual US$750 million vs programmed US$1.5 billion).
  - Measures: aggressive targeted FX purchases, activating facility with international bank, expected 2019 Eurobond.
- Program performance summary (program review context):
  - Three PCs missed at end-June; two PCs missed at end-December.
  - Continuous PC on gross financing of BoG to the government missed.
  - Inflation remained within the inner band of the MPCC.
  - Staff support for waivers given corrective actions including seven prior actions.
- Selected macro and fiscal indicators (highlights, exact values preserved):
  - GDP at constant prices: 5.9 (2017); 8.1 (2018); 6.3 (2019 Prog.); 5.6 (2019 Prov.); 8.8 (2020 Prog.1); 5.8 (2020 Prov.); 4.4 (2021 Prog.); 4.5 (2021 Prov.).
  - Central government budget (cash basis, percent of GDP) — Revenue: 18.9 (2017); 13.9 (2018); 17.9 (2019 Prog.); 14.6 (2019 Prov.); 16.1 (2020 Prog.1); 15.3 (2020 Prov.); 15.9 (2021 Prog.); 15.9 (2021 Prov.).
  - Central government debt (gross): 70.5 (2017); 57.3 (2018); 70.3 (2019 Prog.); 59.6 (2019 Prov.); 62.0 (2020 Prog.1); 60.0 (2020 Prov.); 58.2 (2021 Prog.); 56.3 (2021 Prov.).
  - Nominal GDP (millions of GHc): 202,389 (2017); 256,671 (2018); 241,717 (2019 Prog.); 299,099 (2019 Prov.); 347,239 (2020 Prog.1); 399,175 (2020 Prov.); 454,163 (2021 Prog.); 516,935 (2021 Prov.).
  - Gross international reserves (millions of US$): 5,783 (2017); 5,491 (2018); 5,909 (2019 Prog.); 5,317 (2019 Prov.); 5,631 (2020 Prog.1); 6,448 (2020 Prov.); 7,063 (2021 Prog.); 8,301 (2021 Prov.).
  - Net international reserves (millions of US$): 4,475 (2017); 4,652 (2018); 5,035 (2019 Prog.); 3,980 (2019 Prov.); 4,502 (2020 Prog.1); 5,409 (2020 Prov.); 6,142 (2021 Prog.); 7,509 (2021 Prov.).
  - Consumer price index (annual average): 11.8 (2017); 12.4 (2018); 9.3 (2019 Prog.); 9.8 (2019 Prov.); 9.1 (2020 Prog.1); 8.4 (2020 Prov.); 7.5 (2021 Prog.); 6.8 (2021 Prov.).
  - Financial soundness indicators (selected):
    - Regulatory capital to risk weighted assets: 19.3 (Dec 2018).
    - Nonperforming loans to total gross loans: 18.2 (Dec 2018).
    - Bank provisions to nonperforming loans: 70.8 (Dec 2018).
    - Return on assets: 2.3 (Dec 2018).
    - Liquid assets/total deposits: 40.1 (Dec 2018).

### Debt sustainability, DSA findings, and risks
- Overall DSA assessment:
  - Risks of external and overall debt distress continue to be assessed as high.
  - Rebasing improved public debt-to-GDP ratios but debt service ratios continue to breach thresholds under the baseline.
- Contingent liabilities coverage:
  - Total contingent liabilities for the CL test estimated at 8.4 percent of GDP.
- Key DSA numeric highlights and trajectories (selected):
  - PV of PPG external debt-to-GDP: 36.8 (2017); 36.8 (2018); 38.7 (2019); 37.4 (2020); 35.5 (2021); 33.8 (2022); 33.0 (2023); 30.1 (2028); 22.1 (2038).
  - PPG debt service-to-exports ratio examples: 18.5 (2017); 17.0 (2018); 17.1 (2019); 14.6 (2020); 14.4 (2021).
  - PPG debt service-to-revenue ratio examples: 47.9 (2017); 41.1 (2018); 37.3 (2019); 32.9 (2020); 30.7 (2021).
  - Public sector debt examples: 57.7 (2017); 59.8 (2018); 62.4 (2019); 60.5 (2020); 58.6 (2021); 56.7 (2022).
  - Gross financing need examples (percent of GDP): 18.2 (2017); 14.7 (2018); 12.0 (2019); 9.6 (2020); 8.8 (2021).
- Stress and sensitivity tests (select outcomes):
  - Two out of four external indicators are in breach under the baseline (debt service-to-exports and debt service-to-revenue).
  - Tailored commodity price shock (C3) shows PV of debt-to-GDP rising to 82 in latter years.
  - Market financing stress and combined scenarios show significant upward pressure on PV of debt-to-GDP.
- Country capacity and classification:
  - Ghana assessed to have a medium debt carrying capacity; Composite indicator score 2.83.
  - Public debt benchmark: 55 percent of GDP.
- Policy implications:
  - Maintain fiscal discipline, build buffers, diversify exports, and exercise caution in new external financing for infrastructure.
  - Strengthen SOE oversight and monitor contingent liabilities closely.

### Program appraisal, priorities, and staff recommendations
- Macro gains and outlook:
  - Rising growth, single digit inflation, reduced budget deficit, sustained primary surpluses, and banking sector clean-up noted.
- Core policy priorities recommended:
  - Entrench macro stability through irreversible policies ahead of 2020 elections.
  - Credible and sustained fiscal adjustment to reduce financing needs and anchor debt dynamics.
  - Strengthen domestic revenue mobilization to reduce funding needs and protect priority spending.
  - Avoid shifting expenditure off-budget; curb excessive public spending.
  - Intensify fiscal structural reforms: pass PFM regulations, improve GRA operations, ensure fiscal rule monitoring and SOE oversight.
  - Address energy sector fiscal risks decisively: resolve losses from high-cost fuel and IPPs, improve collection, ensure cost-recovery tariffs.
  - Manage debt strategy carefully: avoid encumbering revenues, ensure transparency, and conduct value-for-money assessments for debt-financed investments.
  - Monetary and FX: remain vigilant against exchange rate shocks; rebuild FX buffers; foster FX market development.
  - Banking sector: fully operationalize Financial Stability Council; consider marketable instruments instead of special resolution bonds; step up write-offs and resolve distressed deposit-taking institutions.
  - Institutional coordination: strengthen EPCC; continue Fund assistance for policy dialogue and capacity development.
- Staff supports completion of the seventh and eighth reviews under the ECF arrangement and waivers for nonobservance of certain PCs given corrective measures.

*Source: Excerpts from IMF staff report and staff appraisal (content unit 1ghaea2019001).*

### 1. Impact of the 2018 GDP Rebase ________________________________________________________________ 6

### 1. Impact of the 2018 GDP Rebase

### Summary of the 2018 GDP Rebase
- Ghana’s GDP was revised in September 2018, with the new base year 2013.
- The rebase increased 2017 nominal GDP by 25 percent.
- The rebase follows a prior major rebase in 2010 (base year changed from 1993 to 2006) that revised GDP by more than 60 percent.

### Sectoral adjustments and drivers
- Major adjustments occurred in agriculture and industry:
  - Agriculture increased by 44 percent in 2017 relative to the old series.
  - Industry increased by 62 percent in 2017 relative to the old series.
- Agriculture adjustments reflected expansions in livestock, crops, and fishing sub-sectors; e.g., the number of registered crops increased from 12 to 27 in the 2013 base year.
- Industry adjustments reflected increases in mining and quarrying (including inclusion of Sankofa and TEN fields), manufacturing (number of establishments used by the Integrated Business Establishment Survey increased from 27,000 to 90,000 in the 2013 base year), and electricity (a sizable portion of transmission and distribution had not been included in previous series).

### Macroeconomic effects and nuances
- Measured impacts on ratios (Before / After / Diff., in percent of GDP):
  - Debt: 71.8 / 57.3 / -14.5
  - Fiscal Deficit: 6.0 / 4.7 / -1.3
  - Tax Revenue: 17.5 / 13.9 / -3.6
  - Capital Expenditure: 3.1 / 2.5 / -0.6
- While debt and deficit ratios are lower after the rebase, the revenue ratio has declined, potentially placing Ghana among the lowest tax collectors relative to peers.
- Government capital expenditures decreased significantly in percent-of-GDP terms after the rebase.
- Ratios invariant to GDP (for example, debt service-to-revenue) remain unchanged and continue to reflect high debt-servicing pressures.

### Implications for interpretation and policy
- The rebase presents a generally positive impact on headline debt and deficit metrics but reveals weaker revenue effort and lower capital expenditure shares.
- High debt-servicing burdens persist in absolute terms because indicators invariant to GDP did not change.
- The rebase highlights the importance of maintaining fiscal discipline, improving revenue mobilization, and managing contingent liabilities to secure debt sustainability.

*Source: Ghana authorities and IMF Staff estimates.*

### Box 3. Financial Sector Fragilities

### Box 3. Financial Sector Fragilities

### Asset Quality Review and initial capitalization shortfalls
- An Asset Quality Review (AQR) finalized in March 2017 identified nine banks as being undercapitalized, with an aggregate capital shortfall of about 1.6 percent of GDP (IMF Country Report No. 17/262).
- By September 2017, the BoG had closed two deeply insolvent banks; most other institutions were reporting capital adequacy ratios above the regulatory minimum of 10 percent.

### Onsite inspections, bank resolutions, and creation of a bridge bank
- Onsite inspections in late 2017 and early 2018 highlighted further under-provisioning in some institutions, resulting among others in the appointment of an official administrator at UniBank.
- Prudential reports for UniBank proved largely inaccurate; UniBank was deeply insolvent. Given the absence of credible rehabilitation prospects, the BoG resolved UniBank in August 2018 together with four other troubled banks.
- A government-owned bridge bank, Consolidated Bank Ghana (CBG), was created; good assets and liabilities of the resolved banks were transferred to CBG.
- The gap between assets and liabilities was covered via the issuance of special resolution bonds of GHc 7.6 billion (in two tranches).
- In January 2019, two more banks were closed via similar operations, supported by the issuance of another GHc 1.5 billion in resolution bonds.
- While these steps helped support depositor confidence, substantial business transformation of CBG remains necessary to buttress its resilience and enable a successful privatization over the medium term.

### Financial sector costs (GHc million, 2018 and 2019)
- Banking sector costs: 10,250 (2018), 1,500 (2019)
- GCB resolution bonds (UT, Capital Bank): 2,200
- CBG resolution bond (UniBank et al), first tranche: 3,200
- CBG resolution bond (UniBank et al), second tranche: 4,400
- CBG equity injection: 450
- CBG resolution bond (Heritage, Premium): 1,500
- SDIs costs: 4,000
- MFI clean-up: 1,000
- Savings and Loans and Finance Houses clean-up: 3,000
- Total costs: 10,250 (2018), 5,500 (2019)
- Memorandum items:
  - Total costs (in percent of GDP): 3.4 (2018), 1.6 (2019)
  - Nominal GDP (GHc million): 299,099 (2018), 347,239 (2019)
- Note: Excluding potential recoveries.

### Capital requirements, recapitalization schemes, and related concerns
- BoG announced an increase of minimum paid-up capital from GHc 120 million to GHc 400 million by end-2018 (September 2017) to buttress capitalization.
- As of end-2018, 16 banks had met the new minimum requirement on a stand-alone basis through retained earnings and fresh capital injections; six other banks merged, forming three new banking groups.
- A handful of indigenous banks unable to comply adopted a recapitalization scheme to raise funds from the private sector (pension funds and other institutional investors) through a special purpose vehicle (Ghana Amalgamated Trust or GAT).
- The envisaged use of government guarantees in the scheme may pose fiscal risks upon maturity of the bonds.
- GAT’s effectiveness depends on its ability to successfully transform the supported banks, potentially requiring reorientation of business strategies and further investments in risk management capabilities.

### Regulatory and supervisory strengthening
- Following the Capital Requirements Directive (July 2018) to align regulatory capital requirements with Basel II/III, the BoG issued new Directives and guidelines, including:
  - Directives on Corporate Governance and Cyber and Information Security;
  - A new guideline on the prevention of money laundering and terrorism financing;
  - Draft requirements on the fitness and propriety of shareholders and bank management, financial holding companies and mergers and acquisitions.
- The introduction of IFRS 9 (effective as of 2018), enhancement of risk-based supervision practices, envisaged introduction of a Pillar 2 capital framework, and new liquidity requirements will further enhance the supervisory and regulatory framework.
- The breadth and scope of the new requirements will require effective enforcement and will test the banking sector’s absorption capacity.

### Specialized deposit-taking institutions (SDIs) and sector clean-up
- BoG analysis in 2018 (in cooperation with the World Bank) identified a large number of microfinance institutions (MFI) and rural banks that warrant prompt intervention to protect depositors and enable the sector to contribute to financial sector development and inclusion.
- Clean-up of savings and loans companies and finance houses, which also show signs of distress, will complete the financial sector reform strategy.
- BoG is finalizing plans to intervene in distressed institutions; the sector’s clean-up will require mobilization of government funding to cover resolution costs (as a first step, funding for MFIs is being secured).

*Source: Bank of Ghana and staff estimates.*

### 20.      Fiscal structural reforms are proceeding, though at a slower pace than anticipated

### 20.      Fiscal structural reforms are proceeding, though at a slower pace than anticipated

### Progress on structural fiscal benchmarks and information systems
- Four structural fiscal benchmarks, reset from the previous review, called for completion of institutional reforms; a fifth sought publication of a fiscal risk statement by end-2018.
- Met benchmarks:
  - Integration of the payment, personnel (HRMIS) and budget (GIFMS) information systems in the education sector by end-August.
  - Publication (with a delay) of a comprehensive Fiscal Risk Statement, broadly reflecting FAD guidance.
- Unmet or delayed benchmarks:
  - September benchmark on the Treasury Single Account (TSA) was not met; 176 accounts of ministries, departments, and agencies (MDAs) remained to be transferred.
  - End-December benchmarks related to GIFMIS and HRMIS were not met: for GIFMIS, all MDAs of the central and local governments are on the system but 4 out of 58 entities with internally generated funds remain outside GIFMIS; HRMIS covers about 80 percent of the government payroll, and rollout will continue until all MDAs are part of the system.
- Follow-up and monitoring:
  - Progress on completing the rollout of the TSA and GIFMIS will continue to be tracked under the World Bank’s PFM reform project.

### Public Financial Management legislation and implementation
- Passage and implementation of the Public Financial Management (PFM) Act were critical program developments and supported by Fund TA.
- Implementing regulations, reflecting broad consultations, are with the Legislative Committee of Parliament (prior action) and will be approved on a lapse-of-time basis by early April.

### Fiscal rules and fiscal council
- Enactments in December:
  - The Fiscal Responsibility Act, 2018 (982) establishes two numerical fiscal rules:
    - Limits overall fiscal deficit on a cash basis to 5 percent of GDP.
    - Mandates a positive primary balance.
  - The rules cover central and local governments, autonomous agencies, and statutory bodies.
  - The law allows suspension of the rules for circumstances of force majeure, severe economic shocks (including commodity price shocks), and periods when the GDP growth rate is one percent or below.
  - If the numerical fiscal rules are missed by more than one percentage point, Parliament may pass a vote of censure on the Finance Minister.
- Fiscal council:
  - A fiscal council of seven members appointed by the President was established; terms will lapse with the President’s term.
  - Staff recommended delinking the two terms to support the independence of the council.

### Financing strategy and debt management
- Adherence to ECF debt limits:
  - Authorities decided to continue to adhere to the ECF debt limits for new external borrowing post-program.
- Eurobond plans for 2019:
  - Government plans to issue a Eurobond in H1 2019 of up to US$3 billion (of which US$2 billion for budget financing and US$1 billion for liability management operations).
  - Staff recommended that part of the proceeds of the 2019 Eurobond be used to buy back maturing domestic securities held by foreign investors, given the challenging redemption profile over the next 18 months.
- Monetization and collateralized borrowing:
  - Plan to monetize future revenues from gold royalties expected from 2020 onwards, for a total amount of up to US$500 million.
  - GETFund authorized to borrow up to the equivalent of US$500 million, for three years, backed by its earmarked sales tax; authorities assured borrowing would not exceed the equivalent of US$250 million and confirmed funding would be used solely for budgeted spending.
  - Staff cautioned against excessive debt collateralization and revenue monetization due to creation of seniority among creditors and uncertainty over revenues in the medium term.
- Debt management reforms:
  - Publish the 2019 Annual Borrowing Plan by end-Q1 2019.
  - Revamp the joint bookrunner system and accept higher auction yields.
  - Coordination between MOF and the BoG on debt management enhanced through the re-established Economic Policy Coordination Committee (EPCC), which includes a sub-committee on debt and finance.

### Large off-balance SPV transaction (Sinohydro arrangement)
- Structure summary:
  - Government entering financing arrangement with Sinohydro under the Master Project Support Agreement (MPSA) approved by Parliament in July 2018; Sinohydro will provide US$2 billion worth of infrastructure in exchange for Ghana's refined bauxite.
  - Early November: Parliament approved Deferred Payment Agreements (DPAs) and EPC contracts for ten projects worth US$646 million in the first phase.
  - Ghana Integrated Aluminum Development Corporation (GIADC) established as a commercial-based independent SPV to develop and manage bauxite reserves.
- Key terms:
  - Tenor: 15 years from project commencement; grace period of 3 years; repayment period of 12 years.
  - Interest rate: 6 months US Libor + 2.80 p.a.
  - Other charges: management fee (0.7 percent flat), commitment fee (0.5 percent p.a.), Sinosure premium (one-off, 7 percent flat).
  - Collateral: GIADC required to set up an offshore escrow account for bauxite sales revenue; escrow must hold amounts sufficient to cover upcoming two instalments from start of construction onward; funds for the “exclusive benefit of Sinohydro.”
- Staff preliminary assessment and risks:
  - Based on authorities’ explanation, the financial obligation to Sinohydro is not yet current and thus not captured by the performance criterion on borrowing.
  - Committing future bauxite receivables to debt service and locking bauxite sales receipts in escrow limits GoG’s discretion over proceeds.
  - GoG estimate: Ghana’s bauxite resources can potentially deliver over US$500 billion in revenue, but GIADC capability to produce sufficient refined bauxite will take considerable effort and time.
  - If GIADC breaches the agreement, Sinohydro may demand prepayment.
  - If transfer of obligations from MoF to GIADC is not completed as envisaged, arrangement will be considered a government obligation.
  - Conditions precedents (CPs) in the agreement have not been met and could take a few months to be satisfied.
- Contextual data:
  - Ghana produces around 1.5 million of tons of bauxite per year.
  - Exports of bauxite were around US$50 million in 2017, 0.3 percent of total exports.
  - Bauxite price hovered around $45 per ton.
  - VALCO produces around 200,000 tons per year.
  - Aluminum international price dropped since mid-2018, from US$2,300 per ton to around US$1,970 per ton currently.

### State-owned enterprises (SOEs) and fiscal risks
- General assessment:
  - Energy sector SOEs continue to pose significant fiscal risks due to inefficiencies, weak governance, and inadequate tariff structure despite debt restructuring attempts.
  - SOEs and financial sectors’ related fiscal cost projected to total some 10 percent of GDP over 2017-19.
  - The general government debt service bill relative to revenues has continued to grow, reducing fiscal room for maneuver.
- Mitigation and oversight measures:
  - Flagship SOE report has significantly enhanced monitoring and disclosure of SOE financial performance.
  - Legislation to establish a single oversight entity—the State Interest and Governance Authority (SIGA)—prepared and submission to Parliament slated by mid-March (prior action).
  - Plans to introduce annual performance contracts and a standardized credit analysis framework for more rigorous credit assessments.

