Ghana Aiming to Boost Economy With IMF Assistance

Ghana hopes to enter into an assistance program with the IMF to improve its economy, after a similar program brought growth to the country five years earlier

It was in August when the International Monetary Fund (IMF) Management received a formal request from the Ghanaian authorities to initiate discussions on an economic program that could be supported by the IMF. Now in September, after talks with the IMF began earlier this month, Ghana’s President John Mahama hopes his country can begin a three-year financial assistance program with the IMF by January, according to comments released by his office on Thursday.

Ghana’s outcry for IMF assistance is an attempt to repeat the success of last time it went to the IMF five years ago. The then resulting three-year program helped the country raise its real GDP growth rate from about 4% in 2009 to 7.9% in 2012 with a crest of 14.4% in 2011.

Despite the rise of the economy in these years, the trend slowed down last year with a growth of about only 5.4%, and IMF forecasts of about 4.8% this year. The underlying problems have fuelled up the inflation rate to a record level of 15%, devalued the Ghanaian currency—the cedi—by 37% against the US dollar since the beginning of the year, and the central bank policy rate increased to 19% in July.

The economic performance of Ghana has been inundated by what experts call the “twin deficits” of fiscal and current account deficits. Higher salaries and inferior gold and cocoa processes are quoted to be the major drivers of this twin deficit situation.

A recent Fitch rating suggested stabilisation of sovereign rating credit outlook, which is currently B minus, with the application of an IMF program that supports fiscal consolidation and addresses macroeconomic imbalances in Ghana. The suggestion, however, comes with a warning. Consideration should be given, as experts say that, “an IMF program is not a foregone conclusion, nor is its effective implementation as a lasting reduction in exchange rate and funding pressures is unlikely until a program is agreed and a credible deficit reduction strategy is implemented.”

An IMF program will definitely act as a life saver for Ghana, but the key challenge is for the Government to utilise all resources and employ all stakeholders back on the track of sustainable growth by implementing the necessary measures.

There are high hopes in the international community that the three-year IMF program will initialise and stabilise the macroeconomic environment of the country. As per government sources, an initial round of talks with the IMF was due to end on Thursday. 

-->