Ghana’s economy shows signs of improvement, but debt restructuring is crucial — IMF

A staff team from the International Monetary Fund (IMF) has observed encouraging signs of economic stability in the country. This comes just weeks after the approval of a $3 billion extended credit facility, with $600 million already disbursed. 

The details 

• During the week-long visit, the team observed positive signs of macroeconomic development for the country. These include a decrease in inflation, an increase in international reserves and a stabilized exchange rate. 
• The team also emphasized the importance of Ghana's timely progress in negotiating the restructuring of its external debt. This is crucial for the country to fully reap the benefits of the latest bailout offered by the IMF, they said. 

What was said 

• On the economic gains, IMF's Mission Chief, Stephane Roudet commented: 

“During the visit, we discussed recent macroeconomic developments. Against a complex global economic backdrop, the Ghanaian economy is showing signs of stabilization, with softening inflation, an increase in international reserves and a less volatile exchange rate.” 

• He further added: 

“We also took stock of the authorities’ progress in meeting key commitments under the Fund-supported program...In discussing progress on the debt restructuring operations, we reiterated that timely restructuring agreements with creditors are essential to secure the expected benefits of the Fund-supported program.” 

Of note 

• Since it peaked at 53.6% in January, inflation rate in Ghana has been on a steady decline, nestling at a six-month low 42.2% in May.
• One of the criteria unofficially laid down by the IMF was that the country commits to zero budgetary financing by its central bank, a condition the country promptly implemented before the first round of the arrangement was approved. 
• However, restructuring its external debt has not been achieved by the country and the possibility has been described as difficult. An analysis of IMF’s projections on the country revealed that for Ghana to close its financing gap, it must secure an average of $2.6 billion yearly in debt forgiveness. 

Before now 

• Ghana approached the IMF for a bailout following protracted economic woes worsened by the COVID-19 pandemic and the Russia-Ukraine conflict. 
• Last December, the IMF announced that it had reached staff-level agreement with Ghana on a three-year extended credit facility worth $3 billion.
• In May, the IMF’s board approved the first review of the extended credit facility and disbursed $600 million to the country.