Ghana reaches $3 billion bailout deal with IMF

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After months of economic losses in Ghana, the country can now breathe a sigh of relief thanks to an IMF bailout.

This is a follow up to a visit to Accra, Ghana., by an IMF team led by Mr. Stéphane Roudet, Chief of Mission for Ghana. The visit, which lasted from December 1 to 13, 2022, discussed with the Ghanaian authorities the IMF’s support for the country’s policy and reform plans.

IMF staff and the Ghanaian authorities reached a staff-level agreement on economic reforms and policies that will be supported by a new three-year agreement under the Extended Credit Facility (ECF) of US$3 billion.

The authorities’ robust reform program aims to restore macroeconomic stability and debt sustainability while protecting the vulnerable, preserving financial stability, and laying the foundation for a strong and inclusive recovery.

To support the goal of restoring public debt sustainability, the authorities have launched a comprehensive debt operation.

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In addition to early fiscal consolidation and measures to reduce inflation and rebuild external buffers, the program calls for far-reaching reforms to address structural weaknesses and improve resilience to shocks.

IMF statement: At the end of the mission, Mr. Roudet issued the following statement:

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  • “I am pleased to announce that the IMF team has reached a staff-level agreement with the Ghanaian authorities on a three-year program supported by an Extended Credit Facility (ECF) agreement in the amount of SDR 2.242 billion or about US$3 billion. The economic program aims to restore macroeconomic stability and debt sustainability while laying the foundation for stronger and more inclusive growth. The staff-level arrangement is subject to approval by IMF Management and the Executive Board and receipt of necessary financial guarantees from Ghana’s partners and creditors.
  • “The Ghanaian authorities have committed to a broad program of economic reform, which builds on the government’s Program for Post-COVID-19 Economic Growth (PC-PEG) and addresses the profound challenges facing the country.
  • “Key reforms aim to ensure the sustainability of public finances while protecting the vulnerable. The fiscal strategy is based on advance measures to increase domestic resource mobilization and rationalize spending. In addition, the authorities have committed to strengthening social safety nets, including reinforcing the existing program of targeted cash transfers for vulnerable households and improving the coverage and efficiency of social spending.
  • “Structural reforms will be introduced to support the fiscal strategy and ensure lasting consolidation. These include developing a medium-term plan to generate additional revenue and promoting reforms to strengthen tax compliance. This will help create space for growth-enhancing measures and social spending. Efforts will also be made to strengthen public spending commitment controls, improve fiscal transparency (including reporting and tracking of arrears), improve the management of public companies, and address structural challenges in the energy and oil sectors. cocoa. The authorities have also committed to further strengthen governance and accountability.
  • “To support the goal of restoring public debt sustainability, the authorities have announced a comprehensive debt restructuring. Sufficient guarantees and progress will be needed on this front before the proposed IMF-supported program can be submitted to the IMF Executive Board for approval.
  • “Reducing inflation, improving resilience to external shocks, and improving market confidence are also important program priorities. Accordingly, the Bank of Ghana will continue to strengthen its monetary policy framework and promote exchange rate flexibility to rebuild external reserves. As part of the authorities’ debt strategy, an internal debt swap has been launched. The authorities undertake to take the necessary mitigation measures to guarantee the stability of the financial sector.
  • “IMF staff met with Vice President Bawumia, Finance Minister Ofori-Atta, and Bank of Ghana Governor Addison and their teams, as well as representatives from various government agencies. The IMF team has also continued to engage with other stakeholders. The staff would like to express their gratitude to the Ghanaian authorities, the Parliamentary Finance Committee and all representatives of the private sector, trade unions and civil society for their open and constructive engagement over the past few months”.

For the record: The deal, which still requires IMF board approval, allows the government to address its precarious public finances and support the cedi, the world’s worst-performing currency this year.

  • Investor concerns about rising government debt, which is forecast to outstrip the size of its economy this year, led to a sell-off in government bonds this year that effectively shut the country out of international capital markets.
  • The IMF bailout also comes with tough conditions that Ghana would have agreed to adopt.

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