The fund said it had engaged with the government which had demonstrated a strong commitment to expenditure performance (spending strictly according to budget) in 2024.

Speaking at a joint news conference by the Ministry of Finance and the IMF on the approval of the first review of Ghana’s three-year Extended Credit Facility (ECF) programme by the Executive Board, the IMF Mission Chief to Ghana, Stephane Roudet, said: “We have ratings under the programme in terms of spending which have been codified in the budget that was approved by Parliament.

“We have targets under the programme, performance has so far been good; we have very strong commitments that the authorities will continue to follow the programme objectives and that makes us optimistic,” he stated.

The Executive Board of the IMF last Friday approved the first review of Ghana’s programme after the country finally reached an agreement with the Bilateral Official Creditor Committee of the Paris Club, co-chaired by France and China.

The approval of Ghana’s programme will pave the way for the immediate release of the second tranche of $600 million to the country, bringing the total disbursement under the programme to $1.2 billion.

The approval is also expected to trigger the release of a another $550 million from the World Bank for budget support and the operationalisation of the Financial Stability Fund.

In his address to the media, the Minister of Finance, Ken Ofori-Atta, said the final crucial step in the government’s strategy involved the restructuring of the commercial debt of $14 billion, out of which $13 billion was in Eurobonds.

Slippages

The IMF, in a release last Friday, said Ghana’s performance under the programme had been strong, with all quantitative performance criteria for the first review and almost all indicative targets and structural benchmarks met.

It also stated that Ghana’s reforms were bearing fruits and signs of economic stabilisation were emerging.

“Growth in 2023 has proven resilient, inflation has declined, and the fiscal and external positions have improved,” the fund said.

“Progress is also being made on debt restructuring, with the domestic debt exchange completed last year, and an agreement recently reached on the restructuring of official bilateral debt,” the IMF release added.

In spite of the successes chalked up under the programme, economic and political analysts have expressed fears that going into the 2024 elections the possibility of the government sacrificing all the gains in a bid to ‘break the eight’, similar to what happened in 2000, 2008, 2012, 2016, with 2020 recording a similar trend in a pandemic year.

IMF programme, election years

Prior to the 2016 elections, Ghana was under an IMF programme which started in April 2015 and had chalked up a lot of successes in the first year.

However, the successes were all sacrificed in the 2016 election year, with the country recording a budget deficit of 8.7 per cent against a programme target of 5.3 per cent.

This meant that the IMF programme which was expected to be completed in 2018 had to be extended for another year.

In 2004, in spite of the country just benefiting from the Highly Indebted and Poor Countries (HIPC) initiative which led to a total debt relief of $3.5 billion, Ghana still recorded a budget deficit of 3.2 per cent of Gross Domestic Product (GDP) against a target of 1.7 per cent.

In 2008, which was another election year, the budget deficit went into double digits and more than double of what was budgeted for, recording 11.5 per cent of GDP against a projection of four per cent.

The story was not different in 2012 as the country recorded a budget deficit of 12 per cent against a target of 6.7 per cent.

In 2016, in spite of being under an IMF programme, the government still missed its budget deficit target.

The overall budget deficit on cash basis was equivalent to 8.7 per cent of GDP against an IMF programme target of 5.3 per cent of GDP. On commitment basis, the fiscal deficit was 10.3 per cent of GDP.

In 2020, COVID-19 expenses, coupled with election year spending, led to the missing of the deficit target.

The overall budget deficit on cash basis was 11.7 per cent of GDP against a revised target of 11.4 per cent of GDP.

In 2024, the government has set a budget deficit target of 5.9 of GDP. 

Final crucial step

For his part, the Finance Minister said the IMF Board's approval of the First Review and the recent agreement with the OCC set the stage for an impending re-engagement with bondholders, which would commence this week.

“We are working hard to reach an agreement with our bondholders in the shortest possible time.

We are optimistic that we may arrive at an agreement no later than the end of February,” he stated.

Mr Ofori-Atta said government officials had met with the steering committee representatives in Marrakesh, Morocco, who gave their proposal to the government.

“We also met more of the investors in London in which we broadly outlined that we will be looking at a haircut between 20 per cent and 40 per cent.

“What has happened with the Domestic Debt Exchange Programme (DDEP) and the OCC will guide us to arrive at a resolution that will be fair for everyone,” the Finance Minister added.

Inflation to ease further

Also at the press conference was the Governor of the Bank of Ghana (BoG), Dr Ernest Addison, who said inflation was expected to ease further in 2024, underpinned by continued implementation of sound policies towards the single digit objective.

In this regard, he said the BoG would continue to monitor both domestic and external developments and respond appropriately to ensure that the downward inflation trajectory observed in recent months was sustained without undermining growth.

“The 2023 experience of a strong reduction in inflation and stronger growth is instructive,” Dr Addison stated.

The Governor also noted that the banking sector remained sound, liquid and profitable, adding that the central bank would continue to closely monitor banks’ capital restoration efforts in line with approved plans, including through support from the Ghana Financial Stability Fund.