## 1. Health Policy Response to the COVID-19 Pandemic

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---

### Context
- Spread of COVID-19 in Ghana described as "still limited" but with rising risk of a large outbreak.
- Authorities announced:
  - US$100 million allocation earmarked to health spending.
  - A partial lockdown, sweeping social-distancing measures and travel restrictions.
  - A $166 million Coronavirus Alleviation Program (CAP).
  - A financing strategy combining drawdowns on oil funds and exceptional financing from the Fund and the World Bank.
  - An interest rate cut plus liquidity injection in the banking system.

### Impact of the COVID-19 Pandemic (Macro and Financing Developments)
- Pre-shock conditions:
  - Broad macroeconomic stabilization, high growth, and inflation close to the midpoint of the Bank of Ghana (BOG) target band.
  - February Eurobond issuance of US$3 billion.
  - Gross international reserves (excluding oil funds) of US$8.3 billion or about 4 months of imports by end-February.

- Recent deterioration and specific developments:
  - Commodity price movements:
    - Oil prices have more than halved since early January.
    - Cocoa prices rose earlier but have since dropped about 10 percent year-to-date.
    - Gold prices increased strongly.
  - Financing conditions:
    - Eurobond spreads peaked at 1,355 basis points in late March.
    - Yields on domestic debt have so far remained broadly stable.
  - Exchange rate:
    - The Cedi began depreciating in late February and by late March had erased its gains for the year.

- 2020 macro outlook projections and components:
  - Growth projected to fall to 1.5 percent (compared to December 2019 Art. IV projection of 5.8 percent).
  - Inflation expected to rise but remain below the upper band of the central bank target.
  - Current account deficit projected to widen to 4.5 percent of GDP.
    - Main causes: expected decline in Ghana’s oil exports by more than US$2 billion, lower tourism revenues and remittances.
    - Offsets: higher gold prices and lower profit-repatriations and intra-company payments.
    - Imports expected to decline due to lower domestic demand and global supply disruptions.
  - Gross international reserves projected to decline to 2.7 months of imports by end-year assuming exceptional financial support of about US$1.3 billion by the IMF and other IFIs.
  - Government deficit projected to reach 9.5 percent of GDP, or 6.4 percent of GDP in the government measure excluding energy and financial sector costs.
    - Revenues expected to be lower by 2.2 percent of GDP relative to the 2019 Article IV baseline.
    - COVID-19 spending expected to amount to 0.4 percent of GDP:
      - Higher health and social expenditures: 0.2 percent of GDP.
      - CAP fiscal stimulus package: 0.2 percent of GDP.
    - Additional depositor compensation (financial sector restructuring, unrelated to COVID): 1.3 percent of GDP, mostly financed through a 5-year zero-coupon bullet bond, increasing net financing needs by 0.3 percentage points of GDP.
  - Gross government financing needs expected to be higher by 6.1 percentage points of GDP relative to the 2019 Article IV baseline.

### Medium-Term Outlook and Risks
- Medium-term prospects remain favorable and unchanged from the 2019 Article IV consultation:
  - Increase in government deficit expected to be temporary; most spending increases are one-off.
  - Revenues expected to return to trend as growth rebounds next year.
  - Debt Sustainability Analysis (DSA) risk rating remains at high risk of debt distress; increase in debt does not materially affect debt service indicators.
  - Outlook assumes continued market access once global financial conditions normalize.

- Downside risks:
  - More extensive and prolonged domestic outbreak could cause severe human consequences, steep contraction in 2020, lower recovery in 2021, higher food insecurity, and worse poverty outcomes.
  - Slower-than-expected global recovery could further depress oil and cocoa prices and reverse gold price increases.
  - Rollover risks exacerbated by higher financing needs in 2020, worsening investor confidence, and recent monetary policy easing; non-resident investors hold about one-quarter of domestic government debt.
  - Existing and new contingent liabilities could materialize:
    - Energy sector costs could increase absent implementation of the Energy Sector Reform Program.
    - Financial sector clean-up costs may increase (recapitalization of a troubled state-owned bank, fragilities in non-bank sector, potential increase in non-performing loans).

### Addressing the Impact of the Pandemic — Fiscal Policy
- Authorities’ actions and readiness:
  - Committed to ramping up public health measures depending on pandemic evolution.
  - On March 30, announced the CAP: stimulus package worth GHc 1 billion (US$166 million).
    - CAP aims: promote selected industries (e.g., pharmaceutical sector supplying COVID-19 drugs and equipment), support SMEs and employment, and create guarantees and first-loss instruments.
    - Tax filing deadline extended from April to June.
  - Staff recommended CAP measures be timely, targeted, and temporary.
  - Staff proposed additional measures: expand targeted relief and support for SMEs, vulnerable households, and informal sector; scale up cash transfer programs; further prioritize health spending; clear existing arrears and avoid new ones.

- Health policy specifics (as of April 5):
  - 214 confirmed cases and five deaths.
  - Testing initially at Noguchi Memorial Institute for Medical Research (NMIMR) in Accra, extended to Kumasi Centre for Collaborative Research (KCCR).
  - Support from WHO, CDC, NAMRU-3, Bernard Nocht Institute, World Bank, DFID, and other partners.
  - President committed US$100 million to support preparedness and response funded by the World Bank.
  - Initial preparedness budget: US$6.5 million, with US$2.8 million already spent.
  - Social distancing and travel restrictions timeline:
    - March 16: suspension of public gatherings exceeding 25 for four weeks; closure of universities and schools until further notice; mandatory 14-day self-quarantine for residents returning from countries with at least 200 confirmed cases within last 14 days; no testing without symptoms except for close contacts.
    - March 23: borders closed to travellers.
    - March 30: partial lockdown centered around major urban areas.

- Fiscal space creation and financing:
  - Government plans spending cuts in goods and services, transfers, and capital investment totaling at least GHc 1.1 billion (0.3 percent of GDP).
  - Agreement to postpone interest payment on non-marketable domestic bonds held by public institutions to fund financial sector clean-up: about GHc 1.2 billion (0.3 percent of GDP).
  - Ministry of Finance exploring additional sources:
    - Disbursement under the RCF of about US$1 billion to support the budget.
    - Discussions for exceptional financing from the World Bank in the order of US$300 million.
    - Requested additional financing from the African Development Bank.
    - Intended draw on the Oil Stabilization fund for about US$218 million per the Petroleum Revenue Management Act.
    - Proposed to Parliament to amend the law to grant access to the Heritage Fund of US$591 million.
    - If no donor funding materializes, plan to raise remaining US$1.1 billion on the domestic debt market.
    - Continued exploration of liability management operations in the domestic market.

- Fiscal governance:
  - Considering suspending the fiscal rule in accordance with the Fiscal Responsibility Act, 2018 (allows suspension for a public health epidemic or an unanticipated severe economic shock).
  - The Act requires presenting plans to restore public finances to Parliament within 30 days of suspending the fiscal rule.
  - COVID-19-related funds should be channeled through the budget with strict budgetary procedures, controls, and audits.

### Using Monetary and Exchange Rate Policies
- BOG measures:
  - On March 18, the Monetary Policy Committee (MPC) cut its key policy rate by 150 basis points to 14.5 percent.
  - MPC announced measures including lower reserve and capital requirements, revised provisioning and classification rules for specific loan categories, and steps to facilitate and lower the cost of mobile payments.
  - MPC signaled it would continue to monitor and decide on additional measures if necessary.

