Key Questions on Ghana

Last Updated: November 30, 2022

Find answers to key questions regarding Ghana and the IMF

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What is the status of discussions with Ghana for an IMF-supported economic reform program? What is the possible timing for an agreement?

The IMF has been engaging with the Ghanaian authorities on their post-COVID program for economic growth and reform and associated policies and reforms that could be supported by a new IMF lending arrangement.

 

Following several rounds of discussions between IMF staff and Ghanaian authorities in Accra and Washington, DC, an IMF team will visit Accra from December 1 – 13 to make further progress towards reaching an agreement as soon as feasible.

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Why is Ghana requesting an IMF program?

Ghana’s fiscal and debt vulnerabilities worsened fast amid an increasingly challenging external environment. During the COVID-19 pandemic, Ghana’s public debt increased significantly. At the same time, the government’s efforts to preserve debt sustainability were not seen as sufficient by investors, leading to credit rating downgrades, the exit of non-resident investors from the domestic bond market, and ultimately Ghana’s loss of access to international capital markets. These adverse developments, further exacerbated by price and supply-chain shocks from the war in Ukraine, have led to a large exchange rate depreciation, a surge in inflation (40.4 percent year on year in October) and pressure on foreign exchange reserves. Against this backdrop, the government requested assistance from the IMF in early summer. Discussions between IMF staff and the Ghanaian authorities have been ongoing since then.

 

An IMF-supported program would support Ghana in implementing policies that restore macroeconomic stability and ensure debt sustainability while protecting the most vulnerable parts of its population. It would help create the conditions for inclusive and sustainable growth and job creation. Such a program would also help strengthen policy credibility, alleviate exchange rate pressures, and provide a catalytic effect on additional sources of financing.

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What type of program is Ghana eligible for? How much is Ghana seeking?

We are discussing with the authorities the type of IMF facility that best fits Ghana’s needs. The Fund’s various lending instruments are tailored to different types of balance of payments needs and the specific circumstances of a member country. See the IMF Lending webpage.

 

The previous arrangement with Ghana was a three-year Extended Credit Facility (ECF) in 2015-2018, which was extended to April 2019. However, since negotiations are ongoing, it is premature to comment on the final form the latest financing program will take.

 

The IMF Executive Board will decide the level of access (credit amount) and the final program design.

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What will be the objectives of an IMF program with Ghana?

The goal of the government’s economic program, which would be supported by IMF financing, is to restore macroeconomic stability and ensure debt sustainability, support the credibility of government policies, restore confidence in the central bank’s ability to manage inflation and rebuild foreign exchange reserve buffers to make the economy more resilient to shocks. Specifically, in the fiscal sector, an important policy objective would be to increase revenues, critical for debt sustainability while safeguarding spending on health, education, and social protections.

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Does Ghana need debt restructuring? When will a new Debt Sustainability Assessment (DSA) be published?

When an IMF member country requests financing, the Fund assesses whether the country’s policies are consistent with debt sustainability. This assessment is based on a Debt Sustainability Assessment (DSA) conducted jointly by the IMF and World Bank to determine whether the government is able to meet all its current and future payment obligations. It a forward-looking exercise that needs to take into account the authorities’ policies.

 

The last DSA published in the 2021 Article IV Staff Report concluded that: “Public debt was sustainable conditional on a rigorous and credible implementation of the authorities’ medium-term consolidation plan to put debt on a declining trajectory and ensure continued market access.”

 

In their recent 2023 budget statement, the authorities have assessed their public debt as being unsustainable over the medium term. Together with efforts to bring the government deficit down, they have announced their intention to conduct a debt operation to ensure debt sustainability. We welcome the authorities’ intentions to implement policies that will ensure the sustainability of public finances. However, the nature of engagements and debt operations between Ghana and its creditors are sovereign decisions.

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Will the program result in a cut in social programs?

Protecting the vulnerable is a core objective of IMF programs. In general, IMF-supported programs seek to boost social spending to improve socioeconomic outcomes and help promote inclusive growth. It is important that social spending measures be adequate, efficient, and financed sustainably to achieve this.