Economy on 'path of sustained recovery' – Finance Minister

The Minister of Finance has expressed confidence in the country’s economic recovery trajectory, following International Monetary Fund (IMF) approval of the second review under its US$3billion Extended Credit Facility (ECF) arrangement.

“I am confident that our economy is certainly on the path of sustained recovery, and we will continue to work tirelessly to ensure sustainable growth and prosperity for all Ghanaians,” Dr. Mohammed Amin Adam said at a joint media briefing in Accra.

The IMF’s approval, announced on June 28, 2024, allows for an immediate disbursement of US$360million to Ghana, bringing the total disbursements under the arrangement to US$1.6billion. This development marks a significant step in the country’s economic reform programme, which began in May 2023.

Dr. Adam highlighted several key achievements that have bolstered Ghana’s economic outlook. In June 2024, the country reached agreements on debt restructuring with both official creditors and Eurobond holders.

“We have reached an agreement with OCC on the restructuring of US$5.1billion, which will lead to debt service relief of US$2.8billion between 2023-2026,” he explained.

Additionally, an agreement with Eurobond holders on restructuring US$13.1billion is expected to result in a debt cancellation of US$4.7billion and provide debt service relief of US$4.4billion over the same period.

The finance minister emphasised government’s commitment to fiscal consolidation, even in an election year. “We are committed to enhancing domestic revenue mobilisation and tightening expenditure commitment controls to avoid policy slippages,” Dr. Adam assured.

This commitment aligns with the IMF’s observations, as noted by Stéphane Roudet – the IMF Mission Chief for Ghana, who confirmed that the country’s primary fiscal balance improved by over 4 percent of GDP last year.

Mr. Roudet praised Ghana’s progress, stating: “Ghana’s economic reform programme is delivering on its objectives. Following acute economic and financial pressures in 2022, the Fund-supported programme has provided a credible anchor for government to adjust macroeconomic policies and implement reforms to restore macroeconomic stability and debt sustainability”.

The signs are that the IMF’s assessment of the country’s performance under the programme has been largely positive.

Mr. Roudet noted that all quantitative performance criteria for the second review and almost all indicative targets were met. He also acknowledged the progress made on key structural reforms, despite some delays.

The Bank of Ghana’s role in maintaining a prudent monetary policy stance was recognised as crucial in the country’s economic recovery.

According to Mr. Roudet, this has contributed to a rapid reduction in inflation and steps to rebuild international reserves. The central bank has also taken measures to preserve financial sector stability, including ensuring the implementation of banks’ recapitalisation plans.

Dr. Adam outlined some unique features of Ghana’s debt restructuring process, including its completion in record time and the fact that it marks the first time an international debt restructuring has been commenced and completed by the same administration.

He stated: “While the restructuring process has been challenging, we deliberately chose to implement an economic reset – recognising that starting anew in the post-COVID-19 pandemic and global inflation era would provide Ghana with the best opportunity to achieve sustainable growth and development”.

While the overall outlook is positive, both the finance minister and IMF representative cautioned about potential challenges.

Mr. Roudet noted that while the medium-term outlook is favourable, it is subject to downside risks; including those related to the upcoming general elections.

The IMF emphasised the importance of sustaining macroeconomic policy adjustment and reforms to fully restore stability and debt sustainability.

He stated: “Looking ahead, sustaining macroeconomic policy adjustment and reforms is essential to fully and durably restoring macroeconomic stability and debt sustainability – especially during the upcoming electoral period -while fostering a sustainable increase in economic growth and poverty reduction,” he stated.

Dr. Adam acknowledged the support of bilateral and multilateral partners, including the OCC, IMF, and World Bank, who provided financial assistance and facilitated the restructuring process. He extended gratitude to bondholders for their constructive engagement and to Ghana’s OCC co-chairs, China and France, for their leadership and support.