THE IMF has approved the second review of Ghana’s $3bn loan programme, enabling the immediate release of nearly $360 million. This decision follows Ghana’s successful negotiation with its official creditor committee, a crucial step to unlocking the second tranche of funds.
This new disbursement brings the total IMF assistance to Ghana under the three-year bailout programme to $1.56bn. This programme is designed to help the country navigate its worst economic crisis in a generation.
In a statement, the IMF praised Ghana’s progress under the programme. ‘The authorities’ strategy aimed at restoring macroeconomic stability and reducing debt vulnerabilities is paying off, with clear signs of stabilisation emerging,’ said IMF Deputy Managing Director Kenji Okamura.
Ghana’s central bank expects to receive the funds within the next two days. The country turned to the IMF for support in 2022 as it faced a sharp decline in its cedi currency and soaring inflation, driven by high debt-service costs, overspending, the Covid-19 pandemic, the conflict in Ukraine, and elevated global interest rates.
Since then, Ghana’s economy has shown signs of recovery. Economic growth was reported at 2.9 percent in 2023, with a first-quarter growth of 4.7 percent in 2024. Inflation has decreased from a peak of over 54 percent in December 2022 to 23.1 percent in May 2024. However, the cedi continues to depreciate.
‘Going forward, perseverance in macroeconomic policy adjustment and reforms is essential to fully restore macroeconomic stability and debt sustainability,’ Okamura emphasised.
Ghana has been restructuring its $30bn debt under the G20’s Common Framework mechanism. Recently, the country reached an agreement in principle with two bondholder groups to restructure around $13bn of its debt. This agreement, a significant step towards completing its debt overhaul, involves bondholders agreeing to forego approximately $4.7bn of their loans and providing cash flow relief of about $4.4bn until the programme ends in 2026.
As part of the restructuring agreement, holders of Ghana’s debt instruments will experience a principal ‘haircut’ of up to 37 percent, according to the deal’s details.
The IMF’s approval and subsequent disbursement of funds are expected to further stabilise Ghana’s economy, providing essential financial support and reinforcing the country’s ongoing efforts to achieve macroeconomic stability and sustainable debt levels.
Background: economic challenges and recovery efforts
Ghana sought IMF assistance in 2022 during a period of severe economic distress. The country’s currency, the cedi, had plummeted, and inflation rates soared due to high debt-service costs and multiple external factors, including the global economic fallout from the Covid-19 pandemic and the geopolitical impact of Russia’s invasion of Ukraine. High global interest rates further exacerbated the country’s financial struggles.
Despite these challenges, Ghana has shown resilience and a commitment to implementing necessary reforms to stabilise its economy. The approval of the second tranche of the IMF loan underscores the international community’s confidence in Ghana’s recovery strategy.
Debt restructuring under the G20 Common Framework
A critical component of Ghana’s economic recovery strategy has been the restructuring of its substantial debt. Under the G20’s Common Framework mechanism, Ghana has been negotiating with its creditors to alleviate its debt burden. The recent agreement to restructure around $13bn of its debt, including significant concessions from bondholders, marks a crucial milestone in this process.
The restructuring deal aims to provide Ghana with immediate cash flow relief and long-term financial stability. By agreeing to a principal ‘haircut’ of up to 37 percent, bondholders are playing a key role in facilitating the country’s economic recovery.
Future prospects and continued reforms
Looking ahead, Ghana’s economic outlook appears cautiously optimistic. The IMF’s support, combined with the successful implementation of macroeconomic reforms and debt restructuring, provides a solid foundation for sustained economic recovery. However, ongoing efforts in policy adjustments and reforms will be essential to ensure long-term stability and growth.
The Ghanaian government remains committed to these reforms, focusing on maintaining fiscal discipline, enhancing revenue collection, and improving public financial management. These measures are crucial for building a resilient economy capable of withstanding future shocks and fostering sustainable development.
The IMF’s approval of the second review of Ghana’s loan programme and the subsequent disbursement of $360 million represent a significant step forward in the country’s journey towards economic recovery. As Ghana continues to navigate its economic challenges, support from international partners and the steadfast implementation of reforms will be vital in achieving a stable and prosperous future.