### Energy sector specifics and reforms
- Financial pressures and risks:
  - Electricity sector SOEs (ECG, GridCo, VRA) have generated negative average return on equity since 2014.
  - Supplier payment delays: a supplier to the ECG can expect to wait over a year, on average, to get paid.
  - Collection delays: ECG time to collect from customers increased to over 200 days.
  - Electricity tariff cuts in March 2018 (of up to 30 percent) worsened financial problems and fiscal risks.
  - Gas sector: off-take agreement for Cape Three Points field requires Ghana to make monthly payments equivalent to 0.7 percent of GDP annually; planned pipeline infrastructure not in place to receive the gas.
- Recent developments:
  - On March 1, 2019, a private concessionaire took over ECG distribution and collection operations under a twenty-year concession agreement.
  - Some “conditions precedent” for the concession were converted to “conditions post” and remain to be resolved, including establishment of a regulated electricity tariff consistent with sector viability; new tariff expected to be announced by July 1, 2019.
  - ECG will still face capacity charges under some power purchase agreements.
  - Authorities working with the World Bank on a comprehensive Energy Sector Recovery Program (ESRP) and plan to reduce the large stock of intra-SOE and government payables in the energy sector following completion of an ongoing external audit of the payables.

### Cocobod and commodity-related fiscal risks
- Cocobod financing gap and policy considerations:
  - Cocobod faces an estimated financing gap of GHc 1 billion (0.3 percent of GDP) in the current crop year.
  - Staff view: producer prices should be adjusted to reflect changes in international cocoa prices; farmer income support should be provided via explicit budget transfers to prevent loss of farmland to illegal mining.
  - Authorities and Cocobod are pursuing cost savings measures to close the gap; staff view these may provide temporary relief but more is needed to strengthen Cocobod’s financial position.
- Broader commodity volatility risks:
  - Cocoa sector policies (including guaranteed producer prices) have contributed to sharp increase in Cocobod’s short-term debt.
  - While automatic pricing of fuel products and saving a portion of oil revenue mitigate oil price volatility, cocoa policies remain a source of possible contingent liabilities.

### Monetary and exchange rate policy; central bank safeguards
- Monetary stance and inflation:
  - A relatively tight monetary stance remains appropriate to address underlying inflation pressures.
  - Inflation has continued to decline, although at a slower pace than previously anticipated.
  - Given possible pass-through of cedi depreciation to inflation and weak demand from non-resident investors for domestic government bonds, the MPC needs to exercise caution in further easing the MPR and should stand ready to tighten if conditions warrant.
- Safeguards assessment progress:
  - Progress in implementing key recommendations from recent safeguards assessments has been mixed.
  - Recommendations included strengthening the BoG’s legal framework to prohibit monetary financing of the government and safeguard BoG autonomy.
  - Instead, the memorandum of understanding between the BoG and the government on monetary financing was extended until the end of the program, which will help anchor disinflation.
  - Delays in fully enforcing the BoG’s ELA framework for collateralization of liquidity assistance have possible implications for the BoG’s balance sheet.
  - Going forward, it will be important for the BoG to secure repayment from going concern banks and recover amounts from banks placed under receivership.

*Source: 1ghaea2019001 - 20. Fiscal structural reforms are proceeding, though at a slower pace than anticipated*

### 34.      The BoG remains committed to strengthening its FX operations framework (Box 2). It   is

### 34.      The BoG remains committed to strengthening its FX operations framework (Box 2). It   is

### FX operations framework and market conduct
- The BoG is preparing an internal FX intervention policy (prior action) that outlines a rule-based framework with the dual objective of supporting reserve accumulation and dampening excess volatility in the exchange rate, in line with good international practices.
- To complement this framework and address volatility-inducing practices by certain market participants, the BoG issued new market conduct guidelines and published them on its website on February 25, 2019.
- The authorities consider the market to be excessively shallow, amplifying volatility.
- As part of efforts to address the exchange rate gap that gives rise to an existing MCP, the BoG is moving away from trading at the reference rate to ensure market-based pricing of BoG transactions.
- The BoG has revised the calculation method for the reference rate to exclude BoG trades; this revision will also be outlined on the BoG website.
- These measures seek to develop a deeper and more efficient foreign exchange market.

### Net international reserves (NIR) and FX buffers
- The authorities have maintained NIR at the level observed at end-December 2018 (prior action).
- Issuance of the planned Eurobond is expected to help rebuild buffers, projecting NIR of US$4.5 billion by year-end relative to about US$3.2 billion at the beginning of the program in April 2015.
- Careful FX management (as described above) will help ensure adequate NIR levels into the medium term.

### Financial sector reform progress and remaining actions
- The financial sector reform agenda has broadened substantially over the course of the program, with important initiatives still in train.
- Closure of nine distressed banks and initiation of forensic audits are pivotal to restoring confidence and strengthening accountability, though further actions remain necessary.
- Bank-specific restructuring measures needed to reduce fiscal risks:
  - Actions by the government-owned bridge bank (Consolidated Bank of Ghana, CBG) to restructure its deposit portfolio and establish correspondent relationships are welcome.
  - Authorities are committed to ensuring CBG’s sustainability over the medium term, including via monetization of the remaining resolution bonds with private sector counterparts (MEFP, ¶38).
  - CBG’s successful privatization depends on a sustainable business strategy and further rationalization of operating costs.
  - Authorities are committed to restructure banks undergoing recapitalization via Ghana Amalgamated Trust (GAT) and have gathered professionals to oversee business transformations.
  - To ensure private sector investments in GAT are adequately protected, robust transparency, disclosure practices, and safeguards for GAT’s operational autonomy are imperative.
  - The GAT scheme poses fiscal risks associated with (partial) government guarantees.
- Regulatory reform agenda and supervision:
  - Pending initiatives include a draft directive on risk management, implementation guidance on IFRS9, and the envisaged introduction of a Pillar 2 capital framework.
  - Implementation must be tailored to industry absorption capacity and resource constraints of the BoG’s supervisory function.
  - Enhanced risk-based supervision needs to be combined with a more robust enforcement culture.
  - Authorities have committed to further strengthen the Banks and SDI Act, informed by lessons from the financial sector clean-up.
- Actions to alleviate balance sheet constraints from legacy NPLs:
  - Addressing the NPL overhang is crucial to foster sustainable credit growth.
  - Authorities are implementing their NPL resolution plan.
  - Further write-offs of loans with no reasonable expectation of recovery, as per IFRS 9, are expected to free up banks’ balance sheets.
  - Improvements in the insolvency framework and enforcement of creditor rights should enable more effective workouts of problem loans by banks (MEFP, ¶43).

### Emergency liquidity assistance (ELA) and BoG balance sheet risks
- Further improvements of the BoG’s framework for ELA are important to mitigate risks to the BoG’s balance sheet.
- Drawing on lessons from past years, the BoG is reviewing its ELA framework and has requested IMF TA to further support this process (MEFP, ¶45).
- Staff welcomes the BoG’s commitment to offload the monetized resolution bond at a market-based price (MEFP, ¶38) and cautions against further bond monetization going forward.
- The planned build-up of cash buffers and sale of the bond to third parties will help sterilize the monetary impact of the monetized resolution bond.
- Claims against various bank receiverships will need to be duly provisioned given uncertain recovery prospects.

### Specialized deposit-taking institutions (SDIs) cleanup
- Staff welcomes the mobilization of funding to support the clean-up of SDIs.
- Timebound intervention plans are being finalized for savings and loans and finance houses (prior action).
- Government funding for the resolution of microfinance institutions has been secured (prior action).
- Going forward, robust enforcement of prudential rules, combined with greater scrutiny of SDI business models, are needed to prevent reemergence of fragilities.

### AML/CFT and supervisory coordination
- Corrective actions are needed in anti-money laundering and combating terrorist financing (AML/CFT).
- A national action plan is being implemented by various agencies under the oversight of an Inter-Ministerial Committee, in accordance with timelines agreed with the Financial Action Task Force’s International Cooperation Review Group.
- Establishment of a Regulatory Forum comprising all financial regulators is helping to strengthen cross-sectoral supervisory practices (MEFP, ¶46).
- Timely remediation of all identified gaps remains important to ensure Ghana’s unimpeded access to the international financial system.

### Program modalities, performance, and financing assurances
- Program performance has improved but remained mixed:
  - Three PCs were missed at end-June.
  - Two PCs were missed at end-December 2018.
  - The continuous PC on gross credit to the government by the Bank of Ghana was not observed.
  - PCs on the wage bill and NIR were missed at end-June and end-December.
  - The primary fiscal balance PC was missed at end-June but met at end-December.
  - The continuous PC on gross financing of BOG to the government was also missed.
- Inflation has remained within the inner band of the MPCC.
- Given corrective actions (MEFP, ¶15), including seven PAs, staff support the government’s request for waivers for nonobservance of these PCs.
- Progress on Structural Benchmarks (SBs) has been slow, but there has been progress in key areas (MEFP, ¶17 and Table 2).
- Given improved performance and corrective measures, it is proposed to conclude the two reviews, marking the end of the program which expires on April 2, 2019.
- Financing assurances:
  - The program remains fully financed, with firm commitments in place until the end of the program in April and with good prospects thereafter.
  - Capacity to repay remains adequate.
  - Maximum outstanding liabilities to the Fund will reach 1.7 percent of GDP and 4.7 percent of exports as the external position improves.
  - Staff supports the authorities’ request to use Fund disbursements associated with the seventh and eighth reviews for budget support to help cover BOP needs and mitigate the cost of budget financing.
  - The disbursements will be made directly to the government, consistent with BoG’s zero financing to the latter.

### Staff appraisal — key messages and recommendations
- Macro gains and outlook:
  - Significant macroeconomic gains have taken place: rising growth, single digit inflation, a much-reduced budget deficit and sustained primary surpluses, and a broad-based clean-up of the banking sector.
  - The authorities restated commitment to fiscal discipline and prudent macroeconomic management.
- Main challenges and recommended policy priorities:
  - Entrench macroeconomic stability through "irreversible policies," especially ahead of the 2020 elections.
  - Credible and sustained fiscal adjustment is critical to reduce large financing needs and anchor debt dynamics.
  - Strengthen domestic revenue mobilization to reduce large funding needs and ensure sustainable priority spending.
  - Resist shifting expenditure off-budget; excessive public spending will exert pressures on the economy.
  - Intensify progress on fiscal structural reforms:
    - Passage of the PFM regulations to underpin cash management, spending execution and budget monitoring.
    - Improve Ghana Revenue Authority operations despite prior reform efforts and TA.
    - Ensure the new fiscal rule capping the budget deficit is underpinned by stronger monitoring and oversight, including in the SOE sector.
  - Address energy sector fiscal risks decisively:
    - Resolve losses from high-cost fuel and power bought from IPPs, operational inefficiencies, low revenue collections, and non-payment practices among public sector entities.
    - Establish oversight entity SIGA and implement actions under the World Bank’s forthcoming budget support operation.
    - Ensure proper cost recovery for electricity tariffs.
  - Manage debt strategy carefully:
    - Increased reliance on foreign investors heightens exposure to shifts in market sentiment and exchange rate risk.
    - 2019 financing strategy involves debt collateralization and revenue monetization, which must be managed to avoid encumbering revenue and creating seniority among creditors.
    - Ensure funding is used solely for budgeted spending to anchor debt sustainability and ensure transparency.
    - Plan and manage the planned operation with Sinohydro to avoid significant obligations and encumbrance of resource assets.
    - Enhance transparency and conduct careful value for money assessments for debt-financed investments.
  - Monetary policy and FX:
    - After bringing inflation to single-digits, monetary policy needs to remain vigilant against exchange rate shocks and upside risks to inflation.
    - The IT framework will benefit from continued elimination of fiscal dominance and development of the FX market.
    - FX intervention should foster market efficiency and development; rebuilding FX buffers is paramount.
  - Banking sector and financial stability:
    - Credit the authorities for resolving nine banks in 18 months, though at substantial fiscal and political costs.
    - Fully operationalize the Financial Stability Council.
    - Consider replacing special resolution bonds with marketable instruments to improve bridge bank profitability and facilitate privatization.
    - Closely monitor business transformation of banks recapitalized through GAT to ensure sufficient returns by bond maturity.
    - Step up write-offs of unrecoverable loans and promptly resolve distressed deposit-taking institutions.
    - Strengthen the BoG’s ELA framework and guard against potential credit losses from receiverships.
- Institutional and policy coordination:
  - Increased monitoring and policy coordination are essential to anchor discipline.
  - Revamping the Economic Policy Coordination Committee is welcome.
  - Continued Fund assistance in policy dialogue and capacity development will help strengthen policies and structural reforms beyond the ECF program.

*International Monetary Fund — Ghana: Excerpts from IMF staff report and staff appraisal*

### 52.      On this basis, staff supports the authorities’ request for the completion of the seventh

### 1ghaea2019001 - 52.      On this basis, staff supports the authorities’ request for the completion of the seventh

### Review recommendation
- Staff supports the authorities’ request for the completion of the seventh and eight reviews under the ECF arrangement and request of waivers.

### Selected economic and financial indicators (highlights from Table 1)
- GDP at constant prices: 5.9 (2017); 8.1 (2018); 6.3 (2019 Prog.); 5.6 (2019 Prov.); 8.8 (2020 Prog.1); 5.8 (2020 Prov.); 4.4 (2021 Prog.); 4.5 (2021 Prov.); subsequent Proj. values shown.
- Non-oil GDP: 4.0 (2017); 4.6 (2018); 5.0 (2019 Prog.); 5.0 (2019 Prov.); 6.0 (2020 Prog.1); 6.0 (2020 Prov.); 6.0 (2021 Prog.); 6.0 (2021 Prov.); subsequent Proj. values shown.
- Oil and gas GDP: 42.5 (2017); 80.3 (2018); 20.0 (2019 Prog.); 10.5 (2019 Prov.); 24.9 (2020 Prog.1); 4.7 (2020 Prov.); -4.6 (2021 Prog.); -5.2 (2021 Prov.).
- Real GDP per capita: 3.3 (2017); 5.8 (2018); 3.6 (2019 Prog.); 3.4 (2019 Prov.); 6.6 (2020 Prog.1); 3.7 (2020 Prov.); 2.7 (2021 Prog.); 1.9 (2021 Prov.).
- GDP deflator: 14.2 (2017); 10.4 (2018); 11.1 (2019 Prog.); 10.3 (2019 Prov.); 6.7 (2020 Prog.1); 8.6 (2020 Prov.); 8.9 (2021 Prog.); 9.0 (2021 Prov.).
- Consumer price index (annual average): 11.8 (2017); 12.4 (2018); 9.3 (2019 Prog.); 9.8 (2019 Prov.); 9.1 (2020 Prog.1); 8.4 (2020 Prov.); 7.5 (2021 Prog.); 6.8 (2021 Prov.).
- Consumer price index (end of period): 10.0 (2017); 11.8 (2018); 8.0 (2019 Prog.); 9.4 (2019 Prov.); 8.7 (2020 Prog.1); 8.0 (2020 Prov.); 7.0 (2021 Prog.); 6.5 (2021 Prov.).
- Gross capital formation: 13.7 (2017); 22.0 (2018); 14.1 (2019 Prog.); 21.8 (2019 Prov.); 25.1 (2020 Prog.1); 26.3 (2020 Prov.); 27.9 (2021 Prog.); 28.4 (2021 Prov.).
- National savings: 7.9 (2017); 20.7 (2018); 9.9 (2019 Prog.); 20.4 (2019 Prov.); 21.9 (2020 Prog.1); 22.2 (2020 Prov.); 32.5 (2021 Prog.); 33.5 (2021 Prov.).
- Foreign savings: -5.8 (2017); -3.4 (2018); -4.2 (2019 Prog.); -3.2 (2019 Prov.); -3.0 (2020 Prog.1); -3.5 (2020 Prov.); -3.3 (2021 Prog.); -3.0 (2021 Prov.).
- Central government budget (cash basis, percent of GDP):
  - Revenue: 18.9 (2017); 13.9 (2018); 17.9 (2019 Prog.); 14.6 (2019 Prov.); 16.1 (2020 Prog.1); 15.3 (2020 Prov.); 15.9 (2021 Prog.); 15.9 (2021 Prov.).
  - Expenditure: 25.2 (2017); 18.7 (2018); 24.3 (2019 Prog.); 21.6 (2019 Prov.); 21.7 (2020 Prog.1); 19.8 (2020 Prov.); 20.0 (2021 Prog.); 19.9 (2021 Prov.).
  - o/w financial sector related costs: 0.0 (2017); 3.3 (2018); 1.6 (2019 Prog.); 0.0 (2019 Prov.); 0.0 (2020 Prog.1); 0.0 (2020 Prov.); subsequent Proj. values shown.
  - Overall balance: -6.3 (2017); -4.7 (2018); -6.4 (2019 Prog.); -7.0 (2019 Prov.); -5.6 (2020 Prog.1); -4.4 (2020 Prov.); -4.1 (2021 Prog.); -4.0 (2021 Prov.).
  - Primary balance: 0.2 (2017); 0.5 (2018); 0.1 (2019 Prog.); -1.4 (2019 Prov.); 0.0 (2020 Prog.1); 1.7 (2020 Prov.); 1.6 (2021 Prog.); 1.2 (2021 Prov.).
- Central government debt (gross): 70.5 (2017); 57.3 (2018); 70.3 (2019 Prog.); 59.6 (2019 Prov.); 62.0 (2020 Prog.1); 60.0 (2020 Prov.); 58.2 (2021 Prog.); 56.3 (2021 Prov.).
- Credit to the private sector (commercial banks): 11.0 (2017); 12.8 (2018); 17.8 (2019 Prog.); 11.2 (2019 Prov.); 14.2 (2020 Prog.1); 21.9 (2020 Prov.); 21.0 (2021 Prog.); 18.3 (2021 Prov.).
- Gross international reserves (millions of US$): 5,783 (2017); 5,491 (2018); 5,909 (2019 Prog.); 5,317 (2019 Prov.); 5,631 (2020 Prog.1); 6,448 (2020 Prov.); 7,063 (2021 Prog.); 8,301 (2021 Prov.).
  - in months of prospective imports of goods and services: 3.0 (2017); 2.8 (2018); 2.9 (2019 Prog.); 2.7 (2019 Prov.); 2.7 (2020 Prog.1); 2.9 (2020 Prov.); 2.9 (2021 Prog.); 3.2 (2021 Prov.).
- Net international reserves (millions of US$): 4,475 (2017); 4,652 (2018); 5,035 (2019 Prog.); 3,980 (2019 Prov.); 4,502 (2020 Prog.1); 5,409 (2020 Prov.); 6,142 (2021 Prog.); 7,509 (2021 Prov.).
- Total donor support (millions of US$): 977 (2017); 814 (2018); 456 (2019 Prog.); 828 (2019 Prov.); 608 (2020 Prog.1); 327 (2020 Prov.); 266 (2021 Prog.); 52 (2021 Prov.).
- Nominal GDP (millions of GHc): 202,389 (2017); 256,671 (2018); 241,717 (2019 Prog.); 299,099 (2019 Prov.); 347,239 (2020 Prog.1); 399,175 (2020 Prov.); 454,163 (2021 Prog.); 516,935 (2021 Prov.).
- Nominal GDP (millions of US$): 45,464 (2017); 58,978 (2018); 51,619 (2019 Prog.); 65,191 (2019 Prov.); 68,258 (2020 Prog.1); 72,264 (2020 Prov.); 77,628 (2021 Prog.); 83,740 (2021 Prov.).
- GDP per capita (US$): 1,608 (2017); 2,038 (2018); 1,780 (2019 Prog.); 2,206 (2019 Prov.); 2,263 (2020 Prog.1); 2,348 (2020 Prov.); 2,482 (2021 Prog.); 2,610 (2021 Prov.).

