Bold economic reforms yielding positive results – IMF

The economy is displaying promising signs of progress following a series of robust economic reforms aimed at achieving macroeconomic stability and sustainable growth, Dr. Leandro Medina – the IMF Resident Representative in Ghana, has said.

The IMF Resident Representative highlighted the favourable outcomes of these reforms, shedding light on the country’s focus on fiscal consolidation, debt sustainability and inclusive growth, supported by the International Monetary Fund bailout.

“We’re witnessing substantial headway on all fronts: restoring macroeconomic stability, ensuring debt sustainability and laying the groundwork for inclusive growth. Good progress is being made on all these fronts,” Dr. Medina told the B&FT.

He noted that among these noteworthy achievements is the authorities’ resolve to advance fiscal consolidation and fortify public finances, signalling a confident stride toward economic recovery.

Furthermore, Dr. Medina highlighted the success in monetary policy, noting: “Macroeconomic stabilisation is evident in various indicators. Despite the intricacies of the global economic landscape, international reserves have experienced growth and exchange rate volatility has been reduced”.

Turning to the IMF’s engagement with Ghana, Dr. Medina revealed that the impending first review of the programme is set to unfold: “In September, an IMF mission will visit Accra to appraise performance against established quantitative and structural benchmarks. Positive outcomes will pave the way for presenting the first review to the IMF’s Executive Board for approval – unlocking a second disbursement of approximately US$600million and further reinforcing Ghana’s economic revival”.

Ghana’s pursuit of economic stability further materialised with the IMF Executive Board’s endorsement of a 36-month arrangement under the Extended Credit Facility (ECF) in May 2023. This arrangement, amounting to around US$3billion, underscores the restoration of macroeconomic stability, debt sustainability and the execution of diverse reforms fostering resilience and inclusive growth.

Though Ghana’s journey to recovery has encountered challenges, including severe fiscal and debt vulnerabilities intensified by external shocks, the authorities’ decisive measures – comprising fiscal consolidation and a comprehensive debt restructuring strategy – have instilled optimism in the nation’s economic trajectory.

A pivotal contributor to this trajectory has been the prudent monetary policy adjustments implemented by the Bank of Ghana. Inflation, having peaked at 54 percent in December, has receded to approximately 40 percent in recent months – with a reported rate of 43 percent as of July 2023. An uptick in inflation, primarily due to increased food and imported product prices, has however emerged. Nevertheless, a steadfast execution of the monetary policy is anticipated to sustain a downward trend in inflation moving forward.

The IMF representative delved into Ghana’s commitment to debt sustainability, pointing to substantial progress made through comprehensive debt restructuring. The domestic debt exchange, concluded in February, marked a crucial milestone; with ongoing efforts to address outstanding debts encompassing US dollar-denominated debt and cocoa bills. Meanwhile, collaborative engagement with external creditors remains integral to securing the requisite agreements for external debt restructuring.

Notably, a second round of the Domestic Debt Exchange Programme (DDEP) commenced on June 28, 2023, aiming to restructure GH¢123billion of public debt to fulfil criteria for the IMF ECF programme. The restructuring efforts encompass domestic dollar bonds, cocoa bills and pension funds.

In consonance with broader objectives of the economic programme, Dr. Medina emphasised the significance of inclusive growth and social protection; and government’s strategic reforms to enhance domestic resource obilization, improve public financial management and foster an enabling environment for private sector development.

The expansion of social protection initiatives, including the Living Empowerment Against Poverty (LEAP) and school feeding programme, underscores a resolute commitment to safeguarding vulnerable segments of the population during economic hardships, he added.