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Ghana exchange rate stabilises on IMF’s $1,200m support

Social protection needed to soften impact of FX reforms – IMF

Ghana’s economy is improving and its exchange rate has stabilised following financial support from the International Monetary Fund (IMF) to the tune of $1,200 million since May 2023.

This was disclosed by the IMF in a new report after its staff and the Ghanaian authorities reached a staff-level agreement on economic policies and reforms to conclude the first review of the 36-month Extended Credit Facility (ECF) supported programme.

Performance with respect to the programme’s targets and reform objectives has been very strong, said IMF.

Upon completion of the executive board review, Ghana would have access to special drawing rights (SDRs) 451.4 million (about $ 600 million), bringing the total IMF financial support disbursed under the arrangement, since May 2023, to SDR 902.8 million (about $1,200 million).

“Faced with an acute economic and financial crisis, the authorities have adjusted macroeconomic policies, successfully completed their domestic debt restructuring operation, and launched wide-ranging reforms.

“These actions are already generating positive results, as growth in 2023 has proven more resilient than initially envisaged, inflation has declined, the fiscal and external positions have improved, and the exchange rate has stabilised,” the report noted.

Read also: Nigeria needs 9% tax-to-GDP increase to shore up revenues -IMF

The IMF staff team, led by Stéphane Roudet, mission chief for Ghana, held meetings in Accra from September 25 to October 6, 2023, to discuss progress on reforms and the authorities’ policy priorities in the context of the first review of Ghana’s three-year program under the extended credit facility. The arrangement was approved by the IMF executive board for a total amount of SDR 2.242 billion ($3 billion) on May 17, 2023. The team also conducted the 2023 Article IV consultation.

“I’m very pleased to announce that the IMF staff and Ghanaian authorities have reached a staff-level agreement on the first review of Ghana’s economic programme under the extended credit facility arrangement. This staff-level agreement is subject to IMF management approval and executive board consideration once the necessary financing assurances have been received. An agreement with official creditors on a debt treatment in line with programme parameters would provide the needed financing assurances.

“Consistent with the authorities’ commitments under the Fund-supported program, fiscal performance has been strong, and Ghana is on track to lower the fiscal primary deficit on a commitment basis by about for percentage points of GDP in 2023. Spending has remained within program limits. To help mitigate the impact of the crisis on the most vulnerable population, the authorities have significantly expanded social protection programs. On the revenue side, Ghana has met its non-oil revenue mobilisation target.

Ambitious structural fiscal reforms are bolstering domestic revenues, improving spending efficiency, strengthening public financial and debt management, and enhancing transparency.

“In light of Ghana’s compelling performance under the fund-supported programme, the critical next step is to secure an agreement with official creditors on the terms of a debt treatment consistent with the IMF executive board-approved programme parameters and debt targets. We urge official creditors to move forward and agree on an appropriate debt treatment in line with the financing assurances they provided in May 2023.”