### Budgetary central government operations (Tables 2a–2d highlights)
- Revenue (percent of GDP, Table 2a): 20.2 (2017); 18.9 (2018); 13.9 (2019 Prog.1); 17.9 (2019 Prov.); 14.6 (2020 Prog.1); 16.1 (2020 Prov.); 15.3 (2021 Prog.); 15.9 (2021 Prov.).
- Taxes (percent of GDP): 17.3 (2017); 16.0 (2018); 12.4 (2019 Prog.1); 15.6 (2019 Prov.); 13.0 (2020 Prog.1); 14.3 (2020 Prov.); 14.1 (2021 Prog.); 14.8 (2021 Prov.).
- Interest (percent of GDP): 6.9 (2017); 6.5 (2018); 5.3 (2019 Prog.1); 6.5 (2019 Prov.); 5.6 (2020 Prog.1); 5.6 (2020 Prov.); 6.1 (2021 Prog.); 5.7 (2021 Prov.).
- Net acquisition of nonfinancial assets (percent of GDP): 3.6 (2017); 3.2 (2018); 2.5 (2019 Prog.1); 2.7 (2019 Prov.); 1.5 (2020 Prog.1); 2.4 (2020 Prov.); 2.2 (2021 Prog.); 2.4 (2021 Prov.).
- Overall balance (percent of GDP, cash basis): -6.8 (2017); -6.3 (2018); -4.7 (2019 Prog.1); -6.4 (2019 Prov.); -7.0 (2020 Prog.1); -5.6 (2020 Prov.); -4.4 (2021 Prog.); -4.1 (2021 Prov.).
- Revenue and expenditure (in millions of GHc, Table 2b): Revenue 40,906 (2017); 38,158 (2018); 35,782 (2019 Prog.1); 43,156 (2019 Prov.); 43,523 (2020 Prog.1); 56,003 (2020 Prov.); 61,200 (2021 Prog.); 72,251 (2021 Prov.). Expenditure 54,582 (2017); 50,976 (2018); 47,964 (2019 Prog.1); 58,624 (2019 Prov.); 64,480 (2020 Prog.1); 75,429 (2020 Prov.); 78,875 (2021 Prog.); 90,847 (2021 Prov.).
- Oil revenue (millions of GHc): 2,358 (2017); 2,359 (2018); 2,408 (2019 Prog.1); 3,208 (2019 Prov.); 4,475 (2020 Prog.1); 6,061 (2020 Prov.); 5,006 (2021 Prog.); 5,006 (2021 Prov.).
- Revenue excl. oil, grants, and ESLA (percent of non-oil GDP): 18.1 (2017); 16.7 (2018); 12.2 (2019 Prog.1); 16.5 (2019 Prov.); 12.8 (2020 Prog.1); 14.1 (2020 Prov.); 14.0 (2021 Prog.); 14.8 (2021 Prov.).

### Monetary developments (Table 3 highlights)
- Monetary Survey (M3, millions of GHc): 69,561 (2017); 66,172 (2018); 79,574 (2019 Prog.1); 78,175 (2019 Prov.); 93,648 (2020 Prog.1); 110,727 (2020 Prov.); 130,422 (2021 Prog.).
- Broad money (M2, millions of GHc): 53,914 (2017); 52,066 (2018); 63,560 (2019 Prog.1); 62,049 (2019 Prov.); 73,944 (2020 Prog.1); 87,261 (2020 Prov.); 102,689 (2021 Prog.).
- Base money (memorandum): 26.3 (2017); 13.1 (2018); 21.0 (2019 Prog.1); 4.7 (2019 Prov.); 9.7 (2020 Prog.1); 18.0 (2020 Prov.); 17.7 (2021 Prog.).
- Credit to the private sector (commercial banks, percent change): 11.0 (2017); 12.8 (2018); 17.8 (2019 Prog.1); 11.2 (2019 Prov.); 14.2 (2020 Prog.1); 21.9 (2020 Prov.); 21.0 (2021 Prog.); 18.3 (2021 Prov.).

### Balance of payments (Table 4 highlights)
- Current account (millions of US$): -2,643 (2017); -2,002 (2018); -2,166 (2019 Prog.1); -2,075 (2019 Prov.); -2,035 (2020 Prog.1); -2,531 (2020 Prov.); -2,577 (2021 Prog.); subsequent Proj. values shown.
- Trade balance (millions of US$): -1,449 (2017); 1,151 (2018); 225 (2019 Prog.1); 1,779 (2019 Prov.); 1,807 (2020 Prog.1); 1,431 (2020 Prov.); 1,735 (2021 Prog.).
- Exports, f.o.b. (millions of US$): 12,045 (2017); 13,836 (2018); 13,889 (2019 Prog.1); 14,868 (2019 Prov.); 15,670 (2020 Prog.1); 16,133 (2020 Prov.); 17,244 (2021 Prog.).
  - Of which: cocoa 2,195 (2017); 2,711 (2018); 1,984 (2019 Prog.1); 2,092 (2019 Prov.); 2,128 (2020 Prog.1); 2,191 (2020 Prov.); 2,254 (2021 Prog.).
  - Of which: gold 5,277 (2017); 5,786 (2018); 5,443 (2019 Prog.1); 5,461 (2019 Prov.); 5,805 (2020 Prog.1); 5,922 (2020 Prov.); 6,648 (2021 Prog.).
  - Of which: oil 2,122 (2017); 3,115 (2018); 3,904 (2019 Prog.1); 4,573 (2019 Prov.); 4,748 (2020 Prog.1); 4,941 (2020 Prov.); 4,641 (2021 Prog.).
- Imports, f.o.b. (millions of US$): -13,494 (2017); -12,684 (2018); -13,664 (2019 Prog.1); -13,089 (2019 Prov.); -13,863 (2020 Prog.1); -14,702 (2020 Prov.); -15,509 (2021 Prog.).
- Income (net, millions of US$): -1,463 (2017); -2,651 (2018); -2,198 (2019 Prog.1); -3,926 (2019 Prov.); -4,300 (2020 Prog.1); -4,435 (2020 Prov.); -4,421 (2021 Prog.).
  - Interest on public debt (component): -1,155 (2017); -1,147 (2018); -1,466 (2019 Prog.1); -1,404 (2019 Prov.); -1,662 (2020 Prog.1); -1,726 (2020 Prov.); -1,983 (2021 Prog.).
- Transfers (millions of US$): 2,127 (2017); 2,470 (2018); 2,476 (2019 Prog.1); 2,581 (2019 Prov.); 2,629 (2020 Prog.1); 2,682 (2020 Prov.); 2,736 (2021 Prog.).
- Capital and financial account (millions of US$): 3,255 (2017); 2,739 (2018); 2,379 (2019 Prog.1); 1,554 (2019 Prov.); 2,221 (2020 Prog.1); 3,438 (2020 Prov.); 3,309 (2021 Prog.).
  - Foreign direct investment (net, millions of US$): 2,955 (2017); 3,239 (2018); 3,097 (2019 Prog.1); 2,908 (2019 Prov.); 3,413 (2020 Prog.1); 3,035 (2020 Prov.); 3,649 (2021 Prog.).
- Gross international reserves (millions of US$): 7,282 (2017); 7,555 (2018); 8,080 (2019 Prog.1); 7,025 (2019 Prov.); 7,425 (2020 Prog.1); 8,333 (2020 Prov.); 9,033 (2021 Prog.).
- Gross international reserves (excl. encumbered, millions of US$): 5,783 (2017); 5,491 (2018); 5,909 (2019 Prog.1); 5,317 (2019 Prov.); 5,631 (2020 Prog.1); 6,448 (2020 Prov.); 7,063 (2021 Prog.).

### Financial soundness indicators (Table 5 highlights)
- Regulatory capital to risk weighted assets: 17.9 (Dec 2014); 17.7 (Dec 2015); 17.8 (Dec 2016); 15.6 (Dec 2017); 19.3 (Dec 2018).
- Nonperforming loans to total gross loans: 11.3 (Dec 2014); 14.9 (Dec 2015); 17.3 (Dec 2016); 21.6 (Dec 2017); 18.2 (Dec 2018).
- Bank provisions to nonperforming loans: 69.5 (Dec 2014); 69.9 (Dec 2015); 72.5 (Dec 2016); 77.7 (Dec 2017); 70.8 (Dec 2018).
- Return on assets: 4.7 (Dec 2014); 3.1 (Dec 2015); 2.5 (Dec 2016); 2.4 (Dec 2017); 2.3 (Dec 2018).
- Liquid assets/total deposits: 42.5 (Dec 2014); 40.7 (Dec 2015); 42.8 (Dec 2016); 41.8 (Dec 2017); 40.1 (Dec 2018).

### External financing requirements and sources (Table 6 highlights)
- Total financing requirements (millions of US$): -7,047 (2017); -5,209 (2018); -6,661 (2019); -5,524 (2020); -4,881 (2021).
  - Current account balance (excl. official transfers): -2,002 (2018); -2,079 (2019); -2,035 (2020); -2,531 (2021); -2,577 (2022 Proj.).
  - Debt amortization: -1,177 (2017); -935 (2018); -1,027 (2019); -1,024 (2020); -993 (2021).
  - Private financing (net): -2,086 (2018); -2,643 (2019); -2,793 (2020); -793 (2021); -650 (2022 Proj.).
- Total available financing (millions of US$): 6,731 (2017); 4,930 (2018); 6,326 (2019); 5,524 (2020); 4,881 (2021).
  - Foreign direct investment (net): 3,239 (2018); 2,908 (2019); 3,413 (2020); 3,035 (2021); 3,649 (2022 Proj.).
  - Portfolio investment (net): 2,536 (2018); 929 (2019); 2,000 (2020); 1,854 (2021); 683 (2022 Proj.).
  - Disbursement from external creditors: 767 (2018); 585 (2019); 865 (2020); 691 (2021); 624 (2022 Proj.).
- Financing gap (millions of US$): -316 (2017); -279 (2018); -336 (2019); 0 (2020); 0 (2021).
- Expected other IFIs financing (millions of US$): 248 (2017); 415 (2018); 0 (2019); 0 (2020); 0 (2021).
- Gross international reserves (millions of US$, memorandum): 5,491 (2018); 5,317 (2019); 5,631 (2020); 6,448 (2021); months of imports: 2.8 (2018); 2.7 (2019); 2.9 (2020); 2.9 (2021).

### ECF arrangement schedule and capacity to repay (Tables 7 and 8 highlights)
- Proposed schedule of reviews and disbursements under the ECF arrangement (selected lines, Table 7):
  - 83.025 Millions of SDR, 11.25 Percent of Quota — April 3, 2015: Executive Board approval of the three-year ECF arrangement.
  - 83.025 Millions of SDR, 11.25 Percent of Quota — July 15, 2015: Observance of the performance criteria for April 30, 2015, and completion of the First Review under the arrangement.
  - Subsequent disbursements of 83.025 and 66.42 Millions of SDR on listed dates through February 15, 2019; Total under the ECF arrangement: 664.2 Millions of SDR, 90.00 Percent of Quota.
- Indicators of capacity to repay the Fund (selected rows, Table 8):
  - Fund obligations based on existing and prospective credit (in millions of SDRs):
    - Total obligations (in millions of SDRs): 21.6 (2018); 62.5 (2019); 67.9 (2020); 87.0 (2021); 94.1 (2022); subsequent annual amounts through 2032 shown.
    - In millions of US$: 30.6 (2018); 87.4 (2019); 95.6 (2020); 123.2 (2021); 134.1 (2022); subsequent annual US$ amounts shown.
  - Outstanding Fund credit (in millions of SDRs): 796.6 (2018); 785.5 (2019); 721.4 (2020); 638.2 (2021); 548.0 (2022); 455.0 (2023); 328.8 (2024); 204.2 (2025); 112.9 (2026); 46.5 (2027); 6.6 (2028); 0.0 (2029 onward).
  - Outstanding Fund credit (in millions of US$): 1103.4 (2018); 1101.3 (2019); 1018.0 (2020); 906.4 (2021); 782.8 (2022); 654.0 (2023); 472.6 (2024); 293.6 (2025); 162.3 (2026); 66.8 (2027); 9.5 (2028); 0.0 (2029 onward).
  - Net use of Fund credit (in millions of SDRs, annual): 112.8 (2018); 74.0 (2019); -64.1 (2020); -83.2 (2021); -90.3 (2022); -93.0 (2023); -119.6 (2024); -124.5 (2025); -91.3 (2026); -66.4 (2027); -39.9 (2028); -13.3 (2029); 0.0 (2030 onward).
  - Memorandum nominal GDP (in millions of US$): 65,191 (2018); 68,258 (2019); 72,264 (2020); 77,628 (2021); 83,740 (2022); subsequent projections through 2032 shown.

*Sources: Ghanaian authorities; and Fund staff estimates and projections.*

### Annex I. Fund Capacity Development

### Annex I. Fund Capacity Development

### Role and scope of Fund capacity development (CD)
- Capacity development has supported Ghana’s structural reforms under the program and building needed capacity.
- Activities have been broad-based (including support from AFRITAC West 2 in Accra).
- Key CD areas include fiscal sector, financial sector, debt management, and national accounts/CPI.

### Fiscal sector TA and outcomes
- Focus areas:
  - Domestic revenue mobilization and management, with a particular focus on oil and gas and, more recently, mining, through multi-year projects that include a significant training component.
  - Enhancing fiscal risks monitoring, which led to the publication of the first ever Fiscal Risk Statement.
  - Preparation of the 2016 Public Financial Management and subsequent regulations benefited from significant Fund TA and desk-based reviews from headquarters.
- Noted outputs:
  - First ever Fiscal Risk Statement published.
  - Significant TA contribution to the 2016 Public Financial Management and subsequent regulations.

### Financial sector TA and outcomes
- Focus areas:
  - Enhancing supervisory and regulatory oversight of the banking sector through development of a strategy and implementation program for Basel II/III and risk-based supervision practices and processes.
  - Development of the BoG’s new Capital Requirements Directive.
  - Workshops on various areas supporting regulatory strengthening.
  - Extensive TA on resolution planning in cooperation with the World Bank, supporting the financial sector clean-up.
  - TA on AML/CFT and central bank liquidity support.
- Noted outputs:
  - Development of a strategy and implementation program for Basel II/III and risk-based supervision.
  - New Capital Requirements Directive developed for the Bank of Ghana (BoG).
  - Resolution planning TA provided in cooperation with the World Bank.

### Debt management TA and outcomes
- Focus areas:
  - Developing and implementing a Medium-Term Debt Strategy (coordinated with the World Bank).
  - Strengthening primary market distribution methods and developing the secondary market.
  - Supporting authorities’ objective of deepening the domestic sovereign bond market.
- Noted outputs:
  - Lengthening the average maturity of the debt portfolio.
  - Stronger engagement with investors.
  - More frequent communication published on the BoG and MOF websites.

### National accounts and CPI TA and outcomes
- Focus areas:
  - Strengthening national accounts, in particular related to last year’s GDP rebase.
  - Advising on the current and updated CPI.
- Noted outputs:
  - Support related to last year’s GDP rebase.
  - A number of TA missions advised the authorities on the current and updated CPI (to be launched in H1 2019).

*Source: 1ghaea2019001 - Annex I. Fund Capacity Development*

### 15.      Overall policy implementation under the programme through end-December 2018 has

### 1ghaea2019001 - 15.      Overall policy implementation under the programme through end-December 2018 has

### Programme implementation through end-December 2018
- Three out of nine PCs were not met at end-June 2018: NIR, wage bill, and fiscal primary balance.  
- Two out of nine PCs were not met at end-December 2018: NIR and wage bill.  
- The continuous PC on credit to the government by the BoG was also missed.

Findings on missed targets and causes:
- Wage bill:
  - Missed by a small margin at end-June and at end-December 2018.
  - Overruns by two Ministries (Education and Health) due to higher than programmed wage-related allowances.
  - Government absorbed additional teachers and nurses who had completed training about two years ago to improve student-teacher and nurse-patient ratios.
  - Corrective measure: tighter monitoring of wages and salaries’ budget.
- Fiscal primary balance:
  - Missed by a small margin at end-June due to revenue shortfalls and expenditure overruns.
  - Met at end-December 2018 due to Mid-Year Budget Review measures and enhanced compliance measures in the last quarter of 2018.
- Credit to the government by the BoG:
  - Continuous PC missed due to valuation effects on a foreign currency account and the CBG bond monetization by the BoG in November 2018.
  - BoG is in discussions with international financial institutions to offload the bond at a market-based price to free up its balance sheet.
- Net international reserves (NIR) of the Bank of Ghana:
  - PC missed by US$825 million at end-June 2018, and by US$1,413 million at end-December 2018.
  - Deviations explained by:
    - Loss of reserves from higher-than-projected outflows for coupon payments, payments to independent power producers and BDCs, amounting to about US$1 billion.
    - Lower-than-programmed sovereign bond net receipts: actual receipts of US$750 million instead of the programmed inflow of US$1.5 billion.
  - Measures to restore FX buffers: aggressive targeted FX purchases, activating a facility with an international bank, and expected 2019 Eurobond to help build buffers.

### Performance on indicative targets and structural benchmarks
- Performance on indicative targets was satisfactory.
- Implementation of structural benchmarks (SB) is at advanced stages of completion, with some SBs completed despite earlier delays.
- Government commitment: continue implementing SBs beyond the ECF programme to ensure irreversibility of current policies.

### External outlook and macro projections (2019 and medium term)
- External outlook: uncertain as risks heighten and global forecasts are being marked down; potential for tighter financing conditions and additional pressures on domestic growth.
- Trade and external balances:
  - Key commodity prices likely to trade mixed.
  - Trade surplus in 2019 projected to contract relative to 2018.
  - Current account balance projected to improve somewhat reflecting private remittances, net improvement in the service account, and continued improvement in capital and financial account from increased FDIs and portfolio inflows.
  - Gross foreign asset expected to improve gradually to above 4 months of imports of goods and services.
- Growth projections:
  - Economic growth projected at a conservative 7.6 percent in 2019.
  - Non-oil GDP growth projected at 6.2 percent in 2019.
  - Medium-term average growth expected at about 7 percent annually as the non-oil sector grows.

### Policy anchors and strategic frameworks
- Policy mix for 2019 and beyond anchored on:
  - President’s Coordinated Program (CP).
  - Medium-Term National Development Policy Framework (2018-2021).
  - Building foundations for “Ghana Beyond Aid” and implementing the SDGs.
- Government commitment: fully committed to reform strategy and supporting policies introduced over the last two years of programme implementation.

### Six strategic growth pillars for 2019
- i. Infrastructure:
  - Integrated infrastructural development to move goods, food and people; create jobs; position Ghana as a regional hub in financial services, transportation, energy, fintech and logistics.
- ii. Agricultural Modernization:
  - Planting for Food and Jobs (PFJs) Programme: agricultural growth rate of 8.4 percent in 2017 (after decade average 3.4 percent).
  - 2018 expanded PFJs: target 500,000 farmers vs actual 577,000 farmers supplied with subsidized fertilizers and seeds.
  - 2019 plan: expand the program to cover a million farmers; launch livestock model “Rearing for Food and Jobs” (RFJ) to increase selected livestock production, especially poultry.
- iii. Industrialisation:
  - Support agro-processing via One-District-One-Factory Programme (1D1F).
  - By end-2018: 79 factories in 9 regions at various stages of construction or operation under 1D1F.
  - 2019: continue partnerships with private financial institutions; include feed mills and chicken processing facilities in poultry industry.
- iv. Entrepreneurship:
  - Prioritize Business Regulatory Reform programme, including Legislative and Administrative reforms to improve Doing Business ranking.
  - Launch an online Electronic Registry in 2019 to document all business-related laws, regulations, procedures and fees.
- v. Improving Efficiency in Revenue Mobilization and Protecting the Public Purse:
  - Broaden the tax net; simplify payment of taxes; eliminate paying for any Government service with cash.
  - Enforce Revenue Administration Act provisions requiring valid TINs when dealing with Government.
  - Citizens required to show TIN before accessing services such as free health care under NHIS, free secondary school education under Free SHS beginning in September 2019, vehicle licensing, passport services, banking and mobile money services.
- vi. Social Partnership:
  - Institutionalize Social Partnership Compact among Organised Labour, Ghana Employers Association, and Government to deliberate development matters and build social consensus.

