Ghanaian authorities are being urged to decisively address persistent challenges in the energy and cocoa sectors as part of efforts to sustain the country’s ongoing fiscal policy adjustment under the US$3billion IMF bailout programme.
This call comes as the IMF’s Executive Board approved the fourth review of its Extended Credit Facility (ECF), unlocking a further disbursement of US$367million.
The economy showed stronger-than-expected growth in 2024 and early 2025 on account of robust activity in mining, agriculture, ICT and manufacturing. However, core programme performance faltered at the end of last year due to pre-election fiscal slippages and delays in structural reforms.
Preliminary data showed a sharp rise in government arrears ahead of the December 2024 general elections, with inflation overshooting IMF targets. The metric closed the year at 23.8 percent – 80 basis points higher than the previous and more than double the Bank of Ghana’s aspirational upper limit.
In spite of the setback, the new administration has taken what the IMF described as “bold corrective actions”. IMF Deputy Managing Director Bo Li observed that authorities are strongly committed to restoring fiscal discipline and addressing the structural weaknesses that led to the slippages.
“Forcefully addressing challenges in the energy sector and related arrears is critical to containing fiscal risks,” he stated.
Without a shadow of doubt, the energy sector continues to be a significant burden on public finances. State-owned power utilities face mounting arrears due to inefficiencies in revenue collection, legacy debts and delays of cost-reflective tariff adjustments.
The power sector alone is estimated to have accumulated debts l US$3.1billion as of March 2025, with an estimated US$3.7billion needed to fully settle all outstanding arrears. In fact, analysts believe the situation poses a direct risk to fiscal consolidation efforts outlined in the bailout programme.
Similarly, the cocoa sector is also under pressure despite record prices for the commodity. Global cocoa prices experienced unprecedented volatility, peaking in the first quarter of 2025 at over US$10,700 per tonne due to severe supply shortages caused by poor weather and disease outbreaks in Ghana and Côte d’Ivoire.
This marked a 60-year high, driven by fears of a deepening global cocoa deficit. However, prices are begining to ease gradually – falling to around US$8,400 per tonne. Factors such as aging trees, disease outbreaks, smuggling to neighbouring countries and global price volatility have constrained earnings from one of Ghana’s key export commodities.
This notwithstanding, while authorities are doing their utmost to restore macroeconomic stability, the IMF’s expression of concern and caution to government over its control of the cedi’s stability merits attention.
The Institute of Economic and Research Policy Promotion (IERPP) concurs with the IMF position and further expresses vindication in that regard.
In its fourth review under the Extended Credit Facility Arrangement with Ghana, the IMF’s Executive Board expressed concern about how government has been pumping in forex to support the cedi against major currencies, instead of allowing market factors to determine the local currency’s stability.
Although the Bank of Ghana should maintain an appropriately tight monetary stance until inflation returns to its target, it must reduce its footprint in the foreign exchange market and allow for greater exchange rate flexibility.
In a statement signed by its Executive Director, Prof. Isaac Boadi – who is also Dean, Faculty of Accounting and Finance, UPSA – the IERP said it offered a similar caution to the government but its advice fell on deaf ears.
The IERPP observed that while this may make the currency look stable in the short-term, it distorts market dynamics. In fact, the IERPP accuses BoG of operating its market operations in an ad hoc and opaque manner.
There should be a healthy dialogue between the central bank and think-tanks like the IERPP in relation to economic policy; and this disconnect, we dare say, is problematic – especially when the IERPP says BoG and government show a clear disregard for both IMF and IERPP advice.
It would be great if the central bank came out to address these genuine concerns, since such operations often lead to uncertainty and speculation. We should allow the exchange rate to reflect actual market forces.
