Ghana would receive about US$940 million from the International Monetary Fund (IMF), to help the country turn the ailing economy around.
According to a statement from the IMF, Ghana could be supported with a total of “SDR 664 million (around US$940 million), or 180 percent of Ghana’s IMF quota” and “consideration by the Executive Board is tentatively scheduled in early April 2015.”
This was revealed at a press conference on Tuesday but the funds will be released to Ghana after final approval by the IMF board. The IMF team, led by Joel Toujas-Bernate clarified that the $940 million is for balance of payment supports and not direct budgetary injections.
Mr Toujas-Barnate is quoted in the statement as saying “the IMF mission and the Ghanaian authorities reached staff level agreement on an economic program aimed at overcoming the country’s economic challenges, supporting stronger economic growth and lower inflation.”
Three pillars of the IMF deal;
1. Restrain and prioritise public sector spending
2. Increase tax collection
3. Strengthening the effectiveness of the Bank of Ghana’s monetary policy role
IMF’s take on Ghana’s economic problem
According to the IMF, Ghana experienced three difficult years characterized by declining economic growth, increasing inflation rates, rising debt levels and financial vulnerabilities adding that in 2014 economic growth reached its lowest level in many years, with non-oil GDP growing at 4.1%, in the context of high interest rates, a fast depreciating currency, low aggregate demand and a deepening energy crisis.
“Inflation reached 17%, well above the Central Bank’s inflation target.” IMF further noted that large fiscal deficit caused by a ballooning wage bill, poorly targeted energy subsidies and commodity price shocks pushed government debt and financing costs to very high levels, and made the economy more vulnerable to roll-over risks, despite the implementation of corrective measure in the last couple of years.
“These domestic balances resulted in a weakened external position and pressure on the exchange rate, with international reserves covering just a few days of import coverage in September 2014,” the statement added.
Government petitioned the IMF in 2014 for a possible bailout because of high inflation rates, depreciation of the cedi, huge wage bill, among others. In early February 2015 Government said it had concluded most of the outstanding issues concerning the negotiations with the IMF. This was according to the Head of the Ghana’s negotiation team, Dr. Kwesi Botchway who said the programme would take off not later than April 2015 when the IMF Executive Board meets.