### New financing streams and liability management
- Government intention to issue longer-dated sovereign bonds in 2019 as part of bilateral engagement.
- Objective: raise ultra-long-term bonds to refinance and/or retire about half of the country’s high cost existing debt; not intended to derail but to enhance debt sustainability.
- Sovereign Century Fund to engage bilaterally to raise long-term concessional financing for GIIF, GIADC, PPP projects and other entities, and for liability management.
- New financing schemes to be used for budget spending and must not go beyond presently agreed levels; to fund already budgeted expenditure.
- Ghana Minerals Investment Income Fund Bill passed into law to hold and manage equity interests, receive royalties and rents, and manage/invest assets of the Fund.
  - Government expects to raise up to US$750 million from such a transaction in 2019.
  - Transaction described as non-debt, non-repayment obligation, non-interest bearing and non-guarantee requirement.

### Fiscal policy and budget priorities
- Fiscal consolidation to continue in 2019 and medium term.
- Fiscal Responsibility Act enacted to cap fiscal deficit at 5 percent of GDP and maintain a primary surplus in each fiscal year.
- Government commitment: maintain a positive primary balance of 1.2 percent of GDP (excluding financial sector costs) to achieve an overall fiscal deficit of 4.2 percent of GDP (excluding financial sector costs).
- Medium-term: fiscal deficit expected to decline steadily and remain within the 5 percent of GDP cap with primary surplus consistent with debt sustainability under the Fiscal Responsibility Act, 2018 (Act 982).

2019 Budget allocations and flagship programmes:
- Free SHS:
  - Cost in 2019 estimated at about GHc 1.7 billion, up from GHc 1.1 billion programmed in 2018.
  - School enrolment in 2018 was 490,882 representing an increase of 36 percent over 2017 enrolment of 361,771.
  - As at October 30, a total of 484,743 students have been placed in school for the 2018/2019 academic year.
  - To match increased enrollment, teacher recruitments will be increased, leading to a rise in the wage bill which has been budgeted for.
- School feeding programme allocated GHc 462 million (up from GHc 425 million in 2018).
- Other one-off expenditures amounting to GHc 120 million, including seed capital for creation of six new regions.

### Revenue mobilization measures and tax policy (2019)
- Revenue measures from 2018 midyear budget expected to be fully realised in 2019 and to complement GRA collection efforts.
- Ministry of Finance to roll out a medium-term revenue policy in 2019 to outline revenue reforms and pave way for a Medium-Term Revenue Strategy.
- Revenue-enhancing strategies in 2019 to focus on revenue institution reform and intensified compliance measures.
  - Draft Exemptions Bill submitted to Parliament to rationalize exemptions, outline criteria and procedures, and strengthen Ministerial powers to minimize exemptions.
  - Mandatory rollout of TIN with sanctions for state and private entities that fail to enforce TIN requirements.
  - Use of Third-Party data from NIA, Driver Vehicle Licensing Authority, Law Enforcement Agencies to capture more persons into the tax net.
  - Commitment to reform the tax exemptions regime.
- Mining sector revenue optimization:
  - Intensified measures to verify, assess and collect due state revenues; address loopholes, escape clauses, implementation weaknesses, administrative lapses.
  - Strategies include:
    - a) Greater scrutiny of quantity and quality of minerals produced as basis for revenue determination and export valuation.
    - b) Curbing base erosion as a source of under-valuation of royalties and profits.
    - c) Tightening regime that governs foreign exchange repatriation through the Bank of Ghana.
    - d) Capitalizing Tax Expenditures (Exemptions) and recognizing them as additional government equity holdings in mining companies.
    - e) Revitalizing the Inter-Agency Technical Committee on Mining.
- Central government partnership with MMDAs to enhance local revenue mobilization in 2019:
  - a) Property registration and property data management.
  - b) Use of a simplified inexpensive tool for property valuation.
  - c) Setting up system for generation and distribution of bills.
  - d) Setting up system for efficient collection of property rates and other rates.
- Ministry of Finance to strengthen oversight of MMDA revenue management and implement an electronic payment platform to automate collection and give central government comprehensive view of MMDA finances.
- Tax debt recovery:
  - Prepared files to bring legal action against big tax defaulters.
  - Use of penalties, sealing business premises, liens on assets, requiring debtors or banks to make payments to GRA, seizure and auction of assets.

### Expenditure management challenges and priorities
- Expenditures on Compensation of Employees and Interest Payment constitute close to 72 percent of domestic revenue, creating budget rigidities and limiting fiscal space.
- Need for expenditure management strategy focused on eliminating waste and inefficiencies and aligning MDAs expenditures to government agenda.
- Commitment to fiscal discipline and avoiding off-budget spending.

### Monetary policy
- Monetary policy guided by Bank of Ghana’s inflation targeting framework.
  - Bank’s MPC will monitor developments and take necessary actions to attain medium-term inflation target of 8±2 percent.
- BoG commitment to elimination of fiscal dominance through zero central bank financing of the government.
  - Government has refrained from borrowing from the BoG since 2016 for above-the-line transactions.
  - MoU on zero central bank financing published on Ministry of Finance website.
- BoG FX market policy:
  - Continue strengthening FX market, focusing interventions on smoothing excessive volatility and achieving appropriate level of external buffers consistent with the inflation targeting framework.

*Source: IMF staff report content provided in the supplied PDF excerpt.*

### 36.      Following the successful resolution of nine banks, the banking sector clean-up has

### 1ghaea2019001 - 36.      Following the successful resolution of nine banks, the banking sector clean-up has

### Banking sector clean-up: status and outcomes
- Following the successful resolution of nine banks, the banking sector clean-up has ended, and the sector is now on a stronger footing.
- The receiverships of the failed banks are progressing steadily; the banking sector is described as broadly safe, sound, and stable.
- The ultimate fiscal burden from the clean-up may be less than initial outlays, given recovery prospects.

### Fiscal support, bonds, and recoveries
- Government equity capital provided to establish CBG: GHc 450 million.
- Government bonds issued to fund the difference between liabilities and good assets assumed by GCB and CBG: total now totaling 3.75 percent of GDP.
- Specific bond issuances:
  - Government bond with face value of GHc 2.2. billion issued in favour of GCB for two banks resolved in August 2017.
  - Two bonds with total face value of GHc 7.6 billion issued in favour of CBG in August 2018 for five banks resolved.
  - A third bond with face value of GHc 1.5 billion issued to CBG in January 2019 for two recently-resolved banks.
- Recoveries to date and application:
  - Amount recovered so far by receivers of the two banks resolved in August 2017: GHc 480 million.
  - Proceeds from recoveries will be used to pay down claims in accordance with legal priorities; Government is expected to take the place of depositors in the hierarchy and be repaid to the extent there are net recoveries after receivership costs and Bank of Ghana’s ELA claims.

### CBG stabilization, liquidity, and privatization plans
- CBG has a strong balance sheet supported by Government bonds assumed as assets.
- BoG monetised, on an exceptional basis, the first tranche of GHc 3.2 billion of the GHc 7.6 billion bond issued by Government in August 2018 to fund CBG liquidity needs.
- BoG is in discussions with international financial institutions to offload the bond at a market-based price to free up its balance sheet.
- CBG plans advanced for a foreign financial institution to monetise the second tranche of the August 2018 bond to provide further liquidity.
- Operational improvements at CBG:
  - Strategies to improve deposit mobilization, restructure deposit profile, and establish correspondent banking relationships are beginning to show positive results.
  - Deposits stabilizing after initial outflows.
  - New correspondent banking relationships secured to provide new lines of trade finance business.
  - Efforts underway to attract additional private and public sector business; oversight by a Board composed of competent private sector individuals with proven banking experience.
- Medium-term objective: make CBG sustainable and ready for privatization.

### Accountability, forensic work, and reducing moral hazard
- Measures to ensure accountability for failure of seven banks:
  - Court actions initiated by receivers against some shareholders, directors, and senior managers for breaches of duties.
  - BoG forwarded initial investigation results to appropriate State agencies for criminal investigations and possible prosecution.
  - BoG contracted an international firm to conduct a forensic audit into the bank failures to assist criminal investigations.
  - BoG established an Office of Ethics and Internal Investigations to investigate possible complicity of BoG staff.

### Recapitalisation and supervisory strengthening
- Mandatory recapitalisation exercise completed; industry consolidated and capital base strengthened; banks have accumulated capital buffers.
- BoG focused on strengthening supervisory framework to make reform gains irreversible:
  - Implementation of the Basel II/III framework is ongoing.
  - Banks required to fully comply with pillar 1 capital measurement per the Capital Requirement Directive issued in 2018 with effect from January 2019 (after a parallel-run phase ending December 2018).
  - Development of Pillar II of the Basel II framework to continue with technical assistance from the IMF.
- Regulatory enhancements:
  - New Corporate Governance Directive issued December 2018 to hold boards and executives more accountable.
  - Draft Directives on “fit and proper persons”, related-party transactions, and regulation of financial holding companies being finalised.
  - BoG strengthening capacity through improved systems (including acquisition of new surveillance software), processes, and accountability.

### Asset quality, NPLs, and credit infrastructure
- Industry efforts to reduce high levels of NPLs supported by compliance with BoG’s loan write-off directive; further improvements expected with disclosures of loan write-offs in banks’ 2018 published financial statements.
- BoG will enforce quarterly reporting by banks in line with IFRS 9’s expected credit loss standard adopted in 2018.
- Large exposure regularization and compliance:
  - Energy sector-related large exposures being settled with the ESLA bond issuance programme.
  - All non-oil related large exposures being brought into compliance with the Banks and Specialized Deposit-Taking Institutions (BSDI) Act, 2016, (Act 930).
  - As of end-December 2018, stock of ESLA bonds held by the industry amounted to GHc 2.6 billion (from August 2018 position of GHc 2.46 billion).
  - BoG strictly enforcing statutory single obligor limit under BSDI Act of 2016 (Act 930).
- Risk management and credit infrastructure:
  - A Risk Management Directive is being developed by BoG.
  - Draft Credit Reporting Regulations and draft Borrowers and Lenders Bill submitted to the MoF for submission to Cabinet for review; when passed by Parliament these should improve credit underwriting and enforcement.

### Specialized deposit-taking institutions (SDI) sector
- Pockets of distress persist among savings and loans companies, finance houses, microfinance companies, and rural and community banks.
- BoG adopted a comprehensive action plan to clean up the sector by resolving insolvent SDIs over the next few months with financial support from the Ministry of Finance (SR, ¶38).
- Estimated costs of cleaning up the MFI/RCB sector have been obtained and earmarked by the Ministry of Finance (SR, ¶38).

### Financial safety net, crisis preparedness, and institutional coordination
- Implementation of the Ghana Deposit Protection Scheme established under the Ghana Deposit Protection Act, 2016 (Act 931) as amended, planned before September 2019 to protect depositors and reduce fiscal risks.
- BoG reviewing policy, operational, and governance framework for liquidity support to banks to insulate its balance sheet from credit losses and reduce moral hazard; interdepartmental Working Group preliminary report reviewed by BoG Management; IMF technical assistance requested.
- An IMF mission proposed for April 2019 to advance development of a more robust framework.
- BoG’s exposure to ADB converted to common equity shares held in trust by the Financial Investment Trust to meet new minimum capital requirement.
- A Financial Stability Council established and inaugurated to improve regulatory cooperation and coordinate contingency planning and crisis preparedness; membership: Ministry, BoG, SEC, NIC, GDPC; chaired by the Governor.

### AML/CFT reforms and international assessments
- After a successful first-round FATF evaluation, Ghana volunteered for second-round assessments and was placed on FATF’s “grey list” in October 2018 due to strategic deficiencies.
- Critical steps taken or underway to address deficiencies; national action plan monitored by an Inter-Ministerial Committee chaired by the Minister for Finance.
- Measures underway include:
  - Enhancing capacity of law enforcement agencies, prosecutors, and the Judiciary against ML/TF.
  - Launch by the FIC of the goAML software for electronic submission of intelligence reports to law enforcement to support financial investigations.
  - Adoption by financial regulators of an AML/CFT risk-based supervision manual developed with IMF technical assistance.
  - Preparation of a National AML/CFT Policy for Cabinet approval by the end of March 2019.
  - Drafting of an omnibus law by the end of 2019 to strengthen AML/CFT legal framework.
- New external risk: European Commission placed Ghana on its AML/CFT “black list” on 13th February 2019 on the basis of FATF’s grey-listing; Government notified EC of reservations and will continue engagement.

### Structural reform agenda — Tax Policy and Revenue Administration (selected 2018–2019 measures)
- 2018 administrative tax measures implemented by GRA:
  - Withholding Tax on VAT Supplies: Value Added Tax, 2013 (Act 870) amended to allow withholding 7 percent of VAT payable to the supplier; implementation commenced in July 2018 after selection of eligible traders.
  - Tax Amnesty: Parliamentary approval sought in 2018 to exempt taxpayers registering, filing returns, or making outstanding payments within a targeted period from penalties and interest; Amnesty Act passed; application window closed on August 31st.
  - Excise Tax Stamp: Implementation began January 2018 at ports and March 2018 at point of sale; full implementation delayed until August 2018 due to manufacturers’ concerns; moratorium ending December 2018 for clearance of old unstamped stocks.
  - Automatic Exchange of Information: Standard for Automatic Exchange of Financial Account Information Act 2018 (Act 967) passed; GRA collaborating with DFID-Ghana and World Bank to create IT System to accept information from financial institutions and transfer to other jurisdictions’ Revenue Authorities.
- Tax administration enhancements to be implemented in 2019:
  - Fiscal Electronic Device (FED): Act passed March 2018; tenders received and under evaluation; full implementation to commence in 2019.
  - Voluntary Disclosure Procedures (VDP): Draft bill completed and submitted for stakeholder consultation; to be laid before Parliament for passage and implementation in 2019.
  - Alternative Dispute Resolution (ADR): Draft bill completed and submitted for consultation; to be laid before Parliament for passage and implementation in 2019.
  - Expansion of Tax Clearance Certificate requirement to cover subcontractors and contracts above a specified sum awarded by private entities; provisions in draft Revenue Administration (Amendment) Act for passage in 2019.
  - Deployment of Nation Builder’s Corps (NABCO): about five thousand officers to be assigned to GRA to identify and register potential taxpayers and follow up on arrears.
  - Full usage of tripsTM: system fully deployed in all Domestic Tax Revenue Division offices; further action in 2019 to ensure full uptake.

### Public Financial Management reforms and systems
- Ministry of Finance progress on PFM reforms; continued incremental expenditure control and sensitization on the PFM Act (Act 921).
- Key actions and system rollouts:
  - Accompanying regulations to the PFM Act (Act 921) to be submitted to legislative committee of Parliament by early March and to come into effect at the end of 21 sitting days (SR, ¶21).
  - Streamlining parallel GIFMIS system to reduce duplication by Budget Division and CAGD.
  - GIFMIS rolled out to 216 MMDAs, 20 Development Partner Funds, and 52 IGF institutions including teaching hospitals; to be rolled out to 38 newly created MDAs in coming years.
  - GIFMIS deployed to 54 IGF Sites out of 62, including 4 teaching hospitals: Korle-Bu, Tamale, Kumasi, and Cape Coast; deployed to District Assembly Common Fund, Road Fund, Ghana Education Trust Fund, and Energy Fund.
  - Deployment of an Oracle Business Intelligence Suite Enterprise Edition system planned to facilitate real time fiscal and budget reporting.
  - Plan to transform Institute of Accountancy Training (IAT) into a globally structured PFM training centre.
  - HRMIS live in all 9 pilot MDAs covering 427,166 staff (~80 percent of public service payroll); rolled out to 51 additional MDAs bringing live total to 60 MDAs covering 451,247 staff (~84 percent of public service payroll).
  - Payroll clean-up accelerated; Ghana Audit Service commenced payroll clean-up of CAGD payroll; government-initiated procurement to outsource payroll management on a pilot basis for 2019.
  - Engagement with six Statutory Fund Agencies to prepare 2019–2022 budgets in format prescribed by PFM Act; remaining Agencies to be brought on board.
  - Continued capacity building for key PFM stakeholders on budget implementation, payroll, Internal Audit, procurement, and GIFMIS in line with PFMR strategy.

*Source: 1ghaea2019001 - 36.*

### 52.      The Ministry of Finance (MoF) established a Fiscal Risk Unit in April 2018. The Ministry

### Fiscal Risk Unit, Debt Strategy, and Ghana Beyond Aid (Content unit 1ghaea2019001 - 52)

### Fiscal risk management and institutional reforms
- The Ministry of Finance (MoF) established a Fiscal Risk Unit in April 2018.
- The MoF benefitted from a mission from the IMF’s FAD and GIZ in 2018 to help operationalize the Unit.
- The Fiscal Risks Unit has started monitoring and reporting fiscal risks in close collaboration with relevant agencies and divisions within MoF.
- The MoF has published the first Fiscal Risks Statement (including estimates of quasi-fiscal activities of SOEs and other extra-budgetary funds), in fulfillment of the Structural Benchmark under the ECF programme.
- The Executive established the Financial Stability and Fiscal Responsibility Advisory Councils in December 2018:
  - The Financial Stability Council will strengthen and reinforce the stability of the financial sector as an inter-institutional consultative and co-ordination body.
  - The Fiscal Council will promote sound fiscal policy management and fiscal forecasts.
  - Both Councils comprise a cross-section of eminent economists and industry practitioners with clearly defined Terms of Reference (TOR).
- Institutional safeguards and governance measures listed to entrench reforms include:
  - Passage of a Fiscal Responsibility Act by Parliament.
  - Fully resourced and operationalized Office of the Special Prosecutor and other governance institutions.
  - Strict enforcement of the PFM Act.
  - Continuation of the zero central bank financing arrangement with the BoG.
  - Institutionalization of the Economic Policy Coordination Committee (EPCC) co-chaired by the Finance Minister and Bank of Ghana Governor.
  - Enforce the Public Procurement Act and minimize sole sourcing.
  - Institution of risk management framework and establishment of the Fiscal Risk Unit at MoF.
  - Operationalization of the Public Entities Credit Risk Assessment.
  - Social Partnership arrangement among Government, Organised Labour/Associations and Employers.

### Public sector reform and service delivery
- The National Public Sector Reform Strategy (NPSRS) implementation seeks to improve access, quality and accountability of delivery of administrative services provided by MDAs.
- The Public Sector Reform for Results Project (PSRRP) provides for partial implementation of the NPSRS, 2018-2023, aiming at providing modernized and timely services using available ICT infrastructure.
- Selected entities for reform include: Driver and Vehicle Licensing Authority (DVLA), Passports Office (PO), Ghana Immigration Service (GIS), Environmental Protection Agency (EPA) and Births and Death Registry (BDR).

