IMF Reaches Agreement with Ghana to Unlock $370 Million Loan Under Extended Credit Facility

KEY POINTS

The IMF and Ghana have reached a staff-level agreement to unlock $370 million under the country’s three-year Extended Credit Facility, bringing total disbursements to $2.4 billion.

Ghana’s economy has shown growth in 2024, but fiscal slippages, inflation, and delays in reforms have created significant challenges, which the government is addressing through various measures.

Structural reforms in public financial management, governance, and key sectors like energy and SOEs are central to Ghana’s ongoing efforts to stabilize its economy and manage debt restructuring.

The International Monetary Fund, IMF, has reached a staff-level agreement with the Ghanaian government on the fourth review of its three-year Extended Credit Facility (ECF) program.

This agreement, announced on Tuesday after a two-week mission in Accra, marks a significant step towards securing an additional $370 million in financial assistance for Ghana.

The disbursement, which is subject to approval by the IMF’s executive board, will bring the total amount Ghana has received from the IMF under this credit program to approximately $2.4 billion since May 2023.

Led by Stéphane Roudet, the IMF mission assessed the country’s economic performance and progress in implementing the necessary reforms. Roudet emphasized that while the country’s economic growth in 2024 exceeded expectations, driven by strong performance in the mining and construction sectors, there were still significant hurdles. “Growth in 2024 was higher than expected, underpinned by strong mining and construction activity,” Roudet noted. “The external sector has seen considerable improvement, with solid exports, particularly gold, and higher remittances contributing to a significant increase in international reserves.”

However, despite these positive developments, the IMF also highlighted challenges faced by the government. Preliminary fiscal data indicated a deterioration in the country’s performance at the end of 2024.

According to The Cable, the IMF pointed to slippages in fiscal management ahead of the 2024 general elections, citing a large accumulation of payables. In addition, inflation exceeded program targets, and several key reforms were delayed across fiscal, financial, and energy sectors.

A comprehensive structural reform agenda by IMF

Beyond fiscal measures, the IMF’s discussions also revolved around the Ghanaian government’s broader structural reform agenda, which includes improving governance and transparency, especially in State-Owned Enterprises (SOEs).

In particular, the IMF highlighted reforms in the gold, cocoa, and energy sectors. The resumption of quarterly electricity tariff adjustments, combined with structural reforms, is expected to reduce the energy sector shortfall and stop the accumulation of new arrears.

“The focus on structural reforms in key sectors, such as energy and SOEs, is essential for the country’s long-term fiscal sustainability,” Roudet remarked. The IMF’s report emphasized that financial stability is being maintained, thanks to ongoing recapitalization efforts and the government’s commitment to strengthening public banks.

The Ghanaian government is also committed to completing its comprehensive public debt restructuring, which is crucial for restoring long-term debt sustainability.

An agreement with Ghana’s Official Creditors Committee (OCC) under the G20 Common Framework has been signed, and the focus is now on finalizing bilateral agreements to implement the Memorandum of Understanding (MoU).