By Maxwell Nkansah
The International Monetary Fund (IMF) has reiterated its commitment to help in efforts to stabilize and bolster confidence in Ghana’s economy.
“We are ready to do our part to help the authorities stabilize the economy, lay the ground for stronger growth, and help the most vulnerable,” she tweeted after a “constructive” meeting with the West African country’s Finance Minister, Ken Ofori-Atta, and his team on the countries “economic challenges and the way forward.”
Last month, Ghana’s Vice President, Dr. Mahamudu Bawumia, said the country was returning to the IMF because of the impact of COVID-19 and the Russia-Ukraine war, as well as the banking sector clean-up exercise and the excess energy capacity payments with which the country had been saddled.
Dr. Bawumia referred to these four as the “quadruple whammy” that has forced the country to resort to the IMF for assistance.
Speaking at the launch of two new high-level information technology programs at the Accra Business School on Thursday, July 14, 2022, Dr. Bawumia said: “The Ministry of Finance estimates that the interest payment on this borrowing for the three items amounts to GHC8.5 billion annually. This is some 23% of Ghana’s annual interest payments of GHC 37 billion.
He added: “It should be noted that without the GHC54.0 billion debt for the three exceptional items (COVID-19, Financial Sector, and Energy), Ghana’s debt to GDP would be within the sustainability threshold of some 68% instead of the 76.6% at the end of 2021.”
“If you take out the fiscal impact of this quadruple whammy, Ghana will not be going to the IMF for support because our fiscal, debt, and balance of payments outlook would be sustainable.”
“Of the four factors, two (COVID-19 and the Russia-Ukraine war) were external and the other two (the banking sector clean up and the excess capacity payments) were the result of policies of the previous government.”
The IMF team concluded its visit to Ghana with the conclusion that the country is facing a challenging economic and social situation.
The IMF staff team, led by Carlo Sdralevich, visited Accra during July 6–13, 2022, to assess the current economic situation and discuss the broad lines of the government’s Enhanced Domestic Programme that could be supported by an IMF lending arrangement.
The IMF team met with Dr. Bawumia, Mr. Ofori-Atta, and Governor Ernest Addison of the Bank of Ghana. The team also met with Parliament’s Finance Committee, civil society organizations, and development partners, including UNICEF and the World Bank Group, to engage in social spending.
At the conclusion of the mission, Mr. Sdralevich said, “Ghana is facing a challenging economic and social situation amid an increasingly difficult global environment. The fiscal and debt situation has severely worsened following the COVID-19 pandemic. At the same time, investors’ concerns have triggered credit rating downgrades, capital outflows, loss of external market access, and rising domestic borrowing costs.
“In addition, the global economic shock caused by the war in Ukraine is hitting Ghana at a time when the country is still recovering from the COVID-19 pandemic shock and with limited room for maneuver. These adverse developments have contributed to slowing economic growth, the accumulation of unpaid bills, a large exchange rate depreciation, and a surge in inflation. ”
He disclosed that “the IMF team held initial discussions on a comprehensive reform package to restore macroeconomic stability and anchor debt sustainability. The team made progress in assessing the economic situation and identifying policy priorities in the near term. The discussions focused on: sustainably improving fiscal balances while protecting the vulnerable and poor; ensuring the credibility of the monetary policy and exchange rate regimes; preserving financial sector stability, and designing reforms to enhance growth, create jobs, and strengthen governance.
He said the IMF staff will continue to monitor the economic and social situation closely and engage in the coming weeks with the authorities on the formulation of their Enhanced Domestic Programme that could be supported by an IMF arrangement and with broad stakeholders’ consultation.