### Debt management objectives and 2019 strategy
- Government committed to maintaining public debt below the established threshold of 65 percent of GDP in line with the fiscal responsibility law.
- Binding fiscal rule caps the fiscal deficit at 5 percent of GDP and deliver primary surpluses at all times.
- Medium-term Debt Strategy objectives: lengthen average time to maturity of domestic debt portfolio and reduce refinancing risks.
- MoF and BoG will work together to finalize a Fiscal Agency Agreement on debt management operations and debt issuance process.
- Strategy assumes creation of a cash buffer of up to GHc 1 billion in 2019 on top of the programmed net financing for active liability management and cash management purposes.
- Planned domestic and external issuance and market development for 2019:
  - Issue long term instruments: 7-year, 10-year & 15-year bonds.
  - Issue a 3-year US Dollar denominated bond.
  - Plan to extend domestic yield curve by issuing a new 20-year domestic bond, provided favorable market conditions.
  - Prompt publication of the 2019 borrowing plan (consistent with the 2016 PFM Act).
  - Active LMOs (to ease rollover risks ahead of large upcoming maturities).
  - Building on recent issuance of 6-year bonds to issue MT and LT instruments per the MTDS and quarterly issuance calendars.
  - Publish an annual borrowing and recovery plan for 2019 in accordance with Section 60 (5) of the Public Financial Management Act, 2016 (Act 921).
  - Reform primary dealer framework and securities on the domestic market based on IMF Technical Assistance results.
- Annual Borrowing Plan ceilings for non-concessional external debt in 2019:
  - Sovereign borrowing up to US$3 billion.
  - Up to US$750 million in additional borrowing for priority development projects which cannot be financed on concessional terms.
- Proceeds from the planned sovereign bond issue will be used for both liability management and financing of the budget.
- MoF prepared borrowing guidelines to regulate loan acquisition for MDAs and SOEs; MoF is yet to engage stakeholders on the draft guidelines for publication before the end of the year.
- A credit risk assessment framework was developed and operationalised, focused on specific SOEs in the energy sector as they constitute about 2.8 percent of Government debt portfolio.
  - Eight SOEs were assessed; results will guide Government decisions on guarantees and/or on-lending.

### Energy sector SOE restructuring and related measures
- Government restructuring aims to address legacy debts, improve efficiency and strengthen financial position of SOEs to enhance operational viability and ability to secure funding.
- Establishment of a State Interest and Governance Authority (SIGA) is under way; the SIGA Bill was submitted to Parliament (SR, ¶29).
- A State Ownership Policy is being developed and implemented to define the relationship between the State and companies; improve transparency and accountability.
- The 2017 Annual State Ownership Report was published in September 2018 covering 49 entities (36 SOEs and 13 JVCs).
- A formal plan has been formulated by a joint standing Committee on Energy tasked with reviewing efficiency mechanisms.
- Ongoing measures:
  a) Activities of the Regulator: PURC will soon announce new electricity tariffs. MoF, World Bank and Ministry of Energy are working on a comprehensive energy sector financial recovery plan.
  b) Energy Sector Levies: Strategy to restructure energy sector debt of approximately GHc 10 billion via ESLA Plc Energy Bond Programme.
    - ESLA Plc is in the process of on-lending proceeds from the energy bond issuance to SOEs at favorable rates and terms (longer tenors, capital moratorium etc.) while ensuring SOE financial management discipline.
    - A second phase of the energy bond issuance of up to GHc 4 billion will be issued once receivables from the EDRL improves and can cover 2 times the issuance.
- On-lending/cash support agreements between ESLA Plc and SOEs are being negotiated, subject to validation of net debt position by Ernst & Young and sign off by MOF.
  - MOF appointed Ernst & Young to update the validation of the net debt position as at 30th June 2018.
- ECG concession status:
  - Key Conditions Precedent (CP) for handover have been negotiated among the parties.
  - Consortium is majority Ghanaian-owned; formal takeover scheduled for 27th February 2019.
  - Outstanding key CPs relate to portfolio Power Purchase Agreements, List of Strategic installations/facilities and treatment of VAT/Levies for non-lifeline residential consumers; solutions have been proposed and approved by Cabinet.
- VRA restructuring status:
  - Phase 1 Restructuring and First Tranche of the ESLA Bond program have removed substantial portions of VRA’s costly debts to local banks from its balance sheet.
  - Consultants to be engaged to begin detailed work on divesting some thermal assets owned by VRA in the second quarter of 2019.
  - VRA’s audited financial results for 2017 showed a significant reduction in a net loss position over that of 2016.
- Inter-utility debt treatment:
  - MoF will coordinate the inter-utility debt matrix to ensure timely reconciliation and settlement of debt via cross-debt mechanism.
  - Government contracted Ernst & Young to conduct reconciliation and balancing of inter-utility debts; E&Y has commenced the exercise.
- COCOBOD measures and financing:
  - COCOBOD incurred a loss of about GHc 1 billion due to low international cocoa prices.
  - Management launching cost saving operations including: searching for long term borrowing to withdraw expensive cocobills; improving procurement; strengthening internal audit control through training; decreasing fertilizer costs via a special team.
  - African Development Bank (AfDB) will provide financial support to COCOBOD: a US$600 million loan is expected to be signed by the second quarter of 2019 focusing on production enhancement, building new warehouses, and fighting diseases.

### Macroeconomic outlook and Ghana Beyond Aid prospects
- Macro gains over the past two years restored macroeconomic stability and returned the ECF Programme back on track since programme objectives were derailed at the end of 2016.
- Irreversibility structures to consolidate gains and safeguard medium-term prospects include (selected items reiterated):
  - Fiscal Responsibility Act, Financial Stability and Fiscal Responsibility Advisory Councils, risk management frameworks, cash buffers, caps on non-concessional borrowing, issuance of longer dated instruments, and annual publication of Borrowing Plan.
- Medium-term prospects highlighted:
  a. New oil and gas production from AKER, AGM, and ExxonMobil fields:
    - AKER has proven reserves of over 900 million barrels.
    - AKER accelerated and integrated plan of development will ensure first oil is realised in the fourth quarter of 2020.
    - Inclusion of the Aker field (using 1 out of 3 FPSOs) is anticipated to raise total crude oil production from 171,972 barrels of oil per day in 2018 to 220,000 barrels per day in 2020.
    - Gas production expected to increase from 278.66 mmscf per day in 2018 to 318.41 mmscf per day.
    - Initial projections show that if AKER, AGM, and the ExxonMobil fields are fully operational, Ghana will attain crude oil production of 1 million barrels in the next 4-5 years.
    - Sixteen (including ExxonMobil, Total, ENI, Tullow, Kosmos, Aker) out of sixty companies were shortlisted for the three blocks in the recently published bidding rounds.
  b. Strengthening management of the Ghana Petroleum Funds: Investment Advisory Committee reconstituted.
  c. Strategies to improve non-oil real GDP growth via Government interventions: Planting for Food and Jobs, Rearing for Food and Jobs, Fishing for Food and Jobs, One village One Dam, One District One Factory, Infrastructure for Poverty Eradication Programme.
  d. Improved electricity production expected to trigger manufacturing and industrial production; increasing use of Fintech and inter-operability of payment platforms support services sector growth.
  e. A more vibrant and well capitalised financial sector following the financial sector clean-up exercise.
  f. Positioning Ghana as a regional hub for financial services, petroleum and petroleum services, airport, logistics & transport, manufacturing, real estate and higher education as outlined in the 2019 Budget.
- Government plans to sustain and deepen reforms under the “Ghana Beyond Aid” agenda, aligned with the President’s Coordinated Programme of Economic and Social Development Policies (2017-2024) and the Medium-Term National Development Policy Framework (2018-2021), and consistent with the SDGs.
- Ghana Beyond Aid components:
  - Vision: a prosperous and self-confident nation beyond needing aid, engaging competitively through trade and investments.
  - Mindset change: internalization that the destiny of Ghana is in the hands of Ghanaians and efficient mobilization and deployment of resources for rapid economic transformation.
  - Five goals summarized as W.I.S.E.R Ghana: Wealthy, Inclusive, Sustainable, Empowered, and Resilient.

*Source: IMF content unit 1ghaea2019001 - 52.*

### 78.      Ghana Beyond Aid is a National Project that mobilizes all Ghanaians across partisan divides,

### 1ghaea2019001 - 78.      Ghana Beyond Aid is a National Project that mobilizes all Ghanaians across partisan divides,

### Ghana Beyond Aid: national project and institutional measures
- Ghana Beyond Aid is described as a National Project that mobilizes all Ghanaians across partisan divides, rather than a programme of the Government of the Day.
- Government has begun broad consultations to build national consensus and support for the Ghana Beyond Aid agenda.
- Measures and institutions initiated (in 2017, 2018, and the 2019 budget) include:
  - A Fiscal Council
  - A Financial Stability Council
  - A Social Partnership Framework among Government, Labour, and Employers
  - Flagship projects aimed at boosting human capital, infrastructure, and reviving agriculture and industry

### F. Policies to Support Growth and Poverty Reduction — six strategic pillars
- Government will focus on 6 strategic pillars that build on flagship programmes and recent achievements:
  - i. Infrastructure
  - ii. Agricultural Modernisation
  - iii. Industrialisation
  - iv. Entrepreneurship
  - v. Improving Efficiency in Revenue Mobilisation and Protecting the Public Purse
  - vi. Social Partnership

### Infrastructure and social-sector interventions
- Specific interventions include:
  - Infrastructure for Poverty Eradication Programme (IPEP)
  - National Entrepreneurship and Innovation Plan (NEIP)
  - Nation Builders’ Corps (NABCO)
  - Alignment with Sustainable Development Goals (SDGs) and Africa Union (AU) Agenda 2063
  - Free SHS policy

### Supporting Entrepreneurship and Private Sector Development
- Ten-Point Industrial Transformation Programme: investments into new Strategic Anchor Industries including Automotive and Vehicle Assembly, Pharmaceuticals, Garments and Textiles, Vegetable Oils and Fats, Industrial Starch, Industrial Chemicals, and Iron and Steel.
- Automotive industry developments:
  - In 2018, Government signed MOUs with Volkswagen, Nissan and Sinotruk.
  - In 2019, the three automobile assembly plants are expected to be fully operational and a comprehensive Automotive Industry Policy will be launched.
- Bauxite and aluminium value addition:
  - New law to establish the Ghana Integrated Aluminium Development Corporation (GIADC).
  - GIADC responsible for management of bauxite reserves and entering joint ventures for mining and refining.
  - Agreement negotiated with Sinohydro Corporation of China: Sinohydro will provide $2 billion worth of infrastructure in exchange for proceeds of refined bauxite.
  - Proceeds to be placed in an escrow account by the off-taker for the benefit of GIADC and Sinohydro.
  - Interim negotiation by Government on behalf of GIADC; once GIADC is set up it will become the obligor under the arrangement to avoid adding to the Government of Ghana’s debt stock.
  - Infrastructure to be provided in phases; the first phase involves US$646 million of infrastructure with 10 No EPC contracts signed, pending financial closure.
- GETFund long-term financing for education infrastructure:
  - Proposal to secure up to US$1.5 billion long-term financing for GETFund, to be issued in three (3) tranches of US$500 million.
  - Funds to be used for critical education infrastructure and completion of uncompleted buildings.
  - Commitment to stay within adopted budgetary envelopes for GETFund; additional borrowing only to clear GETFund arrears to suppliers.
- National Entrepreneurship and Innovation Plan (NEIP) results and plans:
  - To date, 7,000 entrepreneurs trained.
  - 1,350 successful entrepreneurs provided with financial support.
  - Expected minimum job creation: two jobs per entrepreneur, totaling 2,700 direct jobs.
  - In 2019, plan to train another 10,000 entrepreneurs and provide financial support to about 2,000 beneficiaries.
  - Development of a comprehensive policy document to guide National Entrepreneurship initiated and expected by end of the year.
- National Industrial Revitalization Programme:
  - In collaboration with participating Financial Institutions, Government disbursed GHc 227.2 million to 14 distressed companies.
  - An additional 35 companies are in the pipeline for consideration in 2019.
- One District, One Factory (1D1F):
  - Aims to establish at least one factory in each district; private-sector led with government facilitation.
  - Fifty-five (55) companies have been funded, with several others in the pipeline.
  - By the end of 2018, a total number of 79 projects would have been approved under 1D1F and at various stages of implementation.
- Nation Builders Corps (NABCO) and employment initiatives:
  - NABCO is a three - year transitional job opportunity that has enrolled 100,000 young graduates to support delivery of public services.
  - The GRA has been assigned ten thousand officers from NABCO to support revenue measures (identify and register potential taxpayers, collect property rates, follow up on debtors).
  - Between 2017 and 2018, financial clearance granted to recruit about 88,719 Ghanaians into critical sectors including agriculture, health, revenue, IT and education.
- Aquaculture for Food and Jobs (AFJ) flagship programme (2019):
  - To complement “Planting for Food and Jobs” (PFJ).
  - Implemented in collaboration with “Feed Ghana” (module 3) and “Enterprise Ghana” (module 5) of NABCO.
  - Under AFJ, 10,200 unemployed youth will be mobilized nationwide into Aquaculture Enterprise Groups.
  - Beneficiaries to be trained in modern aquaculture techniques and supported with inputs such as fish feed, fingerlings, tanks and cages.

### Supporting the Poor and Vulnerable
- Social Protection Single Window Citizens Service established with a single window call centre (Helpline of Hope).
- LEAP and health coverage:
  - A total of 213,044 households received support in 2018 from the LEAP.
  - 550,000 Livelihood Empowerment Against Poverty (LEAP) beneficiaries were either registered onto the NHIS or had expired cards renewed.
- Free SHS policy and education access:
  - 2018 enrolment: 490,882 representing an increase of 36 percent over the 2017 enrolment of 361,771.
  - GHc 1.7 billion budgeted as funding for the Free SHS programme for 2019.
  - Double track school calendar introduced as temporary measure in 400 schools to accommodate more students.
  - Double track system placed an estimated 181,000 students who would otherwise have been denied secondary education due to space constraints.

### Quantitative Program Targets and monitoring (high-level highlights)
- Tabled program indicators include (selected items):
  - Primary fiscal balance targets and actuals (millions of cedis) for multiple periods (table entries preserved in the source).
  - Wage Bill (ceiling; in millions of cedis) entries across reporting periods.
  - Net international reserves of the Bank of Ghana (floor; millions of U.S. dollars) entries across reporting periods.
  - Non-accumulation of new domestic arrears (ceiling; millions of cedis) set at 0 for reporting periods.
  - Net change in stock of arrears (ceiling, millions of cedis) showing negative targets and actuals across periods.
  - Continuous performance ceilings on gross financing of BoG to the Government and SOEs (ceiling; in millions of cedis).
  - Ceilings on contracting or guaranteeing of new external non-concessional debt with sub-ceilings for debt management and debt for projects.
- Monetary Policy Consultation Clause:
  - Twelve-month consumer price inflation bands and central target rate entries (percent) listed in the program tables.
- Indicative targets:
  - Ceiling on contracting or guaranteeing of new external concessional debt (ceiling; millions U.S. Dollars) and social protection spending (floor, in million of cedis) are included in the program tables.

### Structural Benchmarks and Proposed Prior Actions (summary)
- Structural benchmarks noted as met, met with delay, not met, or progressing (selected examples):
  - Complete roll-out of GIFMIS to all IGFs and statutory funds: December 2018 — Not met. Progress is ongoing.
  - Complete central government TSA: September 2018 — Not met. Progress is ongoing.
  - Integrate GIFMIS Payroll, financial HRMIS and Hyperion in the Education sector: August 2018 — Met.
  - Publish a fiscal risk statement, including estimates of quasi-fiscal activities of SOEs and other extra-budgetary funds: December 2018 — Met with delay.
  - Adoption by BoG Management of specific measures to improve FX management and ensure market-based pricing of transactions: August 2018 — Not met. Changed to prior action.
- Proposed prior actions include (selected items and rationales):
  - Submit to Parliament an exemption draft bill removing total exemptions of GHc 500 million and tightening the exemptions granting process (with all exemptions to be approved by the Ministry of Finance) — Improve domestic revenue mobilization.
  - BoG to finalize timeline for the remaining SDI resolutions, in agreement with the Ministry of Finance — Extend financial sector clean-up beyond the banking sector.
  - Adopt FX management policy by BOG (in line with MCM recommendations) — Improve FX management and ensure market-based pricing of transactions.
  - Submit to Parliament legislation establishing single supervisory entity for SOEs — Strengthen oversight of SOEs and mitigate fiscal risks.
  - Minister of Finance to submit PFM regulations to Parliament in line with FAD recommendations — Strengthen fiscal transparency and accountability.

### Attachment II. Technical Memorandum of Understanding — key points
- TMU defines variables subject to quantitative targets and methods for program monitoring; authorities will consult the Fund before modifying TMU measures.
- Program exchange rate assumptions:
  - GHc 4.00 per US$1 for 2016
  - GHc 4.40 per US$1 for 2017
  - GHc 4.7 for 2018
  - GHc 5.0 for 2019
  - Exchange rates to other currencies calculated as the average of buying and selling exchange rates against the U.S. dollar.
- Performance criteria for the arrangement include (selected):
  - Floor on the primary fiscal balance of the government on a cash basis.
  - Continuous ceiling on gross credit to government by the Bank of Ghana (level).
  - Floor on the net international reserves of the Bank of Ghana (level).
  - Ceiling on wages and salaries.
  - Ceiling on net change in the stock of domestic arrears.
  - Continuous ceiling on non-accumulation of new external arrears.
  - Ceiling on contracting or guaranteeing of new external non-concessional debt with sub-ceilings.
  - Monetary policy consultation clause tied to twelve-month consumer price inflation outside target bands.
- Indicative targets include (selected):
  - Floor on poverty-reducing government expenditures.
  - Ceiling on contracting or guaranteeing of new external concessional debt.
  - Ceiling on net domestic assets of Bank of Ghana (level).
  - Ceiling on change in accounts payable of ECG and VRA; floor on net after tax profit of ECG and VRA.

*Source: Excerpt from the IMF staff report chapter on Ghana (content unit 1ghaea2019001).*

### 9. The wage bill of the central government is defined as the sum of basic wages and

### 1ghaea2019001 - 9. The wage bill of the central government is defined as the sum of basic wages and

### Definitions of wage bill and primary fiscal balance
- Wage bill of the central government: sum of basic wages and allowances paid to public servants on the mechanized payroll and in subvented agencies.
- Program primary fiscal balance:
  - Cumulative from the beginning of the fiscal year.
  - Measured from the financing side.
  - Primary deficit = sum of net financial transactions of the government (as defined in paragraph 6)—comprising net foreign borrowing (paragraph 14), net domestic financing (paragraph 13), receipts from net divestitures and net drawing out of oil funds, minus domestic and external interest payments.

### Domestic payments arrears — definition and components
- Domestic payments arrears: payments not made “when due”; measured as the sum of five components:
  - Arrears to the government’s statutory funds: any delay of more than one month in revenue transfers to these statutory funds, relative to the normal payment schedule (typically monthly or quarterly, and defined as a specific percentage of the previous month or quarter’s revenue collections).
  - Employees compensation arrears: wages and salaries, pensions, gratuities, and social security arrears outstanding after the agreed date for payment to staff or the social security fund.
  - Debt service arrears: payments of domestic and external interest, amortization, promissory notes, due and not settled within the grace period specified in the contract.
  - MDAs expenditure arrears (road and other MDAs expenditure arrears): approved invoices on the GIFMIS system that remain unpaid three months after the quarter in which the invoices were approved by the MDA.
  - Arrears to SOEs: payments for debt owed to SOEs that are due and not settled within 30 days after the end of the quarter.