- Measures from the March 18 MPC meeting:
  - Lower the policy rate by 150 basis points to 14.5 percent.
  - Lower the primary reserve requirement from 10 to 8 percent to provide liquidity to banks.
  - Lower the Capital Conservation Buffer from 3 to 1.5 percent to boost bank lending.
  - Change provisioning requirements for some loans from 10 to 5 percent.
  - Reclassify as “Current” loans whose repayments are past due for Microfinance Institutions for up to 30 days.
  - Increase mobile money transaction and wallet limits, waive fees for small transactions, and easier registration for basic mobile money accounts.

- Policy coordination and exchange rate stance:
  - Pandemic is a combined demand and supply shock requiring coordination of monetary, exchange rate and macroprudential policies.
  - BOG committed to maintaining a prudent monetary policy stance to anchor inflation around the target band and mitigate pressures from capital outflows.
  - BOG intends to preserve external buffers and continue to allow for exchange rate flexibility if pressures persist while managing excessive volatility to avoid disorderly market conditions.

### Addressing Financial Stability Challenges
- Banking sector status:
  - Performance and liquidity improved following recent clean-up, but vulnerabilities remain:
    - Still relatively high share of non-performing loans.
    - Recapitalization needs of a large state-owned bank.
    - Cross-sectoral exposures from mixed performance of non-bank institutions.

- Prudential and liquidity measures:
  - BOG could consider exceptional measures such as temporarily lowering capital conservation buffers to zero percent, while avoiding further revisions to loan classification and provisioning standards.
  - BOG scaled up liquidity support and has taken steps to prevent banks from declaring or paying dividends for 2019 using the additional liquidity released by MPC measures.
  - Extended deadline for banks and payment service providers to meet higher minimum capital requirements from June to December 2020.
  - Staff suggested options if needed: step up open market operations, further cut reserve requirements, provide Emergency Liquidity Assistance (ELA) within BOG’s collateral framework (possibly allowing collateral normally not accepted), and in extreme conditions provide targeted, temporary liquidity support to non-banks, backstopped by the government.

- Actions by commercial banks:
  - Banks committed to lowering interest rates on credit to the private sector by about 2 percent, on average.
  - Created a GHc 3 billion credit facility for key industries, including pharmaceuticals, hospitality, services and manufacturing.
  - Agreed to a 6-month moratorium on principal payments in the airline and hospitality industries and to review credit to other industries case-by-case.

### Fund Support and Capacity to Repay
- Authorities requesting a disbursement under the RCF equivalent to 100 percent of quota (SDR 738 million or about US$1 billion).
  - Request that this financing be made available in its entirety as budget support.
  - Disbursement intended to address urgent fiscal needs contributing to the balance of payments gap and provide foreign exchange to avoid a sharp drop in international reserves.
  - Urgent balance of payments need is triggered primarily by sudden exogenous shocks and is expected to resolve within the next 12 months without major policy adjustments.

### Capacity to repay (IMF obligations and repayment metrics)
- Total amount of outstanding credit from the Fund including the proposed RCF disbursement: SDR 1.512 billion (205 percent of quota and 39.2  percent of gross international reserves).
- Repayments to the Fund projected to rise over the medium-term, peaking at SDR 238.9 million in 2026.
- Repayments would remain at 1.1 percent of exports and 5.2 percent of foreign exchange reserves (at peak repayment period).
- Staff judgment: Ghana’s track record of servicing debts to the Fund, improvement in macroeconomic stability, and commitment to fiscal discipline over the medium-term suggest that repayment risks are contained.

- Selected Fund obligations and outstanding credit (exact values preserved from Table 6 highlights):
  - Fund obligations (millions of SDRs): 52.6 (2020), 83.4 (2021), 90.4 (2022), 93.2 (2023), 119.7 (2024), 198.5 (2025), 239.1 (2026), 214.2 (2027), 187.6 (2028), 161.1 (2029), 74.0 (2030), 0.2 (2031), 0.2 (2032), 0.2 (2033).
  - Fund obligations (millions of US$): 72.2 (2020), 114.9 (2021), 125.1 (2022), 129.3 (2023), 166.8 (2024), 277.4 (2025), 334.1 (2026), 299.3 (2027), 262.2 (2028), 225.0 (2029), 103.4 (2030), 0.3 (2031), 0.3 (2032), 0.3 (2033).
  - Outstanding Fund credit (millions of SDRs): 1459.4 (2020), 1376.2 (2021), 1286.0 (2022), 1193.0 (2023), 1073.4 (2024), 875.1 (2025), 636.2 (2026), 422.1 (2027), 234.7 (2028), 73.8 (2029), 0.0 (2030 onward).
  - Outstanding Fund credit (millions of US$): 2006.2 (2020), 1899.1 (2021), 1781.5 (2022), 1658.6 (2023), 1497.6 (2024), 1224.2 (2025), 889.9 (2026), 590.5 (2027), 328.3 (2028), 103.2 (2029), 0.0 (2030 onward).
  - Net use of Fund credit (millions of SDRs): 673.9 (2020), -83.2 (2021), -90.3 (2022), -93.0 (2023), -119.6 (2024), -198.3 (2025), -238.9 (2026), -214.0 (2027), -187.5 (2028), -160.9 (2029), -73.8 (2030), 0.0 (2031 onward).
  - Disbursements under the RCF: 738.00 (2020).

### Debt outlook and risk of debt distress
- Exceptional financing from the IMF and other multilateral institutions would not change Ghana’s risk of debt distress rating.
- Government debt expected to rise from 63.2 percent of GDP at end-2019 to 68.7 percent of GDP at end-2020, driven by a wider fiscal deficit and lower GDP.
- Medium-term debt path remains largely similar to the 2019 Article IV DSA.
- Liquidity indicators:
  - Debt service to revenue ratios: trajectory shows a 15 percentage points increase in 2020 with slower normalization over the medium term, suggesting higher liquidity risk.
- Staff note: Outlook is subject to significant risks.

### IMF safeguards and Bank of Ghana (BOG) governance
- RCF disbursement envisages an update of the previous safeguards assessment completed in April 2015.
- Latest Safeguards Monitoring Report (March 2018) concluded BOG made some progress on 2015 recommendations:
  - Continuation of quality external audits.
  - Improved disclosures in its financial statements.
  - Established procedures to monitor credit to government.
- Outstanding issues:
  - BOG's legal framework has not been strengthened to prohibit monetary financing of the government and safeguard the BOG's autonomy.
  - Current prohibition is ensured by a Memorandum of Understanding (MOU) between MOF and BOG that expires at the end of this year.

