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.
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It is on the back of this, he Executive Board of the International Monetary Fund (IMF) on Wednesday, May 17 approved a 36-month arrangement under the Extended Credit Facility (ECF) in an amount equivalent to SDR 2.242 billion (around US$3 billion, or 304 percent of quota).
The program is based on the government’s Post COVID-19 Program for Economic Growth (PC-PEG), 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.
The Executive Board’s decision enabled an immediate disbursement to Ghana equivalent to SDR 451.4 million (about US$600 million).
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.
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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.