### Social protection expenditures — budgeting and measurement
- Budgeted expenditures on social protection programs of the central government:
  - Taken from each year’s final appropriations bill.
  - Include only spending financed by the government or from internally generated funds.
  - Actual spending on social protection programs, including LEAP, is supplemented with transfers to the National Health Fund (NHF) — which the government considers poverty-related.
  - Actual poverty spending excludes all donor-supported expenditure.
- Overview of Social Protection Programs (as listed in the source):
  - National Health Fund (NHF)
  - Teacher and nurse trainee allowances
  - Livelihood Empowerment Against Poverty (LEAP)
  - Other education social safety nets
  - Free senior high school
  - Health spending on essential drugs
  - Planting for food and jobs program
  - School feeding program
  - Zongo Development Fund

### Net domestic and net foreign financing — government financing definitions
- Net domestic financing of government: change in net credit to government by the banking system (Bank of Ghana plus deposit money banks) plus the net change in holdings of treasury bills and other government securities by the nonbank sector, excluding divestiture receipts.
- Net foreign financing of government: sum of project and program loans by official creditors and commercial external borrowing, minus amortization due.

### Bank of Ghana (BoG) monetary and credit measures
- Outstanding net credit to the government by the Bank of Ghana:
  - Sum of claims on government including overdrafts of the government with the BoG, and claims on the government resulting from accrued interest on government securities less government deposits as defined in the monetary template.
- Outstanding net credit by deposit money banks:
  - DMB holdings of government securities at cost of purchase value (reported by BoG Treasury Department’s Debt Registry), direct loans less government deposits as reported by DMBs in the revised BSD2 report forms (defined in the Monetary Template), plus deferred accrued interest on holdings of inflation-indexed bonds.
- Nonbank financing:
  - Difference between total net cash receipts to the treasury main cash account from sale/repurchase of government securities, less corresponding net cash value received from the BoG and DMBs as indicated on the Debt Registry by holder at discount value, plus deferred accrued interest on holdings of inflation-indexed bonds.

### Net foreign assets and net international reserves (NIR)
- Net foreign assets (monetary survey): short- and long-term foreign assets minus liabilities of the BoG contracted with nonresidents.
  - Short-term foreign assets include: monetary gold (valued at the spot market rate for gold, US$/fine ounce, London), holdings of SDRs, reserve position in the IMF, foreign notes and travelers checks, foreign securities, positive balances with correspondent banks, encumbered external assets and other positive short-term or time deposits.
  - Short-term foreign liabilities include: foreign currency liabilities contracted by the BoG at original maturities of one year or less (including overdrafts), outstanding liabilities to the IMF, deposits of international institutions at the BoG and swaps with non-resident commercial banks.
  - Long-term foreign assets and liabilities: other foreign assets, investments abroad, other long-term liabilities to nonresidents, and bilateral payment agreements.
  - All values not in U.S. dollars are converted to U.S. dollars at the program exchange rate defined in paragraph 2.
- Net international reserves (NIR) of the BoG (for program monitoring):
  - Defined as short-term foreign assets of the BoG, minus short-term external liabilities.
  - Excludes short-term foreign assets that are not fully convertible external assets readily available to, and controlled by, the BoG (pledged or encumbered external assets, including assets encumbered by BoG guarantees).
  - All values not in U.S. dollars are converted to U.S. dollars at the average of buying and selling exchange rates against the U.S. dollar as defined in paragraph 2.
  - NIR components explicitly defined:
    - Plus: Short-term assets composed of Gold; Holdings of SDR; Foreign Notes and Coins; Foreign Securities/Short-term Deposits; Disposal Balances with Correspondent Banks; Fixed Deposits (excludes encumbered assets); any other short-term foreign assets.
    - Minus: foreign short-term liabilities composed of Deposits of International Institutions; Liabilities to International Commercial Banks; Swap Deal Payable with non-resident banks.
    - Minus: all liabilities to the IMF.
    - Minus: MoF’s liabilities to the IMF used for budget support.
    - Minus: all positive foreign currency deposits at the BoG held by resident deposit money banks (including the stock of swaps deal payable with resident banks), public institutions, nonfinancial public enterprises, other financial institutions, and the private sector.
    - Minus: all Bank of Ghana deposits with Ghana International Bank London (GIB).

### Net domestic assets and gross credit to government
- Net domestic assets of the Bank of Ghana: difference between reserve money and net foreign assets of the BoG, converted from U.S. dollars to cedis at the program exchange rate. Government deposits at the BoG from disbursements of Fund resources for budget financing are subtracted.
- Outstanding gross credit to government and public enterprises by the Bank of Ghana (for program monitoring):
  - Total amount of (i) all BoG loans and advances to government and public enterprises, (ii) all government overdrafts, (iii) the absolute value of government deposits reflected as negative values in the monetary survey; (iv) face value for all outstanding Government of Ghana treasury bills, notes and bonds purchased by BoG in the primary and the secondary market.
  - Includes all called guarantees given by BoG for operations between the central government or state owned enterprises and a third party.
  - Excludes: BoG holdings of government T-bills as collateral from commercial banks and BoG reversible market transactions involving government securities that do not result in a change of security ownership.

### Monetary Policy Consultation Clause
- Consultation bands around the projected 12-month rate of CPI inflation (headline CPI published by Ghana Statistical Service) are specified in the Performance Criteria table in the MEFP.
- If observed 12-month CPI inflation falls outside the lower or upper outer bands specified for end-June 2018 and end-December 2018 test dates:
  - Authorities will complete a consultation with the IMF Executive Board focusing on: (i) the stance of monetary policy and whether the Fund-supported program remains on track; (ii) reasons for program deviations, taking into account compensating factors; and (iii) proposed remedial actions if necessary.
  - When consultation with the IMF Executive Board is triggered, access to Fund resources would be interrupted until the consultation takes place and the relevant program review is completed.
- If observed year-on-year CPI inflation falls outside inner bands for end of each test date, authorities will conduct discussions with Fund staff.

### External arrears and ceilings on new external debt
- Non-Accumulation of New External Arrears:
  - External payment arrears accrue when undisputed payments (interest or amortization on debts of the government) to non-residents are not made within contract terms. Monitored continuously.
- Definition of debt for the ceiling on contracting/guaranteeing new non-concessional external debt:
  - Debt defined per paragraph 8 of the Guidelines on Public Debt Conditionality in Fund Arrangements (Executive Board’s Decision No.15688-(14/107)):
    - 8(a) Debt = current liability created under contractual arrangement through provision of value in form of financial/nonfinancial assets or services, requiring obligor to make future payments in assets or services to discharge principal and/or interest; forms include loans, suppliers’ credits, leases (present value at inception).
    - 8(b) Arrears, penalties, judicially awarded damages from failure to pay under contractual obligation that constitutes debt are debt.
- External debt for the ceiling:
  - Any debt as defined in paragraph 24 denominated in currency other than Ghanaian cedis (GHc).
  - Exclusions: use of Fund resources, rollover of BOG’s existing liabilities, normal import-related credits, pre-export financing credits of public enterprises, cocoa loans collateralized by cocoa contracts, and individual leases with a value of less than US$100,000.
  - For program monitoring, debt is considered contracted or guaranteed when all conditions precedent for effectiveness are satisfied. Only debt signed since the beginning of 2015 counted against this performance criterion.

### Nonconcessional vs concessional debt, concessionality threshold, and valuation conventions
- Nonconcessional external debt:
  - External debt contracted or guaranteed by the government, the BoG, and specific public enterprises on non-concessional terms.
  - External debt and its concessionality reported by the Debt Management Division of the Ministry of Finance and Economic Planning, measured in U.S. dollars at current exchange rates.
- Public enterprises covered by the ceilings (subject to paragraph 27):
  - (i) Tema Oil Refinery; (ii) Ghana National Petroleum Company; (iii) Ghana National Gas Company; (iv) Volta River Authority; (v) Electricity Company of Ghana; (vi) GRIDCO; (vii) Ghana Water Company Limited; (viii) GIIF.
- Concessionality:
  - A debt is concessional if it includes a grant element of at least 35 percent.
  - Grant element = (nominal value − net present value (NPV)) / nominal value, expressed as a percentage.
  - NPV computed by discounting future debt service payments at a discount rate of 5 percent.
- Variable-rate loans PV calculation:
  - For loans with variable interest = benchmark interest rate plus fixed spread, PV calculated using a program reference rate plus the fixed spread (in basis points) specified in the contract.
  - Program reference rate for six-month USD LIBOR = 3.34 percent (fixed for duration of the program).
  - Spreads over six-month USD LIBOR:
    - Euro: -250 basis points.
    - JPY: -300 basis points.
    - GBP: -100 basis points.
    - For currencies other than Euro, JPY, and GDP, spread over six-month USD LIBOR is -200 basis points.
  - Where variable rate is linked to a benchmark other than six-month USD LIBOR, a spread reflecting the difference between the benchmark rate and six-month USD LIBOR (rounded to the nearest 50 bps) will be added.
  - Note: program reference rate and spreads based on the “average projected rate” for the six-month USD LIBOR over the following 10 years from the Fall 2014 World Economic Outlook (WEO).

### Sub-ceilings, exemptions, and project list for non-concessional external debt
- Sub-ceilings from completion of the second review:
  - Two sub-ceilings for new non-concessional external debt:
    - (i) Debt for debt management purposes.
    - (ii) Debt for projects integral to the development program for which concessional financing is not available.
  - Debt for debt management purposes defined as non-concessional debt used to improve overall public debt profile.
  - Debt management sub-ceiling cumulative from beginning of each calendar year.
  - For 2018, the exemption for debt management is limited to $1,750 million.
  - Liability management operations: repurchases of existing debt with proceeds from newly issued debt to improve composition of public debt portfolio, broadly NPV-neutral.
- Sub-ceiling for projects integral to the development program:
  - Total amount limited to US$3,500 million cumulative from the beginning of 2015.
  - Amounts applied toward this limit do not count toward the sub-ceiling on non-concessional borrowing for debt management purposes.
  - Any contracting or guaranteeing of non-concessional external debt for projects other than those on the specified list results in nonobservance of the performance criterion.
- Projects listed as eligible for the project sub-ceiling (verbatim list from source):
  - Takoradi Port Expansion 2
  - Supply Agricultural equipment under Food for Africa programme
  - Electricity Company Ghana Limited Prepaid meter distribution
  - Construction and Equipping of Ten (10) Polyclinics in the Central Region
  - Self -help electrification project (SHEP) - 4 -Hunan
  - 4 District Hospitals and accident and emergency center in Bamboi, Somanya, Tolong, Weta, and Buipe
  - Kumasi market phase 2
  - SHEP five regions-CWE
  - Strengthening of Lots 1,2& 4 Central Corridor
  - Eastern Corridor Road Project Refinancing for Section I: Asikuma Junction - Have and Section II: Nkwanta - Oti Damanko
  - Obetsebi Lamptey Drainage network and Interchange
  - Bekwai Hospital Rehabilitation
  - Sugarcane Development and Irrigation Project
  - KARPOWER PROJECT B
  - Takoradi 4 Thermal Power Project (T4)
  - Renovation of Ghana Missions Abroad
  - Works at Kumasi Airport
  - Development of Tamale Airport- terminal building and related infrastructure phase
  - Eastern University
  - Damango Yendi Water project
  - Tema to Akosombo - Western Railway Line Construction Project in Ghana
  - Transport Sector Project (World Bank)
  - Rural Water and Sanitation (World Bank)
  - Secondary Education Improvement (World Bank)
  - Polytechnics, Technical and Vocational training centres
  - Obetsebi Lamptey Interchange - phase 2
  - Kumasi Road Rehabilitation
  - The Modernization of Kumasi Central Market and Execution of Selected Infrastructure in the CBD (phase 2)
  - Koforidua Regional Hospital
  - Rehabilitation of Mampong, Atibie, Aburi and Kyebi hospitals in the Eastern Region
  - Completion of Legon Medical Center
  - Aqua Africa water project
  - Elimina Fishing Port Rehabilitation and Expansion
  - Essiama Enclave Water Supply
  - Planting for Food and Jobs
  - Free Senior High School
  - Infrastructure for Poverty Eradication Programme
  - H.E. Nana Akufo-Addo’s Plan for Agricultural Roads
  - Infrastructure for Zongo communities
  - One-district one-factory
  - Street lighting and SHEP
  - Flood control
  - Water systems and toilet facilities
  - Critical security equipment
  - School feeding
  - LEAP
  - National ID program
  - Support for business incubator

*Source: Excerpt from the IMF staff-monitored program documentation for Ghana (document content provided).*

### 32. Further an additional sub-ceiling of US$350 million for a project is established for 2017 in

### 1ghaea2019001 - 32. Further an additional sub-ceiling of US$350 million for a project is established for 2017 in

### SOEs: Definitions and limits
- An additional sub-ceiling of US$350 million for a project is established for 2017 in the context of third review to accommodate GNPC’s non-concessional borrowing, which was counted against debt limits for 2016 but did not materialize due to unforeseen delays in its loan negotiation with the creditor.
- Net after tax profit of ECG:
  - Defined as the difference between total operating revenues and total costs as reported in the unaudited income statement.
  - Total operating revenues are defined as the sum of: (i) sales of electricity; and (ii) all other operating income, excluding proceeds from central government transfers or payments of ECG’s obligations on ECG’s behalf.
  - Total costs are defined as the sum of: (i) power purchases and all operating costs related to electricity distribution to be borne by ECG; (ii) administrative expenses, including on wages and remuneration of the board of directors, and provisions; (iii) depreciation; (iv) interest expense and any other financial costs.
- Net after tax profit of VRA:
  - Defined as the difference between total operating revenues and total costs as reported in the unaudited income statement.
  - Total operating revenues are defined as the sum of: (i) sales of electricity; and (ii) all other operating income, excluding proceeds from central government transfers or payments of VRA’s obligations on VRA’s behalf.
  - Total costs are defined as the sum of: (i) generation of electric power and all operating costs related to electricity generation to be borne by VRA; (ii) administrative expenses, including on wages and remuneration of the board of directors, and provisions; (iii) depreciation; (iv) financial expenses and any other financial costs, including foreign exchange gain/losses from foreign currency denominated transactions and exchange fluctuation gains/losses on foreign currency denominated loans.
- Payables ceiling:
  - The zero ceiling on change in gross payables of VRA and ECG applies to the total stock of payables, current and non-current, due to trade creditor, related parties and other creditors.

### Adjustors to the Program Targets (Primary Fiscal Deficit; Non-concessional External Debt; NIR)
- Primary fiscal deficit adjustors (deficit ceilings for 2015–18 adjusted for excesses and shortfalls in oil revenue and program loans and grants):
  - i) Downward (upward) by 50 percent of any excess (shortfall) in oil revenue.
  - ii) Downward by 50 percent of any shortfall in concessional program loans.
  - iii) Upward for the full amount of any excess in concessional program loans, where these are used to repay outstanding domestic arrears at a more rapid pace than programmed.
  - iv) Downward by the full amount of any excess of program grants less any use of program grants used to repay outstanding domestic arrears at a more rapid pace than programmed.
  - v) Upward by 50 percent of any shortfall in program grants.
- Primary balance floor for 2018:
  - Will be adjusted downwards by 100 percent for financial sector related costs (including for the bond issued to Ghana Commercial Bank related to the purchase and assumption transaction undertaken in 2017, costs associated with the bank that was intervened in 2018 with the appointment of an official administrator, and for costs associated with other special depositary institutions like micro-finance institutions).
- Non-concessional external debt:
  - The sub-ceiling on contracting of new non-concessional external debt to be used for debt management purposes for 2018 will be adjusted downwards at end-December 2018 by the full amount of any shortfall in liability management operations implemented relative to $1,750 million.
- Net international reserves (NIR) of the Bank of Ghana:
  - The NIR floors will be adjusted upward for any excess of budget grants and loans relative to the program baseline excluding the IMF’s budget support, except where this financing is used to repay outstanding domestic arrears at a more rapid pace than programmed.
  - The NIR floors will be lowered by 50 percent of any shortfall in budget grants and loans relative to the program baseline excluding the IMF’s budget support.

### Provision of Data to the Fund: Reporting requirements and timelines
- General requirement:
  - Data with respect to the variables subject to performance criteria and indicative targets will be provided to Fund staff on a monthly basis with a lag of no more than eight weeks (except for select data for which the reporting lag is explicitly specified in Table 1). The authorities will transmit promptly to Fund staff any data revisions. The authorities will share any prospective external loan agreements with Fund staff before they are submitted to cabinet and before they are contracted.
- Selected fiscal data (to be provided by the MoF):
  - Central budget operations for revenues, expenditures and financing, including clearance of arrears: Monthly, within six weeks of the end of each month.
  - Divestiture receipts received by the budget (in cedis and foreign exchange, net of divestiture transactions costs): Monthly, within six weeks of the end of each month.
  - The stock of domestic payments arrears by sub-category (as defined in para. 11 of the TMU): Quarterly, within six weeks of the end of each quarter.
  - Updated list of (prioritized) projects to be financed by non-concessional loans and concessional loans: Monthly, within six weeks of the end of each month.
  - Cash flow of the central government and cash flow projections: Monthly, within six weeks of the end of each month.
  - Income, cash flow, and debt service projections for the state-owned energy utilities: Monthly, within six weeks of the end of each month.
  - Itemized data on the proceeds from the energy sector levies: Monthly, within six weeks of the end of each month.
  - Financial statements of ESLA Plc and details on amount and timing of interest payments on ESLA bond: Monthly, within six weeks of the end of each month.
  - Expenditures committed but not paid and within the legal period before they become arrears (float): Monthly, within six weeks of the end of each month.
  - Wage bill monthly reports including breakdown of developments per MDAs: Monthly, within six weeks of the end of each month.
- Monetary data (to be provided by the BoG):
  - Net domestic assets and net international reserves of the BoG: Monthly, within two weeks of the end of each month.
  - Detailed balance sheet of the monetary authorities: Monthly, within four weeks of the end of each month.
  - Monetary survey detailing the consolidated balance sheet of commercial banks: Monthly, within six weeks of the end of each month.
  - Weekly balance sheet of the central bank, including gross international reserves, net international reserves: Weekly, within a week of the end of each week.
  - Summary position of government committed and uncommitted accounts at BoG, and total financing from BoG: Monthly, within four weeks of the end of each month.
  - Composition of banking system and nonbanking system net claims on government: Monthly, within four weeks of the end of each month.
  - Financial soundness indicators: Monthly, within four weeks of the end of each month.
  - Stock of BoG swaps and encumbered and non-encumbered loans with resident and non-resident commercial banks: Monthly, within two weeks of the end of each month.
  - Daily computations for the BoG benchmark exchange rate, including all transactions used to derive it: Monthly, within two weeks of the end of each month.
  - Debt registry showing structure and holders of domestic government debt, at face value and at discount. Similar table showing holders of treasury bills for open market operations: Monthly, within four weeks from the end of each month.
  - Itemized overview of outstanding liquidity support, granted to financial institutions: Monthly, within four weeks of the end of each month.
- Balance of payments (to be provided by the BoG):
  - Export and import data on value, volume, and unit values, by major categories and other major balance of payments variables: Quarterly, with a maximum lag of two months.
  - Foreign exchange cash flow: Monthly, within four weeks of the end of the month.
  - Monthly foreign exchange cash flow projections (with actual historical figures updated): Monthly update, with a maximum lag of two weeks of the end of the month.
- External debt and foreign assistance data (to be provided by MoF):
  - Information on the concessionality of all new external loans contracted by the government or with a government guarantee: Quarterly, within four weeks of the end of each quarter.
  - For the coming quarter: (i) total debt service due by creditor, and (ii) debt service paid. Report should cover government and government-guaranteed debt (as defined in this document): Quarterly within four weeks of the end of each quarter.
  - External debt and external debt service incurred by enterprises with government ownership above 50 percent, even if loans have not been explicitly guaranteed by the government: Quarterly, within three weeks of the end of each quarter.
  - Short-term liabilities to nonresidents (maturity in one year or less), including overdraft positions and debt owed or guaranteed by the government or the BoG. Data on the BoG short-term liabilities to nonresident commercial banks on accounts 1201 plus 301 plus Crown Agent: Quarterly, within three weeks of the end of each quarter.
  - Disbursements of grants and loans by creditor: Quarterly, within four weeks of the end of each quarter.
- Other data (to be provided by GSS and Ministry of Energy):
  - Overall consumer price index: Monthly, within two weeks of the end of each month.
  - National accounts by sector of production, in nominal and real terms: Annual, within three months of the end of each year (switching to quarterly when they become available).
  - Quarterly financial statements of main state-owned enterprises (Tema Oil Refinery; Ghana National Petroleum Company; Ghana National Gas Company; Volta River Authority; Electricity Company of Ghana; GRIDCO; Ghana Water Company Limited): Quarterly, within three months of end of quarter.
  - Quarterly financial statements of GIIF: Quarterly, within three months of end of quarter.
  - Annual financial statements of main state-owned enterprises (same list): Annual, within six months of end of year.
  - Electricity pricing (Ministry of Energy): Data on the tariff structure and the cost of producing electricity: Quarterly, within four weeks of the end of each quarter.
  - Petroleum pricing (Ministry of Energy): (i) a breakdown of costs, including the ex-refinery price, duties, levies, and margins, for each of the individual petroleum products; and (ii) the indicative maximum price approved in the bi-weekly review of petroleum pricing for each of the individual petroleum products: Bi-weekly, within two days of the completion of the pricing review.

