Ghana has received the majority of its $3 billion IMF bailout package, but the economic impact remains limited. So far, $1.9 billion, or about 63%, of the total funds has been disbursed over four tranches, with $1.1 billion left to be accessed by the end of the three-year programme.
The IMF bailout, initiated in 2022, was sought after Ghana’s debt soared to unsustainable levels, with $50 billion (761 billion cedis) in liabilities. In exchange for the bailout, Ghana implemented significant debt restructuring, marking the first time in its 17 IMF bailouts that the country underwent painful restructuring, affecting pension funds and investors. This restructuring led to severe haircuts on investments and crippled the once-thriving bonds market.
Despite securing the funds and achieving some economic stability, challenges persist. The high cost of living and inflation continue to plague citizens, and although the exchange rate improved slightly in recent weeks due to a dollar inflow of over $600 million between November 11 and 27, the broader economic outlook remains bleak. Inflation, which had significantly decreased earlier, is climbing again, and budget deficits remain concerning.
Although the IMF has praised Ghana’s economic performance as “satisfactory,” it also emphasized that continued efforts in fiscal policy adjustment and domestic revenue mobilization are necessary. The IMF has stressed the importance of staying on course with macroeconomic adjustments, especially in the energy sector, to contain fiscal risks and enhance debt sustainability.
This fiscal path could limit the flexibility of any future government, as Ghana approaches its 2024 elections. If a new administration takes over, particularly from the opposition party led by John Mahama, they may seek to renegotiate the IMF terms to introduce some flexibility in the agreement. Mr. Mahama has hinted at engaging the IMF for a potential review of the bailout conditions.
The IMF expects the government to maintain fiscal discipline and continue reforms to stabilize the economy. Key areas of focus include improving tax administration, strengthening expenditure controls, managing arrears, and reforming state-owned enterprises. The next government will face challenges in aligning its economic agenda with the stringent IMF conditions if it does not secure a renegotiation of the terms.
