The return to IMF: the good, the bad and the ugly  


After months of insisting on home-grown solutions to navigate mounting economic challenges, managers of the economy appear to have buckled under the weight of an increasingly tighter economic environment and the nation is poised to return to the International Monetary Fund (IMF) for assistance, for the 18th time.

Notice of the imminent return to the Bretton Woods institution for fiscal support was contained in a communique from the Ministry of Information, indicating that with the full backing of cabinet, President Nana Addo Dankwa Akufo Addo, has authorised the Ministry of Finance to “commence formal engagements with the IMF, inviting the Fund to support an economic program put together by the government of Ghana.”

One will ask, why the sudden U-turn when government spokespersons, as recently as last Thursday, were still vehemently insisting that the IMF is a no-go area? The answer is simple! There is also no option left without going to the IMF. In fact, the figures show that going to the IMF is either now or never.

The dire situation

Government in 2022 is facing a daunting challenge of ballooning public debt, which is about 80 percent of gross domestic product (GDP); unprecedented interest costs, with interest payments ranging about GH¢10.6 billion, equivalent to 82.4 percent of tax revenue as of the end of the first quarter of 2022, amid rising cost of financing its budget in face of incessant consumer inflation, which currently is at 27.6 percent.

The country’s dwarfed revenue performance which stood at GH¢16.62 billion in Q1 2022 less than the target of GH¢19.18 billion; amid high government expenditure of GH¢ 26.95 billion in the same period.

Again, the country currently is under a spell of low credit rating from all international rating agencies. Standard & Poor’s credit rating for Ghana stands at B- with a stable outlook. Moody’s credit rating for Ghana was last set at Caa1 with a stable outlook. Fitch’s credit rating for Ghana was last reported at B- with a negative outlook. In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of countries, thus, having a big impact on its borrowing costs.

According to the central bank’s summary of macroeconomic and financial data, the balance of payments position of the country has worsened. Some significant outflows from net portfolio reversals and net private capital outflows, resulted in an overall balance of payments deficit of US$934.46 million for the first quarter of 2022, compared with a deficit of US$429.93 million, the same time last year. The prevailing tight global financing conditions and further policy rate hikes in advanced economies continue to pose risks to the external outlook.

Gross International Reserves (GIR), at the end of April 2022, stood at US$8.34 billion, equivalent to 3.7 months of import cover. This compares with US$9.70 billion, equivalent to 4.3 months of import cover at end-December 2021.

In fact, compared with the last time the economy received a bailout package from the IMF – an extended credit facility (ECF) in 2015, total public debt in 2014 was 67.6 percent of GDP. Budget deficit was 9.4 percent; revenue was 18.4 percent of GDP, as expenditure had shot up to 27.8 percent; inflation was 15.5 percent; and GIR was only 3 months of import cover.

So, if the current macroeconomic environment is compared with the 2014 situation, it is clear that there should be no arguments about the unhealthy state of the economy, hence, the same rehabilitation remedy must be applied to bring it back to shape.

“Logically, the time is ripe for another Fund-supported Program given our last program support that ended in December 2018/March 2019 reporting date,” Prof. Godfred Bokpin, Senior Economist at the University of Ghana Business School said in an early engagement. “Ghana has spent much quality time under the care of the IMF than on our own since independence.”

The IMF programme would foster fiscal discipline/fiscal consolidation reflecting expenditure restraint and revenue enhancement, leading to macroeconomic stability. This will further boost the policy credibility of the government, ensuring a revival of investor confidence in the economy.

The country could receive a balance of payments support of up to US$3 billion through the low-cost financing from the extended credit facility (ECF); shoring up confidence in the economy.


The norm is such that when a country borrows from the IMF, its government agrees to adjust its economic policies to overcome the problems that led it to seek financial aid.

Conditionality guards the design of IMF-supported programs—that is, macroeconomic and structural policies—and the specific tools used to monitor progress toward goals outlined by the country in cooperation with the IMF.

Accordingly, the conditionality would help the country solve balance-of-payments problems without resorting to measures that may be detrimental to its economy. At the same time, the measures are meant to safeguard IMF resources by ensuring that the country’s balance of payments will be strong enough to permit it to repay the loan.

Although the programme’s objectives and policies depend on country-specific circumstances, in the case of Ghana, the overarching goal will be to restore balance-of-payments viability and macroeconomic stability while setting the stage for sustained, high-quality growth.

The IMF’s last review of the conditionality framework recommended measures to improve the realism of projections, sharpen debt sustainability analysis, enhance the quality of fiscal consolidation, and improve the tailoring of structural conditions

Historic Return

Ghana first approached IMF in 1965 for a fund-supported programme but was rejected by the government then. Ghana since then has visited the Fund 16 times, or 17 times, given the recent Rapid Credit Facility (RCF) approved in April 2020.

Historically, the country returns to the IMF for programme support on average every three years and some few months since independence or every 4 years.

Side Effect of the IMF programme

Despite the gains, that country stands to attain with this programme, going to IMF typifies our incapability in managing our affairs after so many years of independence.

IMF already is advising developing countries to pursue steep austerity in the midst of inequality worsening pandemic.

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