### Budget financing and oil revenues (selected cumulative figures)
- Budget Financing and oil revenues, 2016 (GHc millions, cumulative from the start of the calendar year):
  - Program grants: March 0; June 0; September 112; December 133.
  - Program loans: March 0; June 600; September 844; December 844.
  - Oil revenues, net of transfers to GNPC: March 325; June 460; September 785; December 1,640.
- Budget Financing and oil revenues, 2017 (GHc millions, cumulative from the start of the calendar year):
  - Program grants: March 0; August 0; September 73; December 73.
  - Program loans: March 0; August 211; September 617; December 1,902.
    - o/w: IMF Program loan for budget support: March 0; August 0; September 406; December 811.
  - Oil revenues, net of transfers to GNPC: March 391; August 800; September 800; December 1,138.
- Budget Financing and oil revenues, 2018 (GHc millions, cumulative from the start of the calendar year):
  - Program grants: April 0; June 0; September 18; December 18.
  - Program loans: April 0; June 908; September 908; December 1,362.
    - o/w: IMF Program loan for budget support: April 0; June 908; September 908; December 1,362.
  - Oil revenues, net of transfers to GNPC: April 958; June 1,135; September 1,599; December 2,206.

### Debt Sustainability Analysis (DSA): Assessment and key findings
- Overall assessment:
  - This debt sustainability analysis (DSA) concludes that Ghana’s risks of external and overall debt distress continue to be assessed as high.
  - The rebased nominal GDP significantly improved the public debt-to-GDP ratios (albeit remaining elevated), but debt service ratios continue to breach their respective thresholds under the baseline, reflecting underlying vulnerabilities.
- 2018 developments and risks:
  - The downward trend in total public debt-GDP ratio was interrupted in 2018, reflecting the realization of significant contingent liabilities in the banking sectors (seven banks resolved through end-December).
  - Ghana issued a US$2 billion Eurobond in May 2018.
  - Going forward, maintaining fiscal discipline, building buffers, diversifying the export base and exercising caution in contracting new external financing arrangements for infrastructure and other spending are critical to put public debt dynamics on a downward path.
- Coverage and contingent liabilities:
  - The DSA focuses on the public and publicly guaranteed (PPG) debt of the central government and also captures debt contracted independently by selected energy-sector SOEs not explicitly backed by government guarantee.
  - Total contingent liabilities for the CL test are estimated at 8.4 percent of GDP.
- Data, monitoring, and capacity building:
  - Efforts underway to step up government capacity to record and monitor public debt and contingent liabilities include borrowing policy guidelines, a new credit risk assessment framework, and technical assistance by the World Bank and IMF in 2019 to enhance data coverage of SOEs in subsequent DSAs.
- Fiscal outcome note:
  - Including financial sector cleaning up costs, the primary deficit reached 1.4 percent of GDP compared a surplus of a 0.3 percent of GDP projected in the previous DSA.

*Source: Excerpt from the provided IMF content unit 1ghaea2019001.*

### 5.      Ghana has increasingly relied on non-concessional borrowing along with its consistent

### 5.      Ghana has increasingly relied on non-concessional borrowing along with its consistent improvement in income status and has maintained more-sustained market access.

### External borrowing and debt composition
- As of July 2018, Ghana’s external public debt (excluding non-resident holdings of government securities) stood at US$18,211.8 or 28 percent of GDP.
- The borrowing comes mostly from multilateral creditors, bilateral creditors and international market.
- Main multilateral creditors: African Development Bank (AfDB), International Development Agency (IDA) and IMF.
- Bilateral creditors are evenly spread across Paris and non-Paris club creditors.
- Over 50 percent of the external debt stock is denominated in US dollars.
- A financing arrangement approved in 2018 with Sinohydro: infrastructure worth US$2 billion to be financed from Ghana’s refined bauxite export proceeds; the arrangement is planned to be independent of the government and implemented by a commercial entity established by the Parliament. The project is classified as commercial debt and is not included in the coverage of the DSA.
- 2018 debt limits for new non-concessional external borrowing priority projects set at US$3,500 million (cumulatively since end-Dec 2015).

### Underlying assumptions and macroeconomic forecasts
- The updated macroeconomic projections assume a slightly lower short-to medium term growth trajectory compared to the April 2018 DSA and reflect the rebased nominal GDP, which increased 2017 nominal GDP by 25 percent.
- Key macro assumptions and comparisons (DSA April 2018 vs Current DSA):
  - Real GDP (%) — 2017-22: 6.0; 2023-37: 4.7; 2018-23: 5.7; 2024-38: 4.2
  - Inflation (GDP, deflator, %) — 2017-22: 9.0; 2023-37: 6.3; 2018-23: 8.7; 2024-38: 8.2
  - Nominal GDP (Billions of GHc) — 2017-22: 30110; 2023-37: 40434; 2018-23: 18418; 2024-38: 14
  - Revenue and grants (% of GDP) — 2017-22: 17.6; 2023-37: 16.7; 2018-23: 15.6; 2024-38: 15.5
  - Grants (% GDP) — 2017-22: 0.2; 2023-37: 0.0; 2018-23: 0.2; 2024-38: 0.0
  - Primary expenditure (% GDP) — 2017-22: 16.3; 2023-37: 16.2; 2018-23: 14.9; 2024-38: 14.6
  - Primary balance (% GDP) — 2017-22: 1.3; 2023-37: 0.5; 2018-23: 0.7; 2024-38: 0.9
  - Exports of G&S (% change) — 2017-22: 6.7; 2023-37: 6.0; 2018-23: 5.8; 2024-38: 5.0
  - Noninterest current account deficit (% GDP) — 2017-22: -1.1; 2023-37: 1.0; 2018-23: 0.4; 2024-38: 0.9
- Up to US$3 billion Eurobond issuance is planned for 2019, of which US$1 billion is meant for liability management. A series of Eurobond issuances is envisaged to roll over maturing Eurobonds, which are assumed to be repaid on an amortizing basis rather than as bullet payments.

### Baseline macroeconomic assumptions (Box 1)
- Growth
  - Overall real GDP growth is estimated to have moderated to 5.6 percent in 2018 (1 percentage lower than the previous DSA estimate).
  - Projected to increase to 8.8 percent in 2019 on the back of increased oil production.
  - Oil production is currently expected to peak in 2023.
  - Non-oil growth reached 5 percent in 2018 and is expected to increase to 6 percent in 2019 and onwards.
- Inflation and exchange rate
  - Headline inflation decreased from 15.4 percent at end-2016 to 9.6 percent in April 2018; reached 9.4 percent in December 2018.
  - End-period exchange rate depreciated by over 8 percent at end-December 2018 relative to end-December 2017.
  - Inflation is expected to stay within the BOG’s target band going forward.
- Government balance
  - The 2019 budget targets an overall fiscal balance, excluding financial sector costs, of 4 percent of GDP and primary balance, excluding financial sector costs, of 1.6 percent of GDP.
  - High financial sector costs will result in a primary balance of 0 percent of GDP in 2019.
  - After one-off costs, the primary balance is projected to remain around 1.5 percent of GDP over the medium term, provided additional domestic revenues are mobilized.
  - Total public GFNs are projected decline by about 2 percent of GDP in 2019 but will remain elevated.
- Current account balance
  - The current account deficit narrowed to 3.2 percent of GDP in 2018.
  - Projected to further improve to 3 percent of GDP in 2019; in the medium term, it would improve to an average of 3.2 percent of GDP.
  - Gross international reserves would steadily increase to almost 3-months of imports coverage by 2022.
- Financing flows
  - FDI inflows near 5½ percent of GDP in 2017; projected to decline gradually and stay around 4 percent of GDP over the long run.
  - Grant inflows projected to decline to around 0.1 percent of GDP in the medium term.
  - Borrowing projected to become increasingly non-concessional (less than a 35 percent grant element).
- Risk note
  - The project with Sinohydro appears ring-fenced but should be designed and executed to ensure transparency and value for money.

### Realism tools, growth and investment dynamics
- Fiscal adjustment
  - The size of the projected fiscal adjustment over the three-year period up to 2020 is 1.1 percent of GDP (including financial sector cleaning up costs).
- Fiscal adjustment-growth
  - 2018 deviation explained by repairs and technology issues in key oil fields affecting oil and gas production; 2019 baseline real GDP growth converges to paths derived using typical multipliers in LICs.
- Investment-growth
  - Private investment/GDP and public investment/GDP shifted upward following GDP rebase.
  - Private investment expected to stay more or less flat through 2022; public investment will pick up starting in 2019.
- Debt drivers
  - For external PPG, debt dynamics mainly driven by current account deficit and FDI, the exchange rate, real GDP and nominal interest rates.
  - Public debt dynamics driven by real growth and interest rates.
- Forecast errors
  - Historical forecast errors for both external and public debt largely driven by residuals, reflecting materialization of contingent liabilities.

### Country classification and contingent liabilities
- Ghana assessed to have a medium debt carrying capacity.
  - Composite indicator score is 2.83 (above the lower cut-off value of 2.69 but below the strong capacity cut-off value of 3.05).
- Calculation of the CI Index (components, coefficients, 10-year average values and contributions):
  - CPIA: Coefficient 0.385; 10-year average value 3.55; CI Score components 1.374; Contribution 48%
  - Real growth rate (in percent): Coefficient 2.719; 10-year average value 5.49; CI Score components 0.155; Contribution 5%
  - Import coverage of reserves (in percent): Coefficient 4.052; 10-year average value 24.29; CI Score components 0.983; Contribution 35%
  - Import coverage of reserves^2 (in percent): Coefficient -3.990; 10-year average value 5.902; CI Score components -0.24; Contribution -8%
  - Remittances (in percent): Coefficient 2.022; 10-year average value 4.168; CI Score components 0.083; Contribution 3%
  - World economic growth (in percent): Coefficient 13.520; 10-year average value 3.583; CI Score components 0.481; Contribution 7%
  - CI Score: 2.83; CI rating: Medium
- Contingent liabilities (CL) test applied reflecting SOEs and the financial sector represent a material risk to debt sustainability.
  - High levels of systemic losses and poor fee collection capacity in the utility sector could lead to fresh liabilities.
  - Resources secured and set aside for micro-finance sector resolution; authorities working on plans for resolution of the SDIs.
  - Risks from these sectors should be closely monitored.

### External DSA findings and vulnerabilities
- External debt indicators improved relative to the previous DSA on account of the rebased GDP, but vulnerabilities associated with debt service remain.
- Two out of four external indicators are in breach under the baseline.
  - Debt service-to-exports ratio would be breached in the first 3 years; then hovers around the threshold until 2022, breaches again from 2023 to 2026, beyond which it stays around the threshold.
  - Debt service-to-revenue ratio is projected to stay above the threshold over the entire projection period.
- Standard stress tests indicate vulnerability to a decline in exports, underscoring the need to diversify the economy and increase resilience to external shocks.
- Ghana’s gross financing needs have declined significantly over the past three years, but financing risks remain.
  - Market financing risk indicator of Ghana’s GFNs breaches the benchmark, albeit with a small margin.
  - The latest EMBI spread is just below the benchmark of 570, although there was a temporary breach between mid-November 2018 and end-January 2019.

### Public DSA findings and fiscal risk
- Public debt/GDP ratio improved following the GDP rebase but the downward trend was interrupted in 2018 due to realization of significant contingent liabilities in the banking sector.
- Under the baseline, all debt indicators are expected to improve and stabilize reflecting expected fiscal consolidation and sustained growth.
- Total public debt-to-GDP ratio initially breaches the benchmark of 55 percent of GDP and would only decline below the benchmark by 2023.
- Public debt sustainability is significantly vulnerable to commodity price shocks, with the PV of debt-to-GDP reaching 82 percent in 2028.
- Based on this vulnerability, Ghana’s overall public debt risk is assessed to be high.

*International Monetary Fund — Ghana DSA chapter (as in the provided content)*

### CONCLUSIONS

### CONCLUSIONS

### Authorities' commitments and fiscal stance
- The authorities agreed with the DSA results and are taking steps to improve debt dynamics and secure debt sustainability.
- They have committed to cap overall fiscal deficit at 5 percent of GDP and secure positive primary balance, in line with the Fiscal Responsibility Law.
- They have set annual limits for new external borrowing for projects and budget financing in 2019, following the same approach used under the ECF program.

### Risk assessment of debt distress
- The overall risk rating of debt distress is assessed to be high.
- External risk of debt distress is assessed to be high because of breaches of two indicators: external debt service-to-exports and external debt service-to-revenue.
- The overall risk is high also because the PV of debt of total public debt-to-GDP ratio breaches its benchmark.
- Ghana’s debt carrying capacity is rated as medium; the relevant public debt benchmark is 55 percent of GDP.

### Sustainability drivers and policy priorities
- Ghana’s public debt is deemed sustainable based on the authorities’ sustained commitment to fiscal consolidation, prudent borrowing and proactive debt management initiatives, guided by their MTDS and recently passed Fiscal Responsibility Law.
- The average maturity of domestic public debt has been significantly increased in recent years.
- The recent buyback of the 2022 Eurobond with proceeds from the 2018 Eurobond helped to ease near-term refinancing risks.
- Keeping the fiscal performance on track is essential for engineering a favorable debt dynamic and maintaining confidence among foreign investors.
- Strengthening oversight over SOEs will be instrumental to stem their financial losses and prevent further feedback-loops to the budget and public debt.
- While gross financing needs are declining, they will nonetheless remain high in the near term.
- Given the increasing presence of nonresidents in the domestic debt market, continued fiscal discipline and a strong macroeconomic environment are needed to continue attracting nonresident investors and anchor their confidence.
- A departure from the planned fiscal adjustment path could seriously jeopardize debt sustainability.
- Ghana should continue engaging with development partners to seek concessional financing and expedite disbursements under existing commitments from multilateral agencies.

