Ghana: Transforming a Crisis into a Journey Toward Prosperity

IMF News, January 29, 2024

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Ghana requested an IMF-supported program in July 2022 amid an economic and financial crisis.
Preexisting vulnerabilities and external shocks included the COVID-19 pandemic, Russia’s war in Ukraine, and global monetary policy tightening.
Consequences included:
- Loss of international market access.
- Increased pressures on domestic financing and monetary financing by the central bank.
- Declining international reserves, currency depreciation, and accelerating inflation.

IMF Board approved the program in May 2023.
Program aims:
- Restore macroeconomic stability.
- Secure debt sustainability.
- Lay foundations for higher and more inclusive growth.

Fiscal measures:
- Budgets for 2023 and 2024 emphasize fiscal consolidation and sound public finances.
- Fiscal efforts are central to ensuring long-term debt sustainability.
Structural reforms:
- Enhance domestic resource mobilization.
- Strengthen public financial management.
- Create a business environment that better fosters private sector development.
Monetary and financial sector policies:
- Bank of Ghana increased interest rates and eliminated monetary financing of the budget.
- Inflation declined to 23 percent in December 2023 from a record high of 54 percent in December 2022.
- Bank of Ghana aims to maintain policies to bring inflation down to levels consistent with their inflation targeting framework.
- Authorities designed a plan to ensure financial sector stability.
Debt operations:
- Government launched a comprehensive debt restructuring operation in December 2022 that includes:
- A concluded domestic debt voluntary exchange.
- Two external debt operations: one with official bilateral creditors and the other with commercial creditors.
- Under the G20’s Common Framework, authorities reached agreement in principle with official creditors on a debt treatment consistent with program parameters.
- Authorities are engaging external commercial creditors to seek their support.

Performance under the program described as compelling, with the economy “turning the corner.”
Growth in 2023 showed resilience despite a difficult global environment.
Key macro developments:
- Inflation declined from 54 percent in December 2022 to 23 percent in December 2023.
- Currency recovered from a sharp depreciation of 45 percent vis-à-vis the US dollar at end-2022 and has been less volatile.
- International reserves increasing.
Success factors cited:
- Aligning the budget with the program.
- Meeting program targets, especially net international reserve accumulation and primary fiscal balance.
- Carrying out key structural reforms in the financial and energy sectors.

Authorities focused on expanding effective social protection programs while implementing reforms.
Social policy measures and outcomes:
- Targeted cash transfer program (Living Empowerment Against Poverty):
- Benefits doubled in 2023.
- Benefits expected to be doubled again in 2024.
- Benefit coverage increasing from about 6 percent to 12 percent (of household pre-transfer consumption).
- Expected to significantly reduce poverty and inequality.
- Education:
- Allocations to the Ghana School Feeding Program and the Capitation Grant received a boost.
- Health:
- Allocation to the National Health Insurance Authority expanded by over 40 percent to cover medical claims, essential medicines, and vaccines for the most vulnerable.
These interventions are regularly monitored under the IMF-supported program.

Key priorities:
- Lock in gains and continue steadfast implementation of the program.
- Complete fiscal consolidation and debt restructuring operations to put public debt on a sustainable trajectory.
- Continue reforms to foster recovery and bring economic growth back to long-term potential.
- Continue policies to drive inflation lower toward the inflation targeting framework.
Risks and challenges:
- Potential external shocks.
- Political environment in the run-up to the 2024 Presidential and parliamentary elections.
Outlook conditional on sustained implementation:
- If authorities continue to implement the package of policies and reforms with current commitment, sustained implementation of the program promises to bring a brighter future to all Ghanaians.

By Leandro Medina, January 29, 2024 — IMF News