### Staff appraisal: COVID-19 impact and policy recommendations
- Economic impact observed:
  - Growth projected to slow down.
  - Financial conditions have tightened.
  - Exchange rate under pressure.
  - Exports and tax revenue will be lower than expected, leading to large external and fiscal financing gaps.
- Authorities’ response:
  - Government committed funding for additional health expenditures and launched the Coronavirus Alleviation Program to support the most affected households and firms.
  - If crisis deepens, government may need to scale up response; support measures should remain timely, temporary, and targeted.
- Bank of Ghana actions:
  - Taken steps to ensure adequate domestic liquidity and mitigate economic impact.
  - Policy mix recommended: combine monetary, exchange rate and macroprudential policies, and act as lender of last resort.
  - Emphasis: keep measures temporary and targeted, preserve exchange rate flexibility and external buffers.
- Staff recommendation:
  - Support for authorities’ request for a disbursement under the Rapid Credit Facility in the amount of SDR 738 million (100 percent of quota).
  - Support for the disbursement to be made directly in the form of budget support given the large fiscal financing gap.
  - The RCF disbursement would help close the fiscal financing gap together with other expected exceptional financing, savings from government expenditure switching and cuts, withdrawals from the oil fund, and additional domestic debt issuances.
- Staff warning:
  - Crisis amplifies existing risks; situation rapidly evolving with unprecedented uncertainty.
  - Authorities should implement plans rigorously and be ready to introduce additional measures if necessary while preserving macroeconomic stability.

### Key fiscal and external statistics (selected exact figures)
- Overall balance (percent of GDP), Table 2a: -7.0 (2018), -7.5 (2019), -9.5 (2020), -5.0 (2021).
- Revenue (percent of GDP), Table 2a: 14.5 (2018), 14.3 (2019), 13.5 (2020), 15.1 (2021).
- Expenditure (percent of GDP), Table 2a: 21.5 (2018), 21.8 (2019), 23.0 (2020), 20.1 (2021).
- Interest (percent of GDP), Table 2a: 5.6 (2018), 5.7 (2019), 5.4 (2020), 5.0 (2021).
- Gross international reserves (millions of U.S. dollars), Table 4: 5,317 (2018), 6,634 (2019), 5,310 (2020), 5,538 (2021).
- Months of imports cover (gross reserves), Table 4: 2.6 (2018), 3.4 (2019), 2.7 (2020), 2.7 (2021).
- Current account (in millions of U.S. dollars), Table 4: -2,044 (2018), -1,835 (2019), -2,858 (2020), -2,012 (2021).
- External financing gap and exceptional financing, Table 5:
  - Financing gap (III): -317 (2018), -161 (2019), -1,331 (2020).
  - Exceptional Financing / IMF (V): 188 (2018), 117 (2019), 1,013 (2020).
- Memorandum from Table 6:
  - Quota (millions of SDRs): 738 (every listed year).

### Annex I — Public and External Sector Debt Sustainability Analysis (key findings)
- External and overall debt are at high risk of debt distress but remain sustainable.
- COVID-19 shocks (collapse of oil prices, decline in trade, and lower non-commodity growth) expected to deepen current account and fiscal deficits over the medium term resulting in a higher debt path compared to the November 2019 DSA.
- Ghana enters the crisis relatively well prepared:
  - External buffers strengthened in 2019 due to higher gold export receipts and remittances.
  - A $3bn Eurobond issue in early 2020.
  - Contingent risks alleviated thanks to progress on the financial sector clean-up and launch of the energy sector reform program.
  - Gold prices and pre-sale of most of 2020 cocoa harvest mitigate impact this year.

- Stress tests and scenarios:
  - Standard stress tests augmented for a stronger outbreak and protracted national lock-down.
  - Adjustments: growth shock increased to two standard deviations; exchange rate depreciation increased to 40 percent.
  - Under these extreme shocks:
    - Debt still remains sustainable.
    - Debt-service indicators are not on an explosive path.
  - Inclusion of contingent liability stress test at 5 percent of GDP deemed adequate to cover additional financial sector costs from COVID-19.

- Key macro assumptions (selected exact values):
  - Real GDP growth (percent): 8.1, 6.3, 6.1, 1.5, 5.9, 3.3, 7.1, 4.4, 4.3, 4.3, 4.7, 6.7, 4.2.
  - Nominal GDP (Million of US dollars): 58,978; 65,518; 67,240; 64,183; 66,361; 70,316; 76,300; 80,900; 86,320; 119,006; 230,456.

### Appendix I — Letter of Intent (summary)
- Government requests RCF support of SDR 738 million (100 percent of quota), to be disbursed to the Ministry of Finance’s account at the Bank of Ghana as immediate budget support.
- Macroeconomic projections and needs:
  - GDP growth projected to slow to 1.5 percent in 2020 (compared to 6.8 percent envisioned in the 2020 Budget).
  - Current account deficit projected to widen to 4.5 percent of GDP.
  - External financing gap expected to be at least US$1.3 billion.
  - Tax revenues projected to fall short by 2.2 percent of GDP in 2020.
  - Estimated cost of pandemic emergency response at least US$260 million (0.4 percent of GDP) in 2020.
  - Government deficit (excluding energy and financial sector costs) projected to be 6.6 percent of GDP in 2020 (Fund staff’s projection: 6.4 percent).
  - Government estimates requiring an additional US$2.6 billion (4.1 percent of GDP) in 2020 to close the fiscal financing gap.
  - Planned financing combination: additional multilateral and bilateral support, domestic financing, and withdrawing US$219 million from the Ghana Stabilization Fund.
- Development partner commitments:
  - World Bank (including US$300 million in emergency financing).
  - African Development Bank (initial US$15 million).
- Monetary and financial sector measures:
  - MPC rate cut of 150 basis points on March 18.
  - BoG may temporarily increase FX sales and provide liquidity support.
  - BoG safeguards assessment update to be undertaken by the IMF.
- Transparency and commitments:
  - Government agrees to publication of all documents submitted to the Executive Board in relation to this request.
  - Government undertakes not to impose or intensify restrictions on international payments and transfers inconsistent with Article VIII of the IMF’s Articles of Agreement.
  - Government commits to take additional measures necessary to address the pandemic’s immediate needs.
- Letter of Intent dated Accra, April 6, 2020; Statement by Executive Director and advisor dated April 13, 2020.

*Source: IMF staff report excerpt — "Health Policy Response to the COVID-19 Pandemic".*

### 1. Health Policy Response to the COVID-19 Pandemic _____________________________________________8

### 1. Health Policy Response to the COVID-19 Pandemic

### Context
- The spread of COVID-19 in Ghana is described as "still limited" but with rising risk of a large outbreak.
- Authorities announced:
  - US$100 million allocation earmarked to health spending.
  - A partial lockdown, sweeping social-distancing measures and travel restrictions.
  - A $166 million Coronavirus Alleviation Program (CAP) to support the economy.
  - A financing strategy combining drawdowns on oil funds and exceptional financing from the Fund and the World Bank.
  - An interest rate cut plus liquidity injection in the banking system.

### Impact of the COVID-19 Pandemic (Macro and Financing Developments)
- Pre-shock conditions:
  - Broad macroeconomic stabilization, high growth, and inflation close to the midpoint of the Bank of Ghana (BOG) target band.
  - Strong investor interest evidenced by a February Eurobond issuance of US$3 billion.
  - Gross international reserves (excluding oil funds) reached US$8.3 billion or about 4 months of imports by end-February.

- Recent deterioration and specific developments:
  - Commodity price movements:
    - Oil prices have more than halved since early January.
    - Cocoa prices rose earlier but have since dropped about 10 percent year-to-date.
    - Gold prices increased strongly.
  - Financing conditions:
    - Eurobond spreads peaked at 1,355 basis points in late March.
    - Yields on domestic debt have so far remained broadly stable.
  - Exchange rate:
    - The Cedi began depreciating in late February and by late March had erased its gains for the year.

