IMF bailout: Ghana expects to receive third tranche of US$360 million on July 1

Ghana expects to receive a third tranche of US$360 million by Monday, 1st July 2024, which will bring the total disbursement to US$1.56 billion, following the International Monetary Fund’s (IMF) approval of the second review of the country’s Extended Credit Facility (ECF) Arrangement.

This latest development marks a significant milestone in Ghana’s economic reform journey and provides a substantial boost to the nation’s ongoing recovery efforts.

Dr. Mohammed Amin Adam, Ghana’s Finance Minister, announced the impending disbursement, stating, “This is yet an important positive development in our journey towards macroeconomic stability.”

The minister’s comments came after the IMF Executive Board’s decision to complete the second review of Ghana’s US$3 billion, 36-month ECF Arrangement, which was initially approved in May 2023.

The IMF’s assessment of Ghana’s performance under the program has been notably positive. According to the Fund, “Ghana’s performance under the IMF-supported program has been generally strong. All quantitative performance criteria for the second review and almost all indicative targets were met.”

This strong performance has paved the way for the immediate disbursement of SDR 269.1 million, equivalent to about US$360 million.

The IMF highlighted that Ghana’s economic reform program is delivering on its objectives. Following acute economic and financial pressures in 2022, the Fund-supported program has provided a credible anchor for the government to adjust macroeconomic policies and implement reforms. These efforts aim to restore macroeconomic stability and debt sustainability while laying the foundations for higher and more inclusive growth.

Deputy Managing Director of the IMF, Kenji Okamura, praised Ghana’s progress, stating, “The authorities’ strategy aimed at restoring macroeconomic stability and reducing debt vulnerabilities is paying off, with clear signs of stabilization emerging.”

He noted that growth has proven more resilient than initially expected, inflation is declining at a faster pace, and both fiscal and external positions have shown significant improvement.

Significant progress has been made in several key areas. Ghana’s primary fiscal balance improved by over 4 percent of GDP last year, and authorities are committed to further fiscal consolidation. The Bank of Ghana has maintained a prudent monetary policy stance, contributing to a rapid reduction in inflation and steps to rebuild international reserves.

On the debt restructuring front, Ghana reached an agreement with its Official Creditor Committee under the G20’s Common Framework on June 11, 2024. This agreement provided the necessary financing assurances for the completion of the second ECF review. Additionally, the authorities have recently reached an agreement in principle with representatives of Eurobond holders on a restructuring consistent with program parameters.

While the outlook remains favorable, the IMF cautions about potential downside risks, particularly those related to the upcoming general elections in December 2024. Okamura emphasized the importance of sustaining reform efforts, stating, “Going forward, perseverance in macroeconomic policy adjustment and reforms is essential to fully restore macroeconomic stability and debt sustainability, while fostering a sustainable increase in economic growth and poverty reduction.”

The IMF recommends that Ghana continue to focus on mobilizing domestic revenue, streamlining public spending, and finalizing its comprehensive debt restructuring. The Fund also stresses the importance of maintaining a tight monetary stance, enhancing exchange rate flexibility, and implementing banks’ recapitalization plans to ensure financial sector stability.