A statement issued by the  Ministry of Finance on Tuesday, explained that the IMF financial support to Ghana would be used for Balance of Payment Support (BoP) to shore up the country’s international reserves.

“Government is committed to ensuring the smooth operationalisation of all taxes including the e-levy to ensure that in addition to the IMF’s resources, government can continue to support its developmental goals on its own while ensuring that tax-to-Gross Domestic Product (GDP) ratio increases to the peer range of 16 per cent to 18 per cent,” the Ministry of Finance, said.

It said the IMF-supported programme was likely to encourage the government to investigate the factors hindering the success of the e-levy (including by providing technical assistance if needed) and come out with strategies to improve it.

The MoF said “Despite its underperformance so far, government has been reviewing its implementation modalities to minimise the avoidance of the e-levy by users. It is expected that a common platform being rolled out in July will greatly boost the collection of the levy.”

The MoF in the FAQ indicated that government could consider other tax in the medium-term to address the financial challenges facing the country.

The President, Nana Addo Dankwa Akufo-Addo on June 30, 2022 directed the Finance Minister, Ken Ofori-Atta, to commence formal engagements with the IMF to support an economic programme put together by the government.

The Finance Ministry explained that Ghana was seeking IMF support to back its Enhanced Domestic Programme (EDP) to restore stability, contain the rising debt, and address the emerging BoP needs.

Government is pursuing an EDP, a three-year fast-tracked macroeconomic stabilisation programme that seeks to restore investor confidence and achieve fiscal and debt sustainability.

It also said the programme was also to source concessional/cheaper financing to shore up international reserves, stabilise the cedi, continue smooth payments for imports (petroleum products, pharmaceuticals, medical equipment, among others) and restore conditions for strong economic growth (including support for government flagship programmes), while correcting underlying problems.

The MoF said the programme would help the country to access additional financing from third parties (friendly sovereigns/commercial creditors), including resuming international capital market access sooner than later, and facilitating credit rating upgrades.

It further said  in spite of the programme, government’s flagship programme such the Free Senior High School Programme, Planting for Food and Jobs and School Feeding Programme would not be cancelled.

Answering, why the government was now going to IMF and not earlier, the Finance Ministry explained that the primary conditions that necessitated an IMF-supported programme did not exist earlier.

“For a country to seek an IMF support, it would need to have a balance of payments challenge. A few months ago, the conditions that pertain today and the outlook is considerably different from six months ago,” it said.

Also responding to a plan for financing the country’s debt in the long-run, the Finance Ministry said “A successful programme engagement with the IMF is expected to foster a quick return to the International Capital Market and catalyse other commercial financing. This will help raise the needed financing to amortise our debt.”

The week-long meetings with the IMF team officially kick-started today.

Finance Minister, Ken Ofori-Atta led the government team to negotiate with the IMF for a bailout package for the country.