- 2020 macro outlook projections and components:
  - Growth is projected to fall to 1.5 percent (compared to December 2019 Art. IV projection of 5.8 percent).
    - Drivers: lower oil production, weak global aggregate demand, global supply chain disruptions, and steep decline in international travel, trade and retail and hospitality services; containment measures and voluntary social distancing; mining production affected to a lesser degree due to higher gold prices and restart of Obuasi mine.
  - Inflation is expected to rise but remain below the upper band of the central bank target.
  - Current account deficit projected to widen to 4.5 percent of GDP.
    - Main causes: expected decline in Ghana’s oil exports by more than US$2 billion (mainly due to fall in oil prices), lower tourism revenues and remittances.
    - Offsets: higher gold prices and lower profit-repatriations and intra-company payments.
    - Imports expected to decline due to lower domestic demand and global supply disruptions.
  - Gross international reserves projected to decline to 2.7 months of imports by end-year assuming exceptional financial support of about US$1.3 billion by the IMF and other IFIs.
  - Government deficit projected to reach 9.5 percent of GDP, or 6.4 percent of GDP in the government measure excluding energy and financial sector costs.
    - Revenues expected to be lower by 2.2 percent of GDP relative to the 2019 Article IV baseline.
    - COVID-19 spending expected to amount to 0.4 percent of GDP:
      - Higher health and social expenditures: 0.2 percent of GDP.
      - CAP fiscal stimulus package: 0.2 percent of GDP.
    - Additional depositor compensation (in context of financial sector restructuring, unrelated to COVID): 1.3 percent of GDP, mostly financed through a 5-year zero-coupon bullet bond, increasing net financing needs by 0.3 percentage points of GDP.
  - Gross government financing needs expected to be higher by 6.1 percentage points of GDP relative to the 2019 Article IV baseline.

### Medium-Term Outlook and Risks
- Medium-term prospects remain favorable and unchanged from the 2019 Article IV consultation.
  - The increase in government deficit expected to be temporary; most spending increases are one-off (including financial sector restructuring).
  - Revenues expected to return to trend as growth rebounds next year.
  - Debt Sustainability Analysis (DSA) risk rating remains at high risk of debt distress; increase in debt does not materially affect debt service indicators (Annex I).
  - Outlook assumes continued market access once global financial conditions normalize.

- Downside risks highlighted:
  - A more extensive and prolonged domestic COVID-19 outbreak could cause severe human consequences, a steep economic contraction in 2020, lower recovery in 2021, higher food insecurity, and worse poverty outcomes.
  - A slower-than-expected global recovery could further depress oil and cocoa prices and reverse gold price increases.
  - Rollover risks could be exacerbated by higher financing needs in 2020, worsening investor confidence, and recent monetary policy easing; non-resident investors hold about one-quarter of domestic government debt.
  - Existing and new contingent liabilities could materialize:
    - Energy sector costs could increase absent implementation of the Energy Sector Reform Program.
    - Financial sector clean-up costs may increase (recapitalization of a troubled state-owned bank, fragilities in non-bank sector, and potential increase in non-performing loans).

### Addressing the Impact of the Pandemic — Fiscal Policy
- Authorities’ actions and readiness:
  - Committed to ramping up public health measures depending on pandemic evolution.
  - On March 30, announced the CAP: stimulus package worth GHc 1 billion (US$166 million).
    - CAP aims: promote selected industries (e.g., pharmaceutical sector supplying COVID-19 drugs and equipment), support SMEs and employment, and create guarantees and first-loss instruments.
    - Tax filing deadline extended from April to June.
  - Staff recommended CAP measures be timely, targeted, and temporary.
  - Staff proposed additional measures: expansion of targeted relief and support for SMEs, vulnerable households, and informal sector; scaling up cash transfer programs; further prioritization of health spending; clearance of existing arrears and avoidance of new ones.

- Health policy specifics (Box 1):
  - As of April 5, there were 214 confirmed cases and five deaths.
  - Ghana identified among 13 African countries prioritized by WHO for being at risk.
  - Testing initially at Noguchi Memorial Institute for Medical Research (NMIMR) in Accra, extended to Kumasi Centre for Collaborative Research (KCCR).
  - Support from WHO, CDC, US Naval Medical Research Unit 3 (NAMRU-3), Bernard Nocht Institute, World Bank, DFID, and other partners.
  - President committed US$100 million to support preparedness and response funded by the World Bank.
  - Initial preparedness budget: US$6.5 million, with US$2.8 million already spent.
  - Social distancing and travel restrictions adopted:
    - March 16 measures: suspension of public gatherings exceeding 25 for four weeks; closure of universities and schools until further notice; mandatory 14-day self-quarantine for Ghanaian residents who have been to countries with at least 200 confirmed cases within last 14 days; no testing without symptoms except for close contacts.
    - March 23: borders closed to travellers.
    - March 30: partial lockdown centered around major urban areas.

- Fiscal space creation and financing:
  - Government plans spending cuts in goods and services, transfers, and capital investment totaling at least GHc 1.1 billion (0.3 percent of GDP).
  - Agreement with investors to postpone interest payment on non-marketable domestic bonds held by public institutions to fund financial sector clean-up: about GHc 1.2 billion (0.3 percent of GDP).
  - Ministry of Finance exploring additional sources:
    - Disbursement under the RCF of about US$1 billion to support the budget.
    - Discussions for exceptional financing from the World Bank in the order of US$300 million.
    - Requested additional financing from the African Development Bank.
    - Intended draw on the Oil Stabilization fund for about US$218 million per the Petroleum Revenue Management Act.
    - Proposed to Parliament to amend the law to grant access to the Heritage Fund of US$591 million.
    - If no donor funding materializes, plan to raise remaining US$1.1 billion on the domestic debt market.
    - Continued exploration of liability management operations in the domestic market.

- Fiscal governance:
  - Considering suspending the fiscal rule in accordance with the Fiscal Responsibility Act, 2018 (allows suspension for a public health epidemic or an unanticipated severe economic shock).
  - The Act requires presenting plans to restore public finances to Parliament within 30 days of suspending the fiscal rule.
  - COVID-19-related funds should be channeled through the budget with strict budgetary procedures, controls, and audits.

### Using Monetary and Exchange Rate Policies
- BOG measures:
  - On March 18, the Monetary Policy Committee (MPC) cut its key policy rate by 150 basis points to 14.5 percent.
  - MPC announced measures including lower reserve and capital requirements, revised provisioning and classification rules for specific loan categories, and steps to facilitate and lower the cost of mobile payments.
  - MPC signaled it would continue to monitor and decide on additional measures if necessary.

- Measures from the March 18 MPC meeting (Box 2):
  - Lower the policy rate by 150 basis points to 14.5 percent.
  - Lower the primary reserve requirement from 10 to 8 percent to provide liquidity to banks.
  - Lower the Capital Conservation Buffer from 3 to 1.5 percent to boost bank lending.
  - Change provisioning requirements for some loans from 10 to 5 percent.
  - Reclassify as “Current” loans whose repayments are past due for Microfinance Institutions for up to 30 days.
  - Increase mobile money transaction and wallet limits, waive fees for small transactions, and easier registration for basic mobile money accounts.

- Policy coordination and exchange rate stance:
  - Pandemic is a combined demand and supply shock requiring coordination of monetary, exchange rate and macroprudential policies.
  - BOG committed to maintaining a prudent monetary policy stance to anchor inflation around the target band and mitigate pressures from capital outflows.
  - BOG intends to preserve external buffers and continue to allow for exchange rate flexibility if pressures persist while managing excessive volatility to avoid disorderly market conditions.

