The Executive Board of the International Monetary Fund (IMF) has approved US$3 billion 36-month Extended Credit Facility (ECF) arrangement for Ghana.
A press release by the Fund Wednesday evening said “this decision will enable an immediate disbursement of US$600 million.”
The Fund said the Ghanaian government’s economic programme, supported by the ECF-arrangement, builds on its Post COVID-19 programme for Economic Growth , which aims to restore macroeconomic stability and debt sustainability and includes wide-ranging reforms to build resilience and lay the foundation for stronger and more inclusive growth.
Large external shocks in recent years have exacerbated Ghana’s pre-existing fiscal and debt vulnerabilities, resulting in a loss of international market access, increasingly constrained domestic financing, and reliance on monetary financing of the government. Decreasing international reserves, Cedi depreciation, rising inflation and plummeting domestic investor confidence, eventually triggered an acute crisis.
The authorities have 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 programme 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.
Managing Director of the IMF, Ms. Kristalina Georgieva, “The combination of large external shocks and preexisting fiscal and debt vulnerabilities precipitated a deep economic and financial crisis in Ghana. In response, the authorities have launched a comprehensive reform program, to be supported by the ECF-arrangement. It is focused on restoring macroeconomic stability and debt sustainability as well as implementing wide-ranging reforms to build resilience and lay the foundation for stronger and more inclusive growth. Capacity development and continued support by development partners would be critical for the successful implementation of the authorities’ programme
“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.