As part of the program funded by the International Monetary Fund (IMF), the nation has until the end of June 2023 to meet three critical requirements.
In order to unlock the first review of the Extended Credit Facility arrangement in November 2023 and receive subsequent tranches of financial support—the second tranche of another US$600 million and five other tranches of US$360 million each after the semi-annual reviews are successfully completed—the country must comply with conditions relating to fiscal operations, financial sector stability, and energy sector reforms—among other terms—by the end of September 2023.
The initial requirement is for creating a clearance strategy, compiling an exhaustive inventory of payables across all government departments, and enacting structural changes to prevent further arrears.
Gaining insight into unpaid invoices, ensuring prompt clearance, and integrating commitment controls with the Government Integrated Financial Management Information System (GIFMIS) are the objectives. Sanctions under the Public Financial Management (PFM) Act shall be upheld in order to foster financial discipline, along with controls over spending outside of budgeted allotments. By the end of June, a plan will be developed to prevent the accumulation of arrears, focusing on giving authorized projects and purchase orders priority in the procurement process.
The second requirement focuses on bolstering the nation’s financial system and restoring institutions’ reserves while cooperating with the IMF. The impact of the domestic debt exchange and macroeconomic difficulties will be addressed through initiatives put into place by the Bank of Ghana (BoG). Restrictions on undercapitalized banking activities, improved transparency requirements, and incentives for early recapitalization will all be implemented. Financial firms with insufficient capital buffers will not be permitted to pay dividends.
Additionally, risk-based supervision will be encouraged to reduce excessive risk-taking, and government solvency assistance will promote structural improvements and private capital infusions. Priority will be given to the recapitalization of state-owned banks to ensure their long-term sustainability and parity with private banks.
The third requirement is that the new Energy Sector Recovery Plan be published following Cabinet approval. The plan must have clearly defined timeframes and metrics. In order to lessen the take-or-pay responsibility, power purchase agreements (PPAs) negotiations should also be completed. Along with measures to lessen revenue shortages brought on by subsidies, strategies to improve the performance of the Electricity Company of Ghana (ECG) and other state-owned businesses (SOEs) will be developed. To lessen the financial burden on the state, a new policy directive on the selection of new independent power producers (IPPs) will be released before the end of 2023.
Related news: From June 8 to June 15, an IMF team under the leadership of Stephane Roudet visited Ghana. The country’s economic development and the execution of the IMF-supported program announced in May 2023 were the main topics of debate.
Mr. Roudet welcomed encouraging economic stability indicators like declining inflation, rising foreign reserves, and a more steady currency rate. The first review of the Extended Credit Facility agreement will take place in November, and it will formally examine the authorities’ adherence to important commitments.
IMF employees interacted with high-ranking officials throughout the trip, including President Akufo-Addo, Vice President Mahamudu Bawumia, Finance Minister Ken Ofori-Atta, and Governor Ernest Addison of the Bank of Ghana. Meetings were also held with representatives of the commercial sector, civil society, and the Finance Committee of the parliament.
The IMF team expressed gratitude for the helpful cooperation and assistance it got from Ghanaian stakeholders and authorities throughout the assignment.
The conditions of the IMF-backed program being fulfilled successfully will strengthen the economic underpinnings and boost trust among foreign investors and lenders. The IMF team’s acknowledgement of the economy’s stabilization points to a promising path for the growth of the nation. For the government and its stakeholders, however, strict adherence to the deadline and efficient implementation of the necessary steps remain essential.