Time is running out for the government of Ghana to request economic assistance or a programme from the International Monetary Fund (IMF), according to Dr. Williams Kwasi Peprah, an associate professor of finance at Andrews University in the United States. This is because the economy's fundamentals are deteriorating.
He bases his claim on the fact that the nation's net reserves have sharply decreased from $6.09 billion in January 2022 to $4.672 billion in April 2022. The nation's net reserves were $5.867 billion in February 2022 and $5.134 billion in March 2022, respectively.
In response to Bloomberg's article on the Bank of Ghana's dollar restrictions to bulk oil distributors, Dr. Peprah encouraged the government to apply right away for an IMF economic programme to strengthen the economy's shaky fundamentals and ensure investor trust.
According to Dr. Peprah, the nation's declining foreign reserves are a serious issue and necessitate that the government give an IMF programme first priority in order to prevent the economy from suffering more setbacks.
"As a nation, we must consider returning to the IMF to ask for assistance in obtaining foreign currencies to bolster our dwindling gross international reserves as well as our foreign currency reserves. The situation is alarming if you consider the BDC's need for foreign currency and the fact that the Central Bank is only providing them with 22% of the $450 million needed.
The BDCs have only made this one request. What about the telecos, or other extractive industries?" he said.
He said that the IMF was the only viable choice because the government was unable to borrow money from the global capital market.
"In the past, the government would have borrowed $1 billion from the foreign market, but we no longer have that choice."
Despite the government receiving $1 billion from certain foreign lenders, Dr. Peprah warned that it might not be enough.
The problem with all of this, he said, is that the illicit market will predominate in the price of foreign currency due to the shortage, which will affect our calculations of inflation. As a result, inflation will be high.
I reiterate: the administration needs to consider the possibility of returning to the IMF to ask for funding for our foreign reserves.
The government has been firm about requesting financial assistance from the IMF, but Dr. John Kumah, the deputy finance minister, hinted in his remarks that the government would think about going back to the Bretton Woods for financial assistance to protect the economy from problems.
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