By Joshua Worlasi AMLANU & Ebenezer Chike Adjei NJOKU
Ghana has officially requested modifications to the conditionality of its IMF-supported Extended Credit Facility (ECF) programme, as outlined in the recent third review staff report for the Post-COVID-19 Programme for Economic Growth (PC-PEG).
Among the requested modifications are changes to key performance criteria (PCs) and indicative targets (ITs) for the period ending June 2025. These include modifying the primary balance PC and the non-oil revenue IT to accommodate higher nominal GDP projections while maintaining fiscal effort relative to GDP.
Additionally, targets for net international reserves (NIR) for March and June 2025 would be lowered to account for updated foreign exchange cash flow projections.
The Monetary Policy Consultation Clause (MPCC) bands through mid-2025 are also set to be adjusted upwards. This change reflects the impact of recent macroeconomic trends on expected inflation trajectories. Social spending monitoring will now focus on disbursements to ministries, ensuring timely transfers to beneficiaries.
These adjustments are intended to reflect changing macroeconomic conditions and align the programme with the nation’s fiscal realities.
Finance Minister Dr. Mohammed Amin Adam and Governor of the Bank of Ghana, Dr. Ernest Addison, stressed the importance of these adjustments in a joint letter to the IMF.
“The modifications reflect macroeconomic developments, including higher nominal GDP and debt-related payments, while maintaining the integrity of the programme,” they stated.
The government is also introducing an asymmetric adjustor for non-oil revenue, which will account for a one-off dividend from the Energy Sector Levy Act (ESLA) in December 2024. This aims to better capture revenue performance under exceptional circumstances.
Furthermore, nine new structural benchmarks (SBs) for reforms critical to the programme’s objectives will be established. These benchmarks, along with PCs and ITs for December 2025, underscore Ghana’s commitment to long-term fiscal sustainability and macroeconomic stability.
Strong performance under programme
Despite the challenges, the broad performance under the IMF programme has been described as satisfactory. The country met all end-June 2024 quantitative performance criteria and indicative targets. Inflation rates have declined faster than anticipated, remaining within the MPCC’s lower band. This allowed the BoG to lower its policy rate by 300 basis points in 2024.
The government achieved a significant reduction in the fiscal deficit, bringing the primary fiscal balance from a deficit of 4.3 percent of GDP in 2022 to 0.3 percent in 2023. A surplus of 0.5 percent is projected for 2024. While some structural benchmarks were delayed, progress continues, with the implementation of a new cedi reference rate methodology in September and ongoing efforts to update the taxpayer registry.
Debt restructuring progress
The nation has made notable efforts in addressing its debt burden, completing the domestic debt restructuring process in 2023 and advancing external debt restructuring efforts. The updated request to the IMF includes adjustments to the NIR floor to accommodate large payments associated with this restructuring.
The letter to the IMF reaffirmed the government’s dedication to the programme, which is monitored through semi-annual reviews. It includes continuous performance criteria related to exchange restrictions and reforms under IMF Article VIII.
The government has committed to consulting with the IMF before adopting further measures and ensuring timely implementation of agreed actions.
Dr. Adam and Dr. Addison expressed optimism about the programme’s trajectory, stating: “We remain committed to working closely with the IMF to ensure the programme’s success and to provide the necessary information for monitoring progress”.
