- Ghana and the IMF have reached a staff-level agreement on a new program. What does it mean? What are the next steps?
- What will be the objectives of the IMF program with Ghana?
- Why did Ghana request an IMF program?
- When will a new Debt Sustainability Assessment (DSA) be published?
- The government of Ghana recently announced a domestic debt operation and standstill. Is it consistent with IMF policies? What are the IMF’s views?
- Will the program result in a cut in social programs?
Ghana and the IMF have reached a staff-level agreement on a new program. What does it mean? What are the next steps?
The staff-level agreement with Ghana is for a three-year program supported by an arrangement under the Extended Credit Facility (ECF) of about $3 billion. The approval by IMF management and the Executive Board in the period ahead is contingent on receiving financing assurances from Ghana’s partners and creditors.
What will be the objectives of the IMF program with Ghana?
The goal of the government’s economic program is to restore macroeconomic stability and debt sustainability while protecting the vulnerable, preserve financial stability, and laying the foundation for strong and inclusive recovery. To support the objective of restoring public debt sustainability, the authorities have launched a comprehensive debt operation.
Why did Ghana request 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 and a staff-level agreement was reached in December 2022.
The program will 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 alleviate exchange rate pressures and provide a catalytic effect on additional sources of financing.
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. In the case of Ghana, the DSA document will be presented to the Board at the same time as the program request.
The government of Ghana recently announced a domestic debt operation and standstill. Is it consistent with IMF policies? What are the IMF’s views?
Together with efforts to bring the government deficit down, the authorities have announced a comprehensive debt operation to ensure debt sustainability. We welcome policies to ensure the sustainability of public finances, including the planned fiscal adjustment and medium-term policies to lay the foundation for strong and inclusive growth while protecting the vulnerable. The authorities’ debt operation aims to achieve moderate risk of debt distress over the medium term under the IMF-World Bank low-income countries debt sustainability framework, which is an objective we welcome. However, the choice and nature of debt operations between Ghana and its creditors are sovereign decisions.
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.