### Addressing Financial Stability Challenges
- Banking sector status:
  - Performance and liquidity improved following recent clean-up, but vulnerabilities remain:
    - Still relatively high share of non-performing loans.
    - Recapitalization needs of a large state-owned bank.
    - Cross-sectoral exposures from mixed performance of non-bank institutions.

- Prudential and liquidity measures:
  - BOG could consider exceptional measures such as temporarily lowering capital conservation buffers to zero percent, while avoiding further revisions to loan classification and provisioning standards.
  - BOG scaled up liquidity support and has taken steps to prevent banks from declaring or paying dividends for 2019 using the additional liquidity released by MPC measures.
  - Extended deadline for banks and payment service providers to meet higher minimum capital requirements from June to December 2020.
  - Staff suggested options if needed: step up open market operations, further cut reserve requirements, provide Emergency Liquidity Assistance (ELA) within BOG’s collateral framework (possibly allowing collateral normally not accepted), and in extreme conditions provide targeted, temporary liquidity support to non-banks, backstopped by the government.

- Actions by commercial banks:
  - Banks committed to lowering interest rates on credit to the private sector by about 2 percent, on average.
  - Created a GHc 3 billion credit facility for key industries, including pharmaceuticals, hospitality, services and manufacturing.
  - Agreed to a 6-month moratorium on principal payments in the airline and hospitality industries and to review credit to other industries case-by-case.

### Fund Support and Capacity to Repay
- Authorities are requesting a disbursement under the RCF equivalent to 100 percent of quota (SDR 738 million or about US$1 billion).
  - Request that this financing be made available in its entirety as budget support.
  - The disbursement intended to address urgent fiscal needs contributing to the balance of payments gap and provide foreign exchange to avoid a sharp drop in international reserves.
  - The urgent balance of payments need is triggered primarily by sudden exogenous shocks and is expected to resolve within the next 12 months without major policy adjustments.

*Source: IMF staff report excerpt — "Health Policy Response to the COVID-19 Pandemic".*

### 18.      Ghana’s capacity to repay is adequate. Including the proposed disbursement under the

### 1ghaea2020001 - 18.      Ghana’s capacity to repay is adequate. Including the proposed disbursement under the

### Capacity to repay (IMF obligations and repayment metrics)
- Total amount of outstanding credit from the Fund including the proposed RCF disbursement: SDR 1.512 billion (205 percent of quota and 39.2  percent of gross international reserves).
- Repayments to the Fund projected to rise over the medium-term, peaking at SDR 238.9 million in 2026.
- Repayments would remain at 1.1 percent of exports and 5.2 percent of foreign exchange reserves (at peak repayment period).
- Staff judgment: Ghana’s track record of servicing debts to the Fund, improvement in macroeconomic stability, and commitment to fiscal discipline over the medium-term suggest that repayment risks are contained.
- Table 6 highlights (selected rows, exact values preserved):
  - Fund obligations based on existing and prospective credit (Total obligations in millions of SDRs): 52.6 (2020), 83.4 (2021), 90.4 (2022), 93.2 (2023), 119.7 (2024), 198.5 (2025), 239.1 (2026), 214.2 (2027), 187.6 (2028), 161.1 (2029), 74.0 (2030), 0.2 (2031), 0.2 (2032), 0.2 (2033).
  - Total obligations in millions of US$: 72.2 (2020), 114.9 (2021), 125.1 (2022), 129.3 (2023), 166.8 (2024), 277.4 (2025), 334.1 (2026), 299.3 (2027), 262.2 (2028), 225.0 (2029), 103.4 (2030), 0.3 (2031), 0.3 (2032), 0.3 (2033).
  - Outstanding Fund credit in millions of SDRs: 1459.4 (2020), 1376.2 (2021), 1286.0 (2022), 1193.0 (2023), 1073.4 (2024), 875.1 (2025), 636.2 (2026), 422.1 (2027), 234.7 (2028), 73.8 (2029), 0.0 (2030 onward).
  - Outstanding Fund credit in millions of US$: 2006.2 (2020), 1899.1 (2021), 1781.5 (2022), 1658.6 (2023), 1497.6 (2024), 1224.2 (2025), 889.9 (2026), 590.5 (2027), 328.3 (2028), 103.2 (2029), 0.0 (2030 onward).
  - In percent of quota: 197.8 (2020), 186.5 (2021), 174.3 (2022), 161.7 (2023), 145.4 (2024), 118.6 (2025), 86.2 (2026), 57.2 (2027), 31.8 (2028), 10.0 (2029), 0.0 (2030 onward).
  - Net use of Fund credit (in millions of SDRs): 673.9 (2020), -83.2 (2021), -90.3 (2022), -93.0 (2023), -119.6 (2024), -198.3 (2025), -238.9 (2026), -214.0 (2027), -187.5 (2028), -160.9 (2029), -73.8 (2030), 0.0 (2031 onward).
  - Disbursements under the RCF: 738.00 (2020).

### Debt outlook and risk of debt distress
- Exceptional financing from the IMF and other multilateral institutions would not change Ghana’s risk of debt distress rating (Annex I).
- Government debt trajectory:
  - Government debt expected to rise from 63.2 percent of GDP at end-2019 to 68.7 percent of GDP at end-2020, driven by a wider fiscal deficit and lower GDP.
  - Medium-term debt path remains largely similar to the 2019 Article IV DSA.
- Liquidity indicators:
  - Debt service to revenue ratios: trajectory shows a 15 percentage points increase in 2020 with slower normalization over the medium term, suggesting higher liquidity risk.
- Staff note: Outlook is subject to significant risks.

### IMF safeguards and Bank of Ghana (BOG) governance
- Under the IMF’s safeguards policy, the RCF disbursement envisages an update of the previous assessment completed in April 2015.
- Latest Safeguards Monitoring Report (March 2018) concluded the BOG made some progress on 2015 recommendations:
  - Continuation of quality external audits.
  - Improved disclosures in its financial statements.
  - Established procedures to monitor credit to government.
- Outstanding issues (2018 recommendations still outstanding):
  - BOG's legal framework has not been strengthened to prohibit monetary financing of the government and safeguard the BOG's autonomy.
  - Current prohibition is ensured by a Memorandum of Understanding (MOU) between MOF and BOG that expires at the end of this year.

### Staff appraisal: COVID-19 impact and policy recommendations
- Economic impact observed:
  - Growth projected to slow down.
  - Financial conditions have tightened.
  - Exchange rate under pressure.
  - Exports and tax revenue will be lower than expected, leading to large external and fiscal financing gaps.
- Authorities’ response:
  - Government committed funding for additional health expenditures and launched the Coronavirus Alleviation Program to support the most affected households and firms.
  - If crisis deepens, government may need to scale up response; support measures should remain timely, temporary, and targeted.
- Bank of Ghana actions:
  - Taken steps to ensure adequate domestic liquidity and mitigate economic impact.
  - Policy mix recommended: combine monetary, exchange rate and macroprudential policies, and act as lender of last resort.
  - Emphasis: keep measures temporary and targeted, preserve exchange rate flexibility and external buffers.
- Staff recommendation:
  - Support for authorities’ request for a disbursement under the Rapid Credit Facility in the amount of SDR 738 million (100 percent of quota).
  - Support for the disbursement to be made directly in the form of budget support given the large fiscal financing gap.
  - The RCF disbursement would help close the fiscal financing gap together with other expected exceptional financing, savings from government expenditure switching and cuts, withdrawals from the oil fund, and additional domestic debt issuances.
- Staff warning:
  - Crisis amplifies existing risks; situation rapidly evolving with unprecedented uncertainty.
  - Authorities should implement plans rigorously and be ready to introduce additional measures if necessary while preserving macroeconomic stability.

