## IMF Lending Case Study: Ghana

## Source details

**Canonical URL:** [IMF Lending Case Study: Ghana](https://www.imf.org/en/countries/gha/ghana-lending-case-study)

## Other formats

- [Markdown version](/en/countries/gha/ghana-lending-case-study/index.md)
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### Background and macroeconomic problems
- Ghana was described as a success story in sub-Saharan Africa, having cut the poverty rate from 53 percent in 1991 to 21 percent in 2012.
- By 2015, Ghana faced:
  - widening current account and budget deficits,
  - rampant inflation,
  - a depreciating currency,
  - credit drying up as interest rates rose,
  - accumulation of bad loans in the banking system.
- The root cause was identified as out-of-control government spending, largely to pay salaries of an overgrown civil service.

### The IMF-supported program (early 2015)
- The IMF provided a $918 million loan to help stabilize the economy.
- IMF advisors and the Ghanaian government developed a three-part program:
  - Restore debt sustainability:
    - The government limited hiring and wage increases.
    - Subsidies for utilities and petroleum products were eliminated.
    - Revenue measures included cracking down on tax evasion and rationalizing exemptions.
    - New revenue sources included a tax on luxury cars and increased taxes on high earners.
    - The Public Financial Management Act called for improved accounting standards, procedures, and technology.
  - Strengthen monetary policy:
    - The authorities agreed to gradually end central bank financing of the budget deficit.
    - The inflation-targeting regime was to be fortified.
  - Clean up the banking system:
    - An asset quality review revealed significant under-capitalization.
    - Some banks were recapitalized.
    - The Bank of Ghana used enhanced authority to wind down insolvent lenders.
    - The central bank developed regulations to ensure sound underwriting and credit evaluation standards.
    - Insolvent microfinance institutions’ depositors were paid back.

### Outcomes and key statistics
- Trade and budget deficits narrowed.
- Economic growth:
  - Growth was 2.2 percent in 2015.
  - Growth was poised to rise to 8.8 percent in 2019.
- Inflation:
  - Inflation was almost 19 percent (earlier period).
  - Inflation was projected to fall to 8 percent.
- Fiscal and social impacts:
  - Cuts to wasteful spending made room for social services, including free secondary education.
  - For Ghana’s 28 million people, outcomes were described as higher incomes, better job opportunities, and more purchasing power.
- Remaining vulnerabilities:
  - Ghana remained largely reliant on foreign financing, exposing it to swings in investor sentiment.
  - Maintaining fiscal discipline was identified as an ongoing challenge.

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## References

- [Effectiveness of IMF Lending Programs](https://www.imf.org/en/About/effectiveness-of-imf-lending)
- [IMF Lending Factsheet](https://www.imf.org/en/About/Factsheets/IMF-Lending)
- [Ghana and the IMF](https://www.imf.org/en/Countries/GHA)

_Source: https://www.imf.org/en/countries/gha/ghana-lending-case-study_