Ghana awaits $360 million as 3rd IMF review begins

A mission from the International Monetary Fund (IMF) is currently in town for the third review of Ghana’s three year programme with the fund.

The review which started last Tuesday and expected to end on October 4, will assess the performance of the country in relation to the performance targets agreed with the fund under the programme which is aimed at restoring macro-economic stability and debt sustainability.

During the review, the IMF team would meet with the Minister of Finance, the Governor of the Bank of Ghana, and other top government officials to discuss the implementation of the programme, and the country’s economic performance and outlook.

The review will assess six Quantitative Performance Criteria (QPCs), four Indicative Targets (ITs), and a number of Structural Benchmarks (SBs) due by end June 2024 and those due before the Board date for the 3rd Review.

The outcome of the third review will determine the release of the next tranche of $360 million, which would bring total disbursement under the programme to $1.92 billion.
 

Background

After 11 months of negotiations, Ghana secured the approval of the Executive Board of the IMF in May 2023 for a three-year bailout programme which would see the country receive a total of $3 billion within the period of the programme.

After the successful approval, the country immediately received the first tranche of $600 million from the IMF.

The country has since received board approval for the first and second review of programme. The first review resulted in the release of $600 million, while the second review saw the release of $360 million.

 
Govt confident

Ahead of the review, the government had expressed confidence of meeting all the targets.

At the last monthly economic update, the Minister of Finance, Dr Mohammed Amin Adam, said preliminary data for the 1st half of 2024 indicates that the country was on track to meeting the targets for the 3rd Review.

He said it was expected that the IMF Executive Board would consider Ghana’s 3rd Review for approval by end December 2024, which will enable the Board to immediately disburse the 4th Tranche of US$360mn.
 

Fiscal consolidation

The Minister noted that the country’s fiscal consolidation programme was progressing smoothly as it continues to reign in public finances towards achieving fiscal and debt sustainability.

Provisional fiscal data for January to July indicates that total revenue and grants at the end of the period amounted to GH¢89.4 billion (8.8 per cent of GDP), 0.7 per cent above the programmed target of GH¢88.7 billion (8.7 per cent of GDP).

Total expenditure (commitment) also amounted to GH¢114.1 billion (11.2 per cent of GDP), 2.8 per cent below the budgetary provision of GH¢117.4 billion (11.5 per cent of GDP).

The overall budget deficit (on commitment basis) was GH¢24.8 billion (2.4 per cent of GDP), against the target of GH¢28.7 billion (2.8 per cent of GDP) and the deficit of 2.8 per cent of GDP recorded in the corresponding period of 2023.

The primary balance for the period was, therefore, a deficit of GH¢3.8 billion (0.4 per cent of GDP), against the deficit target of GH¢3.5 billion (0.3 per cent of GDP).

Economic growth has also rebounded strongly with the economy growing by 4.7 per cent in Q1 2024, exceeding the 3.1% target. In the second quarter, the economy grew by 6.9 per cent, the highest since second quarter of 2019.

Inflation, which peaked at 54.1 per cent in December 2022, has also declined, dropping to 20.4 per cent in August 2024

Debt restructuring

On the debt restructuring front, after successfully completing the domestic debt exchange, the government has formalized its agreement with the Official Bilateral Creditor Committee, who the country owes $5.1 billion.

The country is now waiting for the individual countries to formalise the agreement through the signing of an MoU.

On the commercial side, the government has reached a deal with Eurobond holders, who the country owes $13 billion. The deal will see Eurobond holders take a 37 per cent haircut on their loans to the government.

The government recently launched the consent solicitation and exchange offer to on the London Stock Exchange to seek the consent of investors to amend the original terms of the agreement.

The government has also reached an agreement with five of the seven independent power producers to restructure its debt, and has also sent an offer to external commercial private banks and contractors for a possible restructuring of its $2.8 billion debt to them.

All of these are expected to ensure that the government is fully on track to achieve its debt targets under the IMF programme.