### Key fiscal and external statistics (selected exact figures from tables)
- Overall balance (percent of GDP), Table 2a: -7.0 (2018), -7.5 (2019), -9.5 (2020), -5.0 (2021).
- Revenue (percent of GDP), Table 2a: 14.5 (2018), 14.3 (2019), 13.5 (2020), 15.1 (2021).
- Expenditure (percent of GDP), Table 2a: 21.5 (2018), 21.8 (2019), 23.0 (2020), 20.1 (2021).
- Interest (percent of GDP), Table 2a: 5.6 (2018), 5.7 (2019), 5.4 (2020), 5.0 (2021).
- Gross international reserves (millions of U.S. dollars), Table 4: 5,317 (2018), 6,634 (2019), 5,310 (2020), 5,538 (2021).
- Months of imports cover (gross reserves), Table 4: 2.6 (2018), 3.4 (2019), 2.7 (2020), 2.7 (2021).
- Current account (in millions of U.S. dollars), Table 4: -2,044 (2018), -1,835 (2019), -2,858 (2020), -2,012 (2021).
- External financing gap and exceptional financing, Table 5:
  - Financing gap (III): -317 (2018), -161 (2019), -1,331 (2020).
  - Exceptional Financing / IMF (V): 188 (2018), 117 (2019), 1,013 (2020).
- Memorandum from Table 6:
  - Quota (millions of SDRs): 738 (every listed year).

*Source: IMF staff report (excerpts provided).*

### Annex I. Public and External Sector Debt Sustainability Analysis

### Annex I. Public and External Sector Debt Sustainability Analysis

### Key findings
- Approved By: Marcelo Estevão (IDA) and Mark Flanagan (IMF)
- External and overall debt are at high risk of debt distress but remain sustainable.
- The shocks from COVID-19 epidemic (collapse of oil prices, decline in trade, and lower non-commodity growth) are expected to deepen current account and fiscal deficits over the medium term resulting in a higher debt path compared to the November 2019 DSA.
- Ghana enters the crisis relatively well prepared:
  - External buffers strengthened with better-than-expected outturn in 2019 due to higher gold export receipts and remittances.
  - A $3bn Eurobond issue in early 2020.
  - Contingent risks alleviated thanks to progress on the financial sector clean-up and the launch of the energy sector reform program.
  - Gold prices (Ghana’s main export) boosted by the global flight to safety and the pre-sale of most of 2020 cocoa harvest mitigate the impact of the shock this year.

### Debt trajectory and fiscal outlook
- The end of exceptional spending items (COVID-19-related spending, financial sector restructuring) and the government’s commitment to the fiscal rule underpin the downward path of debt from 2022.
- The COVID-19-related shocks are expected to result in a higher debt path compared to the November 2019 DSA.

### Stress tests and scenarios
- The standard stress tests have been augmented to reflect a possible scenario with a stronger outbreak and protracted national lock-down.
- Adjustments to stress tests:
  - Growth shock increased to two standard deviations.
  - Exchange rate depreciation increased to 40 percent.
- Under these extreme shocks:
  - Debt still remains sustainable.
  - Debt-service indicators are not on an explosive path.
- The DSA shocks likely exaggerate the impact on these indicators over the medium-long run given that, once the COVID emergency is solved and the elections are over, stressors such as risk premia, low commodity prices, and weak domestic revenues would improve significantly.
- The inclusion of the contingent liability stress test at 5 percent of GDP should also be adequate to cover additional financial sector costs from the impact of COVID-19.

*Source: Annex I. Public and External Sector Debt Sustainability Analysis*

### 3.      Nevertheless, even under the baseline, risks to the outlook remain important. Risks depend

### 1ghaea2020001 - 3.      Nevertheless, even under the baseline, risks to the outlook remain important. Risks depend

### Risks to the outlook
- Risks depend primarily on the depth and duration of the COVID-19 and oil price shock.
- Fiscal costs including pandemic response and measures to support economic activity could exceed those envisioned in the baseline and extend into 2021.
- A deeper global slowdown could have a greater impact on oil prices, private transfers and investment and further weaken the exchange rate.
- A more prolonged crisis could create additional liquidity risks into 2021.
- Stress tests show that, of these risks, exchange rate depreciation, export and commodity prices shocks are associated might have the greatest impact on debt sustainability.

### External Debt Sustainability (baseline indicators and projections)
- External debt (nominal) 2017–2040: 43.8 45.4 47.0 56.0 54.7 53.9 52.6 51.9 51.4 43.1 35.4 35.3 50.4
- of which: public and publicly guaranteed (PPG) 2017–2040: 39.8 41.1 42.4 51.2 49.6 48.6 47.0 46.0 45.2 35.5 25.5 31.4 44.2
- Change in external debt: 1.9 1.6 1.6 9.0 -1.3 -0.8 -1.4 -0.7 -0.5 -1.8 1.4
- Identified net debt-creating flows: -5.5 -6.2 -4.2 -0.2 -5.1 -3.5 -5.4 -4.4 -4.2 -4.3 -2.9 -2.3 -4.2
- Non-interest current account deficit: 1.3 0.8 0.3 1.7 -0.3 -0.2 -0.1 -0.6 -0.3 -1.1 -0.5 4.3 -0.4
- Deficit in balance of goods and services: 3.1 1.1 1.9 2.3 0.1 0.4 -1.2 -1.7 -1.5 -0.4 1.3 6.7 -0.6
- Exports (percent of GDP): 34.6 34.4 34.5 34.1 35.2 34.3 34.4 33.5 32.3 27.0 18.4
- Imports (percent of GDP): 37.7 35.4 36.4 36.4 35.3 34.7 33.3 31.8 30.8 26.6 19.8
- Net current transfers (negative = inflow): -4.2 -3.9 -5.1 -3.3 -3.2 -3.1 -2.9 -2.8 -2.7 -2.2 -1.4 -4.2 -2.7
- Net FDI (negative = inflow): -5.5 -4.4 -4.9 -3.9 -5.0 -5.0 -5.0 -5.0 -5.0 -4.0 -3.0 -5.6 -4.8
- Endogenous debt dynamics: -1.3 -2.5 0.3 2.0 0.1 1.8 -0.2 1.1 1.1 0.8 0.6
  - Contribution from nominal interest rate: 2.1 2.3 2.4 2.8 3.3 3.5 3.3 3.3 3.2 2.6 2.1
  - Contribution from real GDP growth: -3.2 -2.5 -2.7 -0.7 -3.2 -1.7 -3.6 -2.2 -2.1 -1.8 -1.5
  - Contribution from price and exchange rate changes: -0.2 -2.4 0.6
- Residual: 7.4 7.8 5.8 9.2 3.9 2.7 4.0 3.7 3.7 2.5 4.3 4.4 3.8
- Sustainability indicators:
  - PV of PPG external debt-to-GDP ratio: 35.7 42.7 44.0 43.0 41.4 40.9 40.4 31.6 23.0
  - PV of PPG external debt-to-exports ratio: 103.5 125.4 125.1 125.4 120.2 121.9 124.9 117.2 124.7
  - PPG debt service-to-exports ratio: 4.8 5.0 14.3 19.4 15.3 15.9 14.7 14.5 15.8 18.8 19.1
  - PPG debt service-to-revenue ratio: 12.4 12.0 35.0 50.2 36.5 36.9 34.0 32.3 33.5 30.9 20.7
- Gross external financing need (Million of U.S. dollars): -965.0 -590.3 977.2 3602.4 893.2 1102.1 976.7 610.1 1122.1 2177.6 5734.9

