Press Release: IMF Approves Second Annual Loan under ESAF for Ghana

March 23, 1998

The International Monetary Fund (IMF) today approved the second annual loan under the Enhanced Structural Adjustment Facility (ESAF),1 in an amount equivalent to SDR 82.2 million (about US$110 million), to support Ghana’s economic program in 1998. The loan has been augmented by SDR 27.4 million (about US$37 million) at the authorities’ request, by rephasing the remaining amount available under the three-year loan program. The commitment period of the three-year ESAF arrangement has also been extended by one full year to June 29, 1999. The loan is available in two equal semiannual installments, the first of which can be drawn immediately.


Under its economic reform program, Ghana has made significant progress in structural reform, but financial stability has remained elusive, and private sector saving and investment has remained weak. To redress this situation, the central objective of the government’s medium-term economic program is to regain financial stability and create a public policy and regulatory environment in which private sector saving and investment can expand to underpin annual economic growth of well above the 5 percent recorded in recent years, and to reduce inflation to single digits by 1999.

The 1998 Program

The government’s overall objective is to secure a stable macroeconomic environment that supports economic growth led by the private sector, thereby creating jobs, increasing incomes, and reducing poverty. The key macroeconomic targets of the 1998 program are (1) to achieve annual real GDP growth of 5.6 percent, or 2.5 percent on a per capita basis; (2) to reduce annual inflation from 20.8 percent in 1997 to 11 percent by the end of 1998, and further halve it to 5.5 percent by the end of 1999; and, (3) to contain the current account deficit at 7.3 percent of GDP while maintaining gross official reserves at 2.7 months of imports. To achieve these objectives, the Ghanaian authorities plan to strengthen the fiscal adjustment effort launched in 1997. The 1998 budget projects an increase in tax revenue of about 1 percent of GDP, driven in part by improvement in sales tax revenue collections, the introduction of the value-added tax (VAT) effective December 1, 1998, and the intensification of tax system reforms. Monetary policy will continue to target a reduction in inflation through control of the money supply, making any action to lower interest rates conditional upon the abatement of inflationary expectations.

Structural Reforms

Under the program, the government will pursue structural reforms to enhance incentives for saving, encourage private investment, and improve resource allocation. In this context, the government will further deregulate the petroleum and cocoa sectors, aggressively pursue its divesture program, liberalize the financial sector, and reform the civil service and autonomous government agencies.

Addressing Social Needs

The fiscal program provides for a medium-term expenditure framework to be completed by mid-1998 that focuses on the priority sectors of education, health, and roads. The 1998 budget reflects a favorable shift in the composition of domestic expenditures, excluding interest payments, toward health and education. Structural reforms agreed under the program provide for incentives for Ghanaian cocoa farmers through cost-cutting measures for the Cocoa Board and reduction in the effective tax rate on cocoa exports. Additional measures to benefit cocoa farmers were realized with the further opening up of domestic marketing to private traders.

The Challenge Ahead

Ghana’s total external financing requirement during 1998–99 is estimated at about US$1.6 billion. While adequate financing has been identified for 1998, a residual gap of US$108 million has been estimated for 1999. This financing gap is likely to be covered by donor commitments made at the Consultative Group meeting in November 1998, provided that performance under the program remains satisfactory.

Ghana joined the IMF on September 20, 1957, and its quota2 is SDR 274.0 million (about US$368 million). Its outstanding use of IMF financing currently totals SDR 249 million (about US$334 million).

Ghana: Selected Economic Indicators







(Percent change)

Real GDP







Consumer prices (end of period)







(Percent of GDP)

Overall budget balance (deficit-)







External current account balance, excluding official transfers (deficit-)







(Months of imports)

Gross official reserves







Sources: Ghanaian authorities; and IMF staff estimates and projections.


1The ESAF is a concessional IMF facility for assisting eligible members that are undertaking economic reform programs to strengthen their balance of payments and to improve their growth prospects. ESAF loans carry an interest rate of 0.5 percent a year and are repayable over 10 years, with a 5½-year grace period.

2A member's quota in the IMF determines, in particular, the amount of its subscription, its voting weight, its access to IMF financing, and its allocation of SDRs.


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