Dr Ernest Addison, Governor of the Bank of Ghana
The Governor of the Bank of Ghana (BoG), Dr. Ernest Addison, has confirmed that the first tranche of $600 million out of the $3billion IMF bailout will hit the accounts of the central bank today, May 19, 2023,
The Governor stressed that the money would boost the country’s reserves and the Cedi, which is already doing very well in recent times.
Joining a virtual joint Government of Ghana/ IMF press conference in Washington DC yesterday, Dr. Addison said the approval of Ghana’s programme signaled the beginning of work to restore the country’s economy onto the path of growth.
He said aside the money that the IMF programme comes with, it also has a lot of benefits that would help steer the country’s economy out of the current challenges.
Revision of BoG Act
Ghana’s International Monetary Fund (IMF) programme will, among other things, revise the Bank of Ghana Act in a bid to strengthen the central bank’s independence and mitigate fiscal dominance.
The amendments to the BoG Act will feature a stricter limit for monetary financing, mechanisms to monitor and enforce compliance, and a clear definition of emergency situations under which the limit can be temporarily lifted.
Pending legislative changes, as part of the prior actions required by the IMF before Ghana got the deal, the BoG and the Ministry of Finance signed a memorandum of understanding (MoU) to eliminate monetary financing during the programme.
An ongoing updated Safeguards Assessment will provide additional support for designing changes to the BoG Act. It will review the authorities’ gold purchase and gold-for-oil programmes and associated risks for the BoG.
The BoG’s balance sheet is also expected to be affected by the debt restructuring. A report on the country’s programme issued by the IMF said the government and the BoG would assess the impact and develop plans for its recapitalization with Fund technical assistance support.
Previous fiscal/debt vulnerabilities
Following the IMF Executive Board discussion on Ghana, Kristalina Georgieva, Managing Director, said the combination of large external shocks and preexisting fiscal and debt vulnerabilities precipitated a deep economic and financial crisis in Ghana.
“In response, the authorities have launched a comprehensive reform program, to be supported by the ECF-arrangement. It is focused on restoring macroeconomic stability and debt sustainability as well as implementing wide-ranging reforms to build resilience and lay the foundation for stronger and more inclusive growth,” she said in a statement.
In the statement, Mrs Georgieva also stressed that capacity development and continued support by development partners would be critical for the successful implementation of the authorities’ programme.
“Fiscal consolidation is a core element of the programme. A substantial and front-loaded fiscal adjustment has started with the 2023 budget. Enhanced revenue and streamlined expenditure will be combined with policies to protect vulnerable households and create room for higher social and development spending in the medium term. With a view to fostering lasting fiscal discipline, the authorities are also advancing reforms to enhance domestic revenue mobilization, strengthen public financial management, and tackle the deep challenges in the energy and cocoa sectors,” the statement added.
It further disclosed that the government had also launched a comprehensive debt restructuring, including both domestic and external debt, to place debt on a sustainable path.
“Effective collaboration by all parties involved would be critical. Preserving financial sector stability is critical for the success of the programme. Given the adverse impact of the domestic debt restructuring on balance sheets of financial institutions, the authorities will devise and implement a comprehensive strategy to rapidly rebuild financial institutions’ buffers and exit from temporary regulatory forbearance measures,” it noted.
The IMF Managing Director noted in the statement that the monetary and exchange rate policies under the programme will focus on reining in inflation and rebuilding foreign reserve buffers.
It reiterated that the BoG will continue tightening monetary policy until inflation is on a firmly declining path and will eliminate monetary financing of the budget. It added that the central bank will also enhance exchange rate flexibility and limit foreign exchange interventions to rebuild external buffers.
“An ambitious structural reform agenda is being put in place to reinvigorate private sector-led growth by improving the business environment, governance, and productivity,” the statement said.
Ghana’s programme formidable
Relatedly, the IMF has said Ghana’s programme with the Fund is very rich and formidable in its structural components.
Providing insights into the programme during the joint Government of Ghana/ IMF press conference yesterday, the IMF Chief Mission for Ghana, Stephane Roudet, noted that the country’s support programme cover range of the country’s sector and will ensure that the economy will withstand shocks in the future.
“It is important to emphasise that this is a programme that is very rich in its structural components. It includes many reforms that cover a large range of sectors and these reforms will make the economy more resilient to shocks in the future. And this is what the government and the IMF are looking for in this programme. It is a programme that will make the economy more resilient and more likely to withstand shocks in the future,” Roudet reiterated.
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