The International Monetary Fund (IMF) has expressed concerns that the upcoming general elections in December 2024 could potentially pose risks to the gains made under its program with Ghana.
According to the IMF, “the medium-term outlook remains favorable but subject to downside risks—including those related to the upcoming general elections.”
The IMF emphasized the importance of keeping the domestic revenue mobilization agenda on track and tightening expenditure commitment controls to avoid policy slippages ahead of the December 2024 general elections.
This was stated in an IMF release after its Board completed the second program review for Ghana and approved a $360 million disbursement for the country.
The IMF stressed the need for the government to continue implementing the program as planned, ensuring sustainable growth and poverty reduction. Sustaining macroeconomic policy adjustments and reforms is essential to fully and durably restore macroeconomic stability and debt sustainability.
“These efforts should be supported by continued progress in improving tax administration, strengthening expenditure control and management of arrears, and enhancing fiscal rules and institutions,” advised the IMF.
Ghana’s Performance under the IMF Programme
Despite election-related concerns, the IMF acknowledged that Ghana’s performance under the program has been strong, both in meeting quantitative objectives (such as budgetary performance) and in implementing structural reforms.
The reforms aim to make the economy more resilient, ensure lasting improvements in public finances, and lay the foundation for stronger and more inclusive growth.
“The authorities have so far demonstrated a strong commitment to the program objectives, and we welcome Finance Minister Adam’s signaling of the government’s continued commitment to the policies under the program.”
IMF Deputy Managing Director Gita Gopinath praised the government and the Bank of Ghana for decisive steps taken to contain inflation and rebuild foreign reserve buffers. She noted the importance of maintaining a tight monetary stance and enhancing exchange rate flexibility.
Signs of Success under the Programme
According to the IMF, despite a challenging global economic environment, Ghana’s reforms are showing positive results, and signs of economic stabilization are emerging. Growth has proven more resilient than initially anticipated, while inflation is rapidly declining from its 2022 highs. Additionally, the fiscal and external positions have improved, with the Bank of Ghana’s international reserves increasing.
Debt Restructuring and the IMF Programme
The IMF commended Ghana for providing the necessary financing assurances for the second review under the Extended Credit Facility (ECF) Arrangement to be completed. Ghana has recently reached an agreement in principle with Eurobond holders on restructuring consistent with program parameters, subject to confirmation of comparability of treatment by the Official Creditor Committee (OCC).
Background
In May 2023, Ghana secured a program from the IMF to support its post-COVID economic recovery. The program has three primary objectives:
- Implementing large and frontloaded measures to bring public finances back to a sustainable path through mobilizing more domestic revenue and improving the efficiency of public spending, with efforts to protect the vulnerable.
- Implementing ambitious structural reforms to support fiscal adjustment and enhance resilience to shocks, focusing on tax policy, revenue administration, and public financial management, and addressing weaknesses in the energy and cocoa sectors.
- Taking steps to control inflation, such as the Bank of Ghana raising interest rates and eliminating monetary financing of the budget. A flexible exchange rate policy will help rebuild international reserves.
These efforts should be supported by continued progress in improving tax administration, strengthening expenditure control and management of arrears, enhancing fiscal rules and institutions, and improving the management of state-owned enterprises (SOEs). Bolstering targeted social protection programs is also needed to cushion the vulnerable from the impact of fiscal adjustments.
