The report provides a comprehensive overview of the country’s economic situation and the challenges it faces. The authorities’ program, which is supported by the IMF, is a critical step in addressing these challenges and restoring macroeconomic stability and debt sustainability. Here are 20 key insights from the IMF Country Report No. 23/168 on Ghana:
Large external shocks in recent years have exacerbated Ghana’s pre-existing fiscal and debt vulnerabilities.
The government has taken bold steps to tackle these deep challenges, including by accelerating fiscal adjustment.
The government has also launched a comprehensive debt restructuring to address severe financing constraints and the unsustainable public debt.
Securing timely debt restructuring agreements with external creditors will be essential for the successful implementation of the new ECF arrangement.
Key policies under the authorities’ program include large and frontloaded fiscal consolidation to bring public finances back on a sustainable path, complemented by efforts to protect the vulnerable.
The adjustment effort will be supported by ambitious structural reforms in the areas of tax policy, revenue administration, and public financial management, as well as steps to address weaknesses in the energy and cocoa sectors.
Appropriately tight monetary and flexible exchange rate policies will help bring inflation back to single digits and rebuild international reserves.
The program also has a strong focus on preserving financial stability and encouraging private investment and growth.
The program will help Ghana overcome immediate policy and financing challenges, including through its catalytic effect in mobilizing external financing from development partners and providing a framework for the successful completion of the ongoing debt restructuring.
Fiscal consolidation is a core element of the program. A substantial and front-loaded fiscal adjustment has started with the 2023 budget. Enhanced revenue and streamlined expenditure will be combined with policies to protect vulnerable households and create room for higher social and development spending in the medium term. With a view to fostering lasting fiscal discipline, the authorities are also advancing reforms to enhance domestic revenue mobilization, strengthen public financial management, and tackle the deep challenges in the energy and cocoa sectors. The government has also launched a comprehensive debt restructuring, including both domestic and external debt, to place debt on a sustainable path. Effective collaboration by all parties involved would be critical.
Preserving financial sector stability is critical for the success of the program. Given the adverse impact of the domestic debt restructuring on balance sheets of financial institutions, the authorities will devise and implement a comprehensive strategy to rapidly rebuild financial institutions’ buffers and exit from temporary regulatory forbearance measures.
Monetary and exchange rate policies under the program will focus on reining in inflation and rebuilding foreign reserve buffers. The Bank of Ghana will continue tightening monetary policy until inflation is on a firmly declining path and will eliminate monetary financing of the budget. The central bank will also enhance exchange rate flexibility and limit foreign exchange interventions to rebuild external buffers.
An ambitious structural reform agenda is being put in place to reinvigorate private sector-led growth by improving the business environment, governance, and productivity.
The success of the program will depend on a number of factors, including the government's ability to implement the reforms and the willingness of creditors to restructure Ghana's debt. However, if the program is successful, it could help Ghana to overcome its current challenges and lay the foundation for a more prosperous future.
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