### Key macroeconomic assumptions (exact values as presented)
- Real GDP growth (in percent): 8.1 6.3 6.1 1.5 5.9 3.3 7.1 4.4 4.3 4.3 4.7 6.7 4.2
- GDP deflator in US dollar terms (change in percent): -0.8 4.5 -3.3 -5.9 -2.3 2.5 1.3 1.6 2.3 2.3 2.1 0.8 1.1
- Effective interest rate (percent): 5.4 5.9 5.5 5.6 6.1 6.7 6.7 6.6 6.6 6.2 6.5 4.3 6.4
- Growth of exports of G&S (US dollar terms, in percent): 17.0 10.2 10.2 -5.6 6.8 3.3 8.9 3.3 2.8 2.7 4.2 13.6 3.1
- Growth of imports of G&S (US dollar terms, in percent): 8.4 4.3 5.3 -4.5 0.3 4.3 3.9 1.4 3.5 3.6 4.9 9.2 2.4
- Grant element of new public sector borrowing (in percent): 5.2 2.4 8.6 3.3 5.0 2.5 4.6 0.0 4.2
- Government revenues (excluding grants, in percent of GDP): 13.3 14.2 14.1 13.2 14.8 14.8 14.9 15.1 15.2 16.4 17.0 12.9 15.2
- Aid flows (Million of US dollars): 352.7 180.3 191.0 394.9 446.3 930.5 462.4 535.7 341.3 567.2 2.1
- Grant-equivalent financing (in percent of GDP): 1.0 0.5 0.7 0.4 0.3 0.2 0.2 0.0 0.4
- Grant-equivalent financing (in percent of external financing): 8.3 8.0 13.7 7.7 7.0 3.9 5.1 0.0 6.5
- Nominal GDP (Million of US dollars): 58,978 65,518 67,240 64,183 66,361 70,316 76,300 80,900 86,320 119,006 230,456
- Nominal dollar GDP growth: 7.3 11.1 2.6 -4.5 3.4 6.0 8.5 6.0 6.7 6.9 6.9 7.7 5.4
- Memorandum items:
  - PV of external debt: 40.2 47.5 49.1 48.4 47.0 46.8 46.5 39.1 33.0
  - In percent of exports: 116.7 139.5 139.6 141.0 136.5 139.5 144.0 145.2 178.9
  - Total external debt service-to-exports ratio: 7.5 8.0 17.5 22.9 18.9 19.7 18.7 18.8 20.4 25.6 32.4
  - PV of PPG external debt (in Million of US dollars): 23,982.4 27,403.6 29,204.7 30,246.6 31,571.0 33,078.4 34,841.3 37,588.4 53,007.1
  - (PVt-PVt-1)/GDPt-1 (in percent): 5.1 2.8 1.6 1.9 2.0 2.2 0.2 3.1
  - Non-interest current account deficit that stabilizes debt ratio: -0.6 -0.8 -1.3 -7.3 1.0 0.6 1.2 0.1 0.2 0.7 -1.9

### Public Sector Debt Framework (baseline indicators and projections)
- Public sector debt (percent of GDP) 2017–2040 (selected): 57.6 62.5 63.5 73.3 71.2 71.0 69.6 69.3 69.0 51.7 30.7 48.5 65.3
- of which: external debt (percent of GDP): 39.8 41.1 42.4 51.2 49.6 48.6 47.0 46.0 45.2 35.5 25.4 31.4 44.2
- Change in public sector debt (percent of GDP): 0.0 4.9 1.0 9.8 -2.1 -0.2 -1.4 -0.3 -0.2 -3.7 1.2 0.0 0.0
- Identified debt-creating flows (percent of GDP): -2.6 0.7 2.9 8.5 -1.4 0.7 -0.5 0.4 0.5 -3.1 2.0 -0.4 -0.5
- Primary deficit (percent of GDP): -0.5 1.4 1.8 4.1 0.0 -0.5 -0.1 0.1 0.4 -2.8 2.2 2.1 -0.8
- Revenue and grants (percent of GDP): 13.9 14.5 14.3 13.5 15.1 15.1 15.1 15.2 15.2 16.4 17.0 13.7 15.4
  - of which: grants: 0.6 0.3 0.3 0.4 0.3 0.3 0.2 0.1 0.1 0.0 0.0
- Primary (noninterest) expenditure (percent of GDP): 13.4 15.9 16.1 17.7 15.1 14.6 15.0 15.3 15.6 13.6 19.2 15.8 14.6
- Automatic debt dynamics (percent of GDP): -2.0 -0.1 1.2 4.3 -1.4 1.2 -0.4 0.3 0.1 -0.3 -0.2
  - Contribution from interest rate/growth differential: -1.1 -0.5 -1.2 1.3 -0.8 1.5 -1.0 0.5 0.2 -0.2 -0.2
    - of which: contribution from average real interest rate: 3.2 2.8 2.4 2.2 3.3 3.8 3.8 3.4 3.1 2.1 1.1
    - of which: contribution from real GDP growth: -4.3 -3.4 -3.6 -0.9 -4.1 -2.3 -4.7 -2.9 -2.8 -2.3 -1.3
  - Contribution from real exchange rate depreciation: -0.9 0.4 2.4
- Other identified debt-creating flows (privatization receipts negative, recognition of contingent liabilities, debt relief): 0.0 across presented years
- Residual (percent of GDP): 2.5 4.1 -1.9 4.3 -1.3 -1.2 -0.4 -0.9 -0.8 -0.6 -0.1 3.5 -0.4
- Sustainability indicators:
  - PV of public debt-to-GDP ratio (selected): 59.3 68.3 66.6 66.4 65.2 65.0 65.0 48.4 28.8
  - PV of public debt-to-revenue and grants ratio (selected): 413.6 504.3 440.8 440.9 432.1 428.3 426.1 295.3 169.4
  - Debt service-to-revenue and grants ratio: 100.8 68.4 91.7 106.8 79.4 72.7 79.8 81.2 76.1 61.2 33.0
  - Gross financing need: 13.5 10.8 14.9 18.6 12.0 10.5 12.0 12.4 12.0 7.2 7.8

