Ghana 1 st July 2022 officially announced the commencement of engagement with the International Monetary Fund (IMF) to address primarily the current Balance of Payment (BoP) challenges.
This was followed by an IMF staff team visit to Accra from 6th – 13th July led by Carlo Sdralevich-mission chief for Ghana, to begin initial discussions with the Ghanaian authorities for a possible IMF-supported program. The government has reiterated its commitment to negotiate a good deal as the country faces two exogenous shocks (Covid 19 pandemic and Russia-Ukraine War) which have exacerbated the structural domestic economic bottlenecks. In a press statement after a cabinet retreat in March 2022, Ghana lost GH¢ 13.1 billion of revenue and had to increase expenditure by GH¢ 14.2 billion with a combined fiscal impact of GH¢ 26 billion (6.8% of GDP). The public debt to GDP ratio has increased considerably from 54.2% in 2017 to 61.2% in 2019 to 74.4% in 2020 and further to 76.6% at the end of 2021.
Provisional data from the Bank of Ghana indicate that public debt stock has reached GH¢ 387.9 billion (77.2% of GDP) at the end of April 2022. The overall balance of payment deficit has worsened to $934.5 million in the first quarter of 2022, compared with US$ 429.9 million in the same period last year.
Inflation hit an 18-year high at 27.6% in May 2022 while Monetary Policy Rate (MPR) was increased by 200 basis points to 19% in May 2022 to tame inflationary pressures. To address these challenges, the government announced a raft of measures in March 2022 to contain the ballooning expenditure while ensuring tax compliance.
This latest request comes at the back of the IMF's approval of the disbursement of US$ 1 billion drawn under the Rapid Credit Facility (RCF) in April 2020. The disbursement was to aid Ghana address the fiscal and balance of payment challenges, improve confidence, and catalyze support from other development partners. RCF is available to low-income countries and carries a zero-interest rate.
RCF has a grace period of 5½ years and a final maturity of 10 years. IMF's Article IV consultations with Ghana in July 2021 posited that the ongoing recovery from the pandemic is threatened by possible new waves and rising debt vulnerabilities, including large financing needs that leave the government exposed to rollover and solvency risks. This has been heightened by the crisis in Ukraine which has led to supply chain disruptions, skyrocketing food prices, and limited access to the international capital market.
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