The government has completed the first review of its US$3 billion, 36-month Extended Credit Facility (ECF) Arrangement with the International Monetary Fund (IMF). This accomplishment, along with the 2023 Article IV Consultation, signals a positive step forward for the country’s economic recovery post-COVID-19.
The completion of the first ECF review has unlocked an immediate disbursement of SDR 451.4 million, approximately US$600 million, bringing total disbursements under the arrangement to about US$1.2 billion. This financial injection comes at a crucial time as the nation emerges from a period of economic challenges exacerbated by external shocks and pre-existing fiscal vulnerabilities.
A key precursor to the IMF’s approval was the successful debt restructuring deal struck with official creditors. The deal grants a moratorium on debt payments until May 2026 and sets the stage for a potential Eurobond revamp by March 2024. Under the terms of the agreement, US$5.4 billion of bilateral debt will be deferred, splitting repayments over 16-17 years starting in 2039.
Additionally, US$2.8 billion of bilateral obligations will be exempt from debt service payments between 2023 and 2026, providing immediate financial relief.
Finance minister Ken Ofori-Atta expressed his satisfaction with the IMF’s endorsement, stating: “This affirmation reflects the government’s steadfast reform trajectory, unlocking a US$600 million disbursement from the IMF, with an additional US$300 million anticipated”.
He acknowledged the role of the debt restructuring agreement in offering significant cash flow relief until 2026 and expressed gratitude to France and China for their leadership in the negotiations.
The finance minister highlighted the broader economic reforms underway, including those in tax policy, public financial management, energy and cocoa sectors.
Mr. Ofori-Atta re-emphasized the importance of the debt exchange programme in 2023 and commended the commitment of the Ghanaian people to restoring fiscal sustainability.
Looking ahead, Ofori-Atta announced that the next review is scheduled for the second quarter of this year, with an anticipated disbursement of around US$360 million. This second review will assess performance at the end of 2023 on implemented reforms and projections will be revised accordingly.
On a similar tangent, IMF Mission Chief for Ghana, Stéphane Roudet, explained that the second review is tentatively set for April this year to allow for presentation to the Board in May or June.
He further expressed optimism about the review following provisional figures for the period. “Logically, it should occur in early April to present to the board in May or early June. This outlines the broad timeline, but we still need to engage with the authorities to finalize the details of the next mission”.
In a statement following the Executive Board’s discussion, Mr. Bo Li, IMF’s Deputy Managing Director and Acting Chair, praised Ghana’s efforts to reorient macroeconomic policies, restructure debt and implement wide-ranging reforms. Li acknowledged positive results, including resilient growth, declining inflation, improving fiscal and external positions and increasing international reserves.
Li stressed the importance of continued policy and reform implementation for fully and durably restoring macroeconomic stability and debt sustainability. He highlighted the government’s plans to reduce deficits, mobilize additional domestic revenue, streamline expenditure and finalise comprehensive debt restructuring as critical steps.
The Deputy Managing Director emphasized the need for ongoing efforts to protect vulnerable populations and create space for higher social and development spending. Key reforms in tax administration, expenditure control, management of arrears, fiscal rules, institutions and state-owned enterprises (SOEs) management were identified as necessary for lasting adjustments.
On his part, Dr. Ernest Addison, Governor of the Bank of Ghana, speaking via an online platform, commended the successful first review. He stressed the importance of vigilance and commitment for the sound implementation of policies through December 2023 and into 2024, ensuring the completion of structural reforms and sustained macroeconomic recovery.
Dr. Addison highlighted the notable progress in reducing inflation, from 54.1 percent a year ago to 23.2 percent by the end of 2023, attributing it to prudent monetary policy, stable crude oil prices, a steady exchange rate and a successful gold-for-reserve programme.
Looking ahead, he expressed optimism for further easing in inflation in 2024, underpinned by the continued implementation of sound policies.
The Governor reassured that the central bank remains vigilant, monitoring both domestic and external developments to sustain the downward inflation trend without compromising growth. He emphasized the banking sector’s soundness, liquidity, and profitability, with close monitoring of capital restoration efforts to support financial stability through the Ghana Financial Stability Fund.
As the nation moves forward with its economic recovery efforts, these developments underscore the importance of ongoing reforms and policy implementation for sustained stability and growth, analysts have argued.
The successful completion of the first IMF review and debt restructuring agreement provide a foundation for the country’s continued journey to economic resilience, they say.
External debt restructuring
In a related development, this week holds heightened significance for the economy, with pivotal meetings set to unfold as part of the external debt restructuring process.
With an agreement in principle on key parameters having been reached with the Official Creditors’ Committee under the G20 Common Framework, upcoming sessions include a crucial gathering of the World Bank’s Board of Executive Directors, tasked with deliberating on a US$300 million budget support operation.
Simultaneously, government representatives are slated to resume talks with international bondholders of US$13 billion in outstanding Eurobonds, continuing discussions initiated at the October Marrakech meetings. Officials are also scheduled to travel to China, January 23, 2024, for further discussions.
Building on the agreement in principle by the Official Creditors’ Committee, this week, the World Bank’s Board of Executive Directors is scheduled to convene to consider a US$300 million budget support operation, supported by the International Development Association (IDA). This development aligns with the Joint WB-IMF Debt Sustainability Framework, marking a crucial milestone in reinstating debt sustainability for Ghana.
