Despite passing the fourth review of the IMF $3 billion Extended Credit Facility, Ghana is walking a tightrope, and any slip could be very costly.
The staff level report presented to the IMF’s Executive Board after the fourth review reveals that Ghana is at a high risk of going off track of domestic policies aimed at restoring the economy.
This means the fund has flagged “domestic policy slippages” as a high-risk threat to the country’s fragile economic recovery.
In simple terms, there’s a significant chance that Ghana may not stick to its own financial promises and policy targets, like spending within its means, collecting enough revenue, or managing inflation.
The fear is that if that happens, the fallout could affect every Ghanaian, from the street vendor to the corporate boardroom.
What’s the Big Risk?
According to the IMF’s latest Risk Assessment Matrix (RAM) for Ghana, published as part of the Country Report on the ongoing Extended Credit Facility (ECF) programme, the risk of Ghana falling off its fiscal track is rated as “High.”
This matters because if Ghana’s policies go off track, investors will lose confidence, foreign financing may dry up, and the cedi could lose value again, pushing inflation up and increasing the cost of everything from bread to building materials.
The Risk Assessment Matrix (RAM) is a tool used by the International Monetary Fund (IMF) to identify and assess potential threats that could derail a country’s program outcomes. The scale of RAM, as used by the IMF, categorizes the likelihood of identified risks using a subjective probability range. It typically follows this three-level scale: Low – Probability below 10%, Medium – Probability between 10% and 30%, and High – Probability between 30% and 50%
This scale reflects the IMF staff’s judgment on how likely it is that a particular risk such as policy slippages, and external shocks will materialize and significantly alter the country’s baseline economic path.
The report cited by The High Street Journal reveals that the country is in the region of high risk “domestic policy slippages”. This means there’s a strong likelihood that the government could fail to meet its fiscal and policy commitments, such as spending targets, revenue collection, and debt control.
“With debt sustainability in question and IFI [international financial institution] financing delayed, a balance of payments gap would emerge. The exchange rate and FX reserves would come under pressure, inflation would rise,” the IMF warns.
What Can be Done to Avoid This?
The IMF isn’t just raising red flags, it’s also suggesting solutions. The report recommends a “firm commitment to program implementation”.
The Bretton Woods institution says the government must stick to its promises, such as cutting wasteful spending, collecting more taxes efficiently, and ensuring value for money in public investment.
Continued support from international development partner, the IMF, says can help plug financial gaps as the external financial support could ease pressure on the country’s foreign reserves and keep the economy afloat.
Why It Matters to You
You may not follow exchange rates or budget targets, but policy slippages can impact your daily life in real ways.
When the government misses its targets, the cedi weakens, and imported goods become more expensive. This leads to soaring inflation, making food, fuel, and transport costs go up.
It also becomes harder for businesses to plan and grow, which can affect jobs and income.
And if confidence dips, it could lead to delays in development projects, including roads, schools, and healthcare.
The Way Forward
Ghana cannot afford to derail the gains made so far despite the high risk. The IMF-supported economic recovery program is aimed at restoring stability, reducing debt, and building resilience.
The government has no option but to stay on course as the success of the program depends heavily on Ghana sticking to its playbook.