### Public DSA key macro and fiscal assumptions (selected)
- Real GDP growth (in percent): 8.1 6.3 6.1 1.5 5.9 3.3 7.1 4.4 4.3 4.3 4.7 6.7 4.2
- Average nominal interest rate on external debt (in percent): 5.8 6.1 5.8 6.1 6.8 7.1 7.0 7.0 6.9 6.6 7.2 4.4 6.7
- Average real interest rate on domestic debt (in percent): 8.8 7.1 4.1 1.3 4.5 6.3 6.6 5.3 4.3 3.3 2.3 7.6 4.2
- Real exchange rate depreciation (in percent, + indicates depreciation): -2.9 1.5 7.3 ... 2.5 ...
- Inflation rate (GDP deflator, in percent): 10.4 10.2 8.8 9.3 8.3 7.3 6.4 6.5 6.4 6.3 6.1 14.1 7.0
- Growth of real primary spending (deflated by GDP deflator, in percent): -5.4 25.8 7.8 11.4 -9.4 -0.3 10.2 6.1 6.8 5.6 6.5 8.7 2.9
- Primary deficit that stabilizes the debt-to-GDP ratio: -0.5 -3.5 0.8 -5.6 2.1 -0.3 1.3 0.4 0.6 0.9 0.3 -1.1 0.3
- PV of contingent liabilities (not included in public sector debt): 0.0 across presented years

### Stress tests, scenarios, and sensitivity analysis (high-level findings)
- Stress tests indicate the most extreme shocks across 2020–2030 include:
  - One-time depreciation (often the most extreme shock)
  - Exports shock
  - Commodity price shock
- The public DSA allows for domestic financing to cover additional financing needs generated by shocks under the stress tests; additional financing needs under stress tests are assumed to be covered by PPG external MLT debt in the external DSA.
- Default terms of marginal debt are based on baseline 10-year projections.
- Selected thresholds and test features (as presented):
  - Public debt benchmark: 44% 36% 20% 8.5% 8.0%
  - Avg. nominal interest rate on new borrowing in USD, USD discount rate, avg. maturity, avg. grace period: values shown and tailored per debt type in the stress test tables and charts.
- Sensitivity Analysis tables and figures present multiple scenario outcomes (A. Alternative Scenarios; B. Bound Tests; C. Tailored Tests) and indicate breaches of benchmarks where bold values appear.

_Compiled from Country authorities; and staff estimates and projections._

### Appendix I. Letter of Intent

### Appendix I. Letter of Intent

### Request and purpose
- The Government of Ghana requests financial support under the Rapid Credit Facility (RCF) in an amount of SDR 738 million (100 percent of Ghana’s quota).
- Request that the full amount be made available immediately upon approval by the IMF Executive Board and disbursed to the Ministry of Finance’s account at the Bank of Ghana (BoG) to provide immediate budget support.
- Purpose: mitigate the adverse impact of the COVID-19 pandemic and fund the Coronavirus Alleviation Programme (“COVID-19 Alleviation Programme” or “CAP”).

### Macroeconomic impact and projections
- GDP growth projected to slow to 1.5 percent in 2020 (compared to 6.8 percent envisioned in the 2020 Budget).
- Current account deficit projected to widen to 4.5 percent of GDP.
- External financing gap expected to be at least US$1.3 billion.
- Pressure on the exchange rate has increased; part of the shock will be absorbed by exchange rate adjustment and international reserve erosion.

### External and fiscal financing needs
- Tax revenues projected to fall short of target by 2.2 percent of GDP in 2020 due to lower growth and sharp decline in oil prices.
- Estimated cost of the pandemic emergency response plan (including additional health and social spending and CAP) is at least US$260 million (0.4 percent of GDP) in 2020.
- Government deficit (excluding energy and financial sector costs) projected to be 6.6 percent of GDP in 2020 (Fund staff’s projections: 6.4 percent of GDP), versus the 4.7 percent of GDP targeted by the 2020 Budget.
- Government estimates requiring an additional US$2.6 billion (4.1 percent of GDP) in 2020 to close the fiscal financing gap resulting from the shock.
- Planned financing combination: additional multilateral and bilateral support, domestic financing sources, and withdrawing US$219 million from the Ghana Stabilization Fund (paragraph 6).
- Development partner commitments noted: World Bank (including US$300 million in emergency financing) and African Development Bank (initial US$15 million) (paragraph 6 and statement).

### Fiscal response and contingency planning
- The CAP will deliver targeted fiscal stimulus to the most affected sectors.
- Contingency plan: readiness to scale up COVID-19-related government spending (including financial sector support measures), financed by spending adjustment, cuts to non-priority expenditures, and additional exceptional funding from partners.
- Authorities will avoid measures that would compound balance of payments difficulties and will provide IMF with required information to monitor implementation.

### Monetary and financial sector measures
- Bank of Ghana committed to maintaining a prudent monetary policy stance to anchor inflation expectations around the target band and mitigate capital outflow pressures.
- Monetary Policy Committee cut key policy rate by 150 basis points on March 18.
- Bank of Ghana may temporarily increase FX sales to avoid excessive volatility and contain temporary inflation pressures, while maintaining adequate external buffers.
- Bank of Ghana stands ready to provide liquidity support to the banking sector as market conditions require.
- Bank of Ghana to undergo a safeguards assessment update by the IMF as envisaged under the Fund’s Safeguards Policy.
- Ministry of Finance and Bank of Ghana finalizing a Memorandum of Understanding on roles and responsibilities for servicing financial obligations to the Fund.

### Debt, repayment capacity, and risks
- Including the RCF disbursement, repayments to the Fund will increase over the medium-term, but repayment ratios to GDP and exports of goods and services will remain manageable, peaking at 0.4 percent and 1.2 percent in 2026, respectively.
- Authorities state that external and public debt sustainability indicators will not change significantly because of the additional financing to cope with the current crisis.
- Government affirms continued timely meeting of financial obligations to the IMF.

### Transparency, assurances, and commitments
- Government agrees to publication of all documents submitted to the Executive Board in relation to this request.
- Government undertakes not to impose new or intensify existing restrictions on payments and transfers for international transactions, trade restrictions for balance-of-payments purposes, multiple currency practices, or enter bilateral payments agreements inconsistent with Article VIII of the IMF’s Articles of Agreement.
- Government commits to take any additional measures necessary to address the pandemic’s immediate needs.

### Statement by Executive Director and advisor (April 13, 2020) — summary
- Expressed gratitude for timely IMF response and that RCF disbursement will support CAP and health/economic mitigation efforts.
- Reiterated progress achieved under the completed ECF arrangement: strong growth, single-digit inflation, lower deficits, and improved external position.
- Noted heightened risk of large COVID-19 outbreak and decisive containment steps (including full lockdown of major cities effective March 30, national closure of schools, and ban on public gatherings).
- Reaffirmed fiscal stance: short-term fiscal adjustments required; deficit (excluding energy and financial sector costs) to 6.6 percent of GDP (staff estimates 6.4 percent), necessitating activation of exogenous shock clause in the fiscal rule.
- Revenue shortfall initial projection: 2.2 percent of GDP for end-2020.
- Pandemic response fiscal stimulus amounts to 0.4 percent of GDP.
- Government financing needs restated: additional US$2.6 billion (4.1 percent of GDP) in 2020; withdrawal from the Ghana Stabilization Fund cited as US$218 million in the statement.
- Development partner commitments reiterated: World Bank (about US$300 million) and African Development Bank (US$15 million).
- Monetary policy coordination emphasized; MPC rate cut of 150 basis points on March 18; BoG may increase FX sales and provide liquidity support.
- Concluding note: substantial financing gap necessitates urgent external assistance from the Fund; RCF approval would be instrumental to avert humanitarian disaster.

*Appendix I. Letter of Intent — Accra, April 6, 2020.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1ghaea2020001.pdf_