### Key statistics and selected DSA indicators (as reported)
- Authorities’ fiscal cap: overall fiscal deficit at 5 percent of GDP.
- Debt carrying capacity rating: medium; public debt benchmark: 55 percent of GDP.
- External debt (nominal) examples: 41.4 (2015), 41.9 (2016), 41.5 (2017), 42.7 (2018), 44.7 (2019), 42.5 (2020), 40.3 (2021), 38.4 (2022), 37.4 (2023), 34.4 (2028), 25.6 (2038), 31.0 (Average), 38.5 (Actual/Projections label present).
- PPG external (of external debt) examples: 37.4 (2015), 37.9 (2016), 37.5 (2017), 38.7 (2018), 40.7 (2019), 38.5 (2020), 36.3 (2021), 34.4 (2022), 33.4 (2023), 30.4 (2028), 21.6 (2038), 26.9 (Average), 34.5 (Actual/Projections label present).
- Identified net debt-creating flows examples: 1.8 (2015), -6.1 (2016), -5.5 (2017), -3.4 (2018), -5.6 (2019), -3.2 (2020), -3.1 (2021), -3.4 (2022), -2.5 (2023), -1.1 (2028), 0.1 (2038), -1.3 (Average), -2.5 (Actual/Projections label present).
- Non-interest current account deficit examples: 3.2 (2015), 2.4 (2016), 0.3 (2017), 0.8 (2018), 0.2 (2019), 0.4 (2020), 0.4 (2021), 0.3 (2022), 0.4 (2023), 1.1 (2028), 1.4 (2038), 5.1 (Average), 0.6 (Actual/Projections label present).
- Exports: 34.0 (2015), 31.8 (2016), 34.6 (2017), 34.4 (2018), 34.6 (2019), 34.0 (2020), 33.6 (2021), 32.3 (2022), 31.6 (2023), 27.5 (2028), 23.1 (2038).
- Imports: 42.7 (2015), 37.3 (2016), 37.7 (2017), 35.5 (2018), 35.1 (2019), 35.0 (2020), 34.8 (2021), 34.7 (2022), 34.2 (2023), 31.7 (2028), 27.4 (2038).
- Net FDI (negative = inflow): -6.1 (2015), -6.3 (2016), -5.5 (2017), -4.5 (2018), -5.0 (2019), -4.2 (2020), -4.7 (2021), -4.9 (2022), -3.8 (2023), -2.7 (2028), -1.8 (2038), -6.0 (Average), -3.8 (Actual/Projections label present).
- Endogenous debt dynamics examples: 4.7 (2015), -2.2 (2016), -0.3 (2017), 0.3 (2018), -0.8 (2019), 0.6 (2020), 1.2 (2021), 1.2 (2022), 0.9 (2023), 0.5 (2028), 0.4 (2038).
- Contribution from nominal interest rate examples: 2.6 (2015), 2.8 (2016), 3.1 (2017), 2.4 (2018), 2.8 (2019), 3.0 (2020), 3.0 (2021), 2.8 (2022), 2.6 (2023), 1.9 (2028), 1.5 (2038).
- Contribution from real GDP growth examples: -0.8 (2015), -1.3 (2016), -3.2 (2017), -2.1 (2018), -3.6 (2019), -2.5 (2020), -1.8 (2021), -1.7 (2022), -1.8 (2023), -1.4 (2028), -1.1 (2038).
- Residual examples: 7.2 (2015), 6.6 (2016), 5.1 (2017), 4.6 (2018), 7.6 (2019), 1.0 (2020), 0.9 (2021), 1.5 (2022), 1.6 (2023), 0.8 (2028), -1.3 (2038), 3.0 (Average), 1.8 (Actual/Projections label present).
- Sustainability indicators (selected): PV of PPG external debt-to-GDP: 36.8 (2017), 36.8 (2018), 38.7 (2019), 37.4 (2020), 35.5 (2021), 33.8 (2022), 33.0 (2023), 30.1 (2028), 22.1 (2038).
- PV of PPG external debt-to-exports ratio examples: 106.3 (2017), 107.0 (2018), 111.9 (2019), 110.1 (2020), 105.6 (2021), 104.7 (2022), 104.6 (2023), 109.2 (2028), 95.9 (2038).
- PPG debt service-to-exports ratio examples: 15.1 (2015), 17.7 (2016), 18.5 (2017), 17.0 (2018), 17.1 (2019), 14.6 (2020), 14.4 (2021), 14.4 (2022), 16.6 (2023), 14.8 (2028), 17.8 (2038).
- PPG debt service-to-revenue ratio examples: 38.4 (2015), 43.7 (2016), 47.9 (2017), 41.1 (2018), 37.3 (2019), 32.9 (2020), 30.7 (2021), 29.5 (2022), 33.0 (2023), 26.0 (2028), 27.1 (2038).
- Gross external financing need (Million of U.S. dollars) examples: 1504.1 (2015), 1443.0 (2016), 1260.0 (2017), 2074.6 (2018), 1425.0 (2019), 1584.6 (2020), 1158.9 (2021), 856.7 (2022), 2610.5 (2023), 4522.4 (2028), 12228.9 (2038).
- Real GDP growth (in percent) examples: 2.2 (2015), 3.4 (2016), 8.1 (2017), 5.6 (2018), 8.8 (2019), 5.8 (2020), 4.4 (2021), 4.5 (2022), 5.0 (2023), 4.3 (2028), 4.4 (2038), 7.4 (Average), 4.9 (Actual/Projections label present).
- Effective interest rate (percent) examples: 7.4 (2015), 7.6 (2016), 7.9 (2017), 6.4 (2018), 6.8 (2019), 7.2 (2020), 7.5 (2021), 7.6 (2022), 7.5 (2023), 5.8 (2028), 6.0 (2038), 4.5 (Average), 6.9 (Actual/Projections label present).
- Growth of exports of G&S (US dollar terms, in percent) examples: 8.1 (2015), 5.9 (2016), 17.0 (2017), 9.8 (2018), 5.1 (2019), 4.0 (2020), 6.3 (2021), 3.5 (2022), 5.7 (2023), 5.3 (2028), 3.6 (2038), 14.1 (Average), 5.2 (Actual/Projections label present).
- Government revenues (excluding grants, in percent of GDP) examples: 13.4 (2015), 12.9 (2016), 13.3 (2017), 14.3 (2018), 15.8 (2019), 15.1 (2020), 15.8 (2021), 15.8 (2022), 15.9 (2023), 15.6 (2028), 15.1 (2038), 12.1 (Average), 15.6 (Actual/Projections label present).
- Aid flows (in Million of US dollars) examples: 724.3 (2015), 291.7 (2016), 352.7 (2017), 327.3 (2018), 365.1 (2019), 289.2 (2020), 121.5 (2021), 114.5 (2022), 83.8 (2023), 2.3 (2028), 0.2 (2038).
- Nominal GDP (Million of US dollars) examples: 48,595 (2015), 54,989 (2016), 58,978 (2017), 65,191 (2018), 68,258 (2019), 72,264 (2020), 77,628 (2021), 83,740 (2022), 90,497 (2023), 129,120 (2028), 257,368 (2038).
- Memorandum PV of external debt examples: 40.8 (2017), 40.8 (2018), 42.7 (2019), 41.4 (2020), 39.5 (2021), 37.8 (2022), 37.0 (2023), 34.1 (2028), 26.1 (2038).
- Total external debt service-to-exports ratio examples: 17.7 (2015), 20.5 (2016), 21.2 (2017), 19.9 (2018), 19.9 (2019), 17.5 (2020), 17.3 (2021), 17.5 (2022), 19.8 (2023), 18.4 (2028), 22.0 (2038).
- PV of PPG external debt (in Million of US dollars) examples: 21729.8 (2015), 24018.3 (2016), 26404.3 (2017), 27029.2 (2018), 27554.5 (2019), 28286.6 (2020), 29873.7 (2021), 38830.5 (2022), 56898.5 (2038 and other year labels present).
- Public sector debt examples: 55.2 (2015), 57.5 (2016), 57.7 (2017), 59.8 (2018), 62.4 (2019), 60.4 (2020), 58.6 (2021), 56.7 (2022), 54.0 (2023), 41.5 (2028), 26.2 (2038), 42.2 (Average), 53.0 (Actual/Projections label present).
- Change in public sector debt examples: 7.2 (2015), 2.2 (2016), 0.2 (2017), 2.1 (2018), 2.6 (2019), -1.9 (2020), -1.8 (2021), -1.9 (2022), -2.7 (2023), -2.2 (2028), -1.3 (2038), -1.6 (Average).
- Primary deficit examples: 0.3 (2015), 1.9 (2016), -0.5 (2017), 1.4 (2018), 0.0 (2019), -1.7 (2020), -1.6 (2021), -1.2 (2022), -1.3 (2023), -0.7 (2028), -0.8 (2038).
- PV of public debt-to-GDP ratio examples: 57.6 (2017), 59.8 (2018), 62.4 (2019), 60.5 (2020), 58.8 (2021), 57.0 (2022), 54.5 (2023), 42.0 (2028), 27.1 (2038).
- Debt service-to-revenue and grants ratio examples: 119.7 (2015), 133.3 (2016), 134.8 (2017), 91.7 (2018), 74.9 (2019), 73.2 (2020), 65.4 (2021), 67.4 (2022), 73.2 (2023), 50.3 (2028), 35.1 (2038).
- Gross financing need examples: 18.1 (2015), 19.8 (2016), 18.2 (2017), 14.7 (2018), 12.0 (2019), 9.6 (2020), 8.8 (2021), 9.5 (2022), 10.4 (2023), 7.1 (2028), 4.5 (2038).

*Source: Country authorities; and staff estimates and projections.*

### 2. Primary balance1717161717191920212121

### 2. Primary balance1717161717191920212121

### Debt sensitivity and key public debt indicators (Table 4 excerpts)
- Baseline PV of debt-to-GDP ratio: 60 62 61 59 57 55 52 49 47 44 44 42 (years 2018–2028 across table columns)
- Public debt benchmark: 55 55 55 55 55 55 55 55 55 55 55 55
- Baseline PV of debt-to-revenue ratio (selected series): 41 1 387 395 370 358 340 325 310 296 281 269 (presented across table)
- Baseline debt service-to-revenue ratio (selected series): 92 75 73 65 67 73 70 63 53 50 50
- Alternative scenario A1 (Key variables at their historical averages in 2018-2028) impacts:
  - PV of debt-to-GDP ratio series: 60 62 60 58 56 53 51 49 47 45 43
  - PV of debt-to-revenue ratio (A1): 41 1 383 392 364 350 333 319 307 296 285 276
  - Debt service-to-revenue ratio (A1): 92 71 66 60 58 62 60 55 52 52 52
- Bound tests (B1–B6) show varied stress outcomes:
  - B1 Real GDP growth scenario PV of debt-to-GDP: 60 70 74 74 75 74 74 73 73 73 73
  - B2 Primary balance scenario PV of debt-to-GDP: 60 67 73 72 70 68 66 63 61 59 57
  - B3 Exports scenario PV of debt-to-GDP: 60 68 77 75 73 71 68 64 60 55 51
  - B6 Combination of B1–B5 PV of debt-to-GDP: 60 66 70 69 67 65 63 61 59 57 55
- Tailored tests (C1–C4):
  - C1 Combined contingent liabilities PV of debt-to-GDP: 60 71 70 68 67 65 62 60 58 55 54
  - C3 Commodity price (tailored) PV of debt-to-GDP: 60 67 72 76 80 81 82 82 82 81 82
  - C4 Market financing PV of debt-to-GDP: 60 62 61 59 58 55 58 55 52 51 51

Sources noted: Country authorities; and staff estimates and projections.

### Sensitivity analysis for key debt ratios and breach indications
- A bold value indicates a breach of the benchmark (as per table note).
- Thresholds and benchmarks shown:
  - Threshold (for certain tests): 15 15 15 15 15 15 15 15 15 15 15 15 (repeated in table)
  - Public debt benchmark constant: 55 (repeated)
- Examples of ratio trajectories (select series shown across table and figures):
  - Debt service-to-exports ratio, Debt service-to-revenue ratio, PV of debt-to-exports ratio, PV of debt-to-GDP ratio are presented with projections for 2018–2028.

### Drivers of debt dynamics (Figure 3 highlights)
- Figures present:
  - Gross Nominal PPG External Debt and Gross Nominal Public Debt changes (in percent of GDP).
  - Decomposition into drivers: Real GDP growth, Nominal interest rate, Current account + FDI, Price and exchange rate, Depreciation, Residual, Other debt-creating flows, Primary deficit.
- Notes:
  - 1/ Difference between anticipated and actual contributions on debt ratios.
  - 2/ Distribution across LICs for which LIC DSAs were produced.
  - 3/ Given relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation.

### Realism tools and fiscal adjustment trade-offs (Figure 4 highlights)
- Fiscal adjustment and possible growth paths:
  - 3-Year Adjustment in Primary Balance (percentage points of GDP) shown on horizontal axis; distribution across Fund-supported programs for LICs since 1990 shown.
  - Projected 3-year adjustment and possible growth paths under fiscal multipliers: Multiplier = 0.2, 0.4, 0.6, 0.8.
  - Example labels and scales: percent of GDP and percent (growth paths) across 2012–2023 and projected years.
- Public and private investment rates and contribution to Real GDP growth (percent, 5-year average) are displayed comparing previous and current DSAs and contributions of government capital.

### Market-risk indicators (Figure 5 highlights)
- Indicators and notes:
  - 1/ Maximum gross financing needs (GFN) over 3-year baseline projection horizon.
  - 2/ EMBI spreads correspond to the latest available data.
- Benchmarks and status flags:
  - Baseline, Market financing, Threshold lines shown; potential heightened liquidity needs and breach assessments indicated (e.g., "Moderate", "Yes", "No", "Breach of benchmark").
  - Benchmarks noted: GFN Benchmarks = 14; EMBI = 570 (values displayed).
- Time series (selected ratios across 2018–2028 displayed in figures):
  - Debt service-to-revenue ratio (chart spanning 2018–2028 up to values above 200 on y-axis).
  - PV of debt-to-exports ratio.
  - PV of debt-to-GDP ratio.
  - Debt service-to-exports ratio.

### Supplementary information: program progress, prior actions, and reserves
- The supplement provides additional information since Staff Report (EBS/19/10) including fulfillment of seven prior actions for the seventh and eighth reviews under the Extended Credit Facility.
- Prior actions completed by the government include:
  - Submission to Parliament of an exemption draft bill removing exemptions equivalent to GHc 500 million and tightening the exemptions granting process (all exemptions to be approved by the Ministry of Finance).
  - Submission to Parliament of legislation establishing a single supervisory entity (State Interests and Governance Authority, SIGA) for SOEs.
  - Submission to the Legislative Committee of Parliament regulations for the 2016 Public Financial Management Act; regulations to be approved by the LC on a lapse of time basis after 21 sitting days, in April.
  - Completion of financial sector clean-up measures (microfinance institutions and timeline for resolution of remaining insolvent Specialized Deposit-Taking Institutions with placement into receivership by end-2019 and MoF to provide funds for depositor reimbursement).
  - Adoption by the BoG of an FX management policy, consistent with good international practice and in line with MCM recommendations.
  - Rebuilding of NIR: achieved an NIR level amounting to US$3,268.68 million as of March 15, which exceeds end-December 2018 level (US$2,888.71 million) by US$379.97 million.
- One additional structural benchmark met:
  - On March 15, the Ministry of Finance published the first Fiscal Risk Statement on its website, identifying potential risks from SOE activities and other extra-budgetary funds.

### Macroeconomic outlook, program performance, and fiscal policy (statement excerpts)
- Growth and inflation:
  - Growth rebounded from 3.4 percent in 2016 to 8.1 percent in 2017, and remained strong at 6.7 percent for the first three quarters of 2018.
  - Inflation: 9.2 percent in February 2019 (single digit, within BoG target band).
- Fiscal balances:
  - Overall deficit declined from 7.3 percent of GDP in 2016 to 3.7 percent of GDP in 2018 (excluding financial sector costs).
  - Primary balance recorded a surplus of 1.7 percent of GDP in 2018 (primary balance turned positive in 2017 and remained positive in 2018).
  - Current account deficit estimated at 3.2 percent of GDP in 2018.
- Program performance and missed performance criteria (PCs):
  - For end-June PCs: 3 out of 9 PCs were missed (including wage bill and primary fiscal balance, missed by small margins).
  - For end-December 2018 PCs: 2 out of 9 PCs were missed (wage bill and NIR) together with continuous PC on BoG credit to government.
  - Reasons cited: one-time absorption of additional nurses and teachers increased wage bill; continuous PC on BoG credit to government missed due to valuation effects and monetization by the BoG of Consolidated Bank Ghana’s bond in November 2018; NIR impacted by higher coupon payments by foreign investors, one-off payments to independent power producers and BDC, and lower-than-programmed sovereign bond receipts.
  - Corrective measures: enhanced monitoring of wage administration, efforts to offload the bond at market price, guidelines for forex intervention management.
- Authorities’ medium-term projection:
  - Economy projected to grow at around 8 percent in 2019 and 7 percent on average over the medium term.
  - Growth momentum driven by the oil sector and sustained non-oil activity performance; flagship programs under “Ghana Beyond Aid” expected to contribute.

*Sources: Country authorities; and staff estimates and projections (selected tables and figures from the Ghana DSA and Supplementary Information).*

### 1.6 percent of GDP, which according to staff, are in line with a sustainable debt trajectory.

### 1.6 percent of GDP, which according to staff, are in line with a sustainable debt trajectory.

### Fiscal measures and revenue mobilization
- A broad range of revenue and expenditure measures will be introduced as detailed in the MEFP (27-32).
- An Exemptions Bill currently before parliament will tighten exemption procedures and require their approval by the Minister of Finance.
- The Ghana Revenue Authority (GRA) is finalizing preparations to better monitor cargo in transit to land-locked neighboring countries to mitigate revenue loss during clearing of goods at the ports.
- Other revenue measures are being introduced to strengthen tax administration while intensifying compliance.
- Central government is partnering with Municipal, Metropolitan, and District Assemblies (MMDAs) to enhance revenue mobilization at the local government level.
- Parliament has enacted the Fiscal Responsibility Act, which:
  - caps the overall deficit at 5 percent of GDP;
  - sets a positive primary balance each year;
  - includes accompanying sanctions for the Minister for Finance in case of breach of the Act exceeding 1 percent of GDP.
- To sustain fiscal discipline over the medium-term, the government established:
  - the Fiscal Responsibility Advisory Council; and
  - the Financial Stability Advisory Council.
  Both were established this year to offer independent advice on fiscal management and financial sector stability and prevent fiscal slippages.

### Financing and debt management
- Authorities are committed to maintaining public debt below the threshold of 65 percent of GDP as envisaged under the Fiscal Responsibility Act.
- Active debt management strategy aims to bring down the cost of debt and minimize refinancing risks, including by building liquidity buffers (MEFP 55-58).
- To deepen the domestic debt market, authorities have engaged primary dealers to use book-building processes, guided by a published issuance calendar to:
  - enhance transparency;
  - foster price optimization through greater competition; and
  - support debt market development.
- Regarding external debt, authorities are aware of the increased risk of shifting sentiment of foreign investors, who hold a significant share of Ghana’s long-term debt instruments, and are looking at ways to mitigate it.
- Authorities will continue to tap the international markets in 2019 and beyond, ensuring such funding is consistent with the sustainability of their debt strategy.

### Monetary and exchange rate policies
- Monetary policy will remain focused on reducing inflation further to enhance the credibility of BoG under the inflation targeting regime (IT).
- BoG will be vigilant to developments in inflation, including from pressures on the cedi, and stands ready to tighten the monetary policy stance as needed.
- The central bank is adhering to the memorandum of understanding on zero central bank financing of the budget to limit fiscal dominance, which has largely been respected.
- Development of the foreign exchange market is necessary to support IT; BoG’s market intervention focuses on:
  - smoothening excessive volatility;
  - achieving its external buffers objectives consistent with the IT framework; and
  - promoting market deepening.
- To support foreign exchange market development, BoG has developed guidelines to address conduct imperfections in the interbank foreign exchange operations consistent with international standards.

### Financial sector cleanup and stability
- Banking sector cleanup following the 2016 Asset Quality Review (AQR) involved:
  - successful resolution of nine banks; and
  - recapitalization of all banks to meet a new unimpaired paid-up capital requirement.
- Consolidation reduced the number of banks from 34 to 23 while strengthening their capital base.
- To preserve indigenous banks’ presence, five healthy local banks are to receive private sector capital injection through the Ghana Amalgamated Trust (GAT), constituted to raise domestic funds by issuing bonds and investing proceeds as equity in recipient banks.
- GAT has a 5-year window of existence to liquidate its interest either through the stock market or sell to institutional buyers.
- Modalities governing private participation through GAT will enhance management and operational efficiency of beneficiary banks to mitigate risk to GAT’s investments.
- BoG is working to extend the clean-up to Specialized Deposit-Taking Institutions (SDIs) and Microfinance Institutions (MFI) in cooperation with the World Bank.
- Finalization of intervention plans for savings and loans and finance houses and mobilization of government funding for the resolution of microfinance institutions have been completed as prior actions for this review.
- To address governance lapses identified in the AQR, the central bank has:
  - issued corporate governance directives to banks and SDIs;
  - streamlined the write-off policy of bad loans consistent with the Banking Act and relevant IFRS9 requirements to help address high NPLs; and
  - is implementing the Basel II/III supervisory framework to bolster risk management and compliance.
- The central bank is reviewing the emergency liquidity assistance (ELA) framework to safeguard potential risks to its balance sheet.

### AML/CFT
- Ghana has been cooperating with GIABA and FATF, demonstrated by adherence to the 16 core and key recommendations for an effective AML/CFT regime.
- Following the 2018 National Risk Assessment (NRA), a national AML/CFT Policy (2019-2022) was developed to address identified deficiencies.
- Oversight is provided by a Committee chaired by the Minister of Finance and is in line with plans agreed with the FATF’s International Cooperation Review Group.
- Authorities are committed to implementing their reform plan ahead of time to ensure that Ghana exit the FATF grey list by end-2019.

### Structural reforms and SOE governance
- Authorities are pursuing flagship reform plans in infrastructure, agricultural modernization, industrialization, and entrepreneurship, with particular focus on:
  - tax policy and revenue administration;
  - public financial management;
  - debt management; and
  - restructuring of SOEs in the energy sector.
- Ghana is currently a net exporter of power to neighboring countries.
- Government streamlined existing Power Purchase Agreements (PPA), resulting in:
  - termination of 11 out of 24 contracts identified to be inefficient; and
  - rescheduling of the remaining 13 contracts to save significant resources over a period of 13 years.
- A private entity, Power Distribution Services (PDS), has taken over electricity distribution from the state-owned ECG under a 20-year concession agreement to improve SOE financial performance.
- A single regulatory authority, State Interest and Governance Authority (SIGA), has been established for all SOEs with a mandate to strengthen governance and ensure transparency.
- In the cocoa sector, Cocobod is pursuing cost-saving measures and providing training to farmers to enhance yield.
- Authorities will seek to strengthen implementation capacity in these areas in cooperation with the World Bank and other partners to ensure a faster pace of reform.

### Conclusion and outlook
- The Fund-supported program has helped Ghana restore macroeconomic stability and make significant in-roads in structural reforms.
- Successful completion of the program leaves authorities with a sense that more can—and should—be accomplished to:
  - continue to enhance fiscal discipline;
  - foster macroeconomic stability; and
  - step up reforms in critical areas to put the economy on an irreversible path of high inclusive growth.
- Authorities look forward to continued cooperation and policy dialogue with Fund staff and express gratitude to the Executive Board and Management for their continued support.

*Source: IMF staff report excerpt.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2019/1ghaea2019001.pdf_