- says critical to sustaining fiscal reforms
- as fourth programme review successful
By Joshua Worlasi AMLANU & Ebenezer Chike Adjei NJOKU
The International Monetary Fund (IMF) has urged local authorities to decisively address persistent challenges in its energy and cocoa sectors as part of efforts to sustain the country’s ongoing fiscal policy adjustment under the US$3 billion bailout programme. The call comes as the IMF’s Executive Board approved the fourth review of the Extended Credit Facility (ECF), unlocking a further disbursement of US$367 million.
While the economy showed stronger-than-expected growth in 2024 and early 2025, on account of robust activity in mining, agriculture, ICT, and manufacturing – 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.
Despite this setback, the new administration has taken what the IMF described as “bold corrective actions,” including the enactment of a 2025 budget aimed at delivering a 1.5 percent primary fiscal surplus through a mix of revenue mobilisation and expenditure rationalisation.
IMF Deputy Managing Director, Bo Li noted that “the authorities are strongly committed to restoring fiscal discipline and addressing the structural weaknesses that led to the slippages. Forcefully addressing the challenges in the energy sector and addressing related arrears are critical to contain fiscal risks,” he added.
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 in cost-reflective tariff adjustments. The power sector is estimated to have accumulated debts totaling US$3.1 billion, as of March 2025, with an estimated US$3.7 billion needed to fully settle all outstanding arrears.
Analysts say the situation poses a direct risk to the fiscal consolidation efforts outlined in the bailout programme. This prompted the expedited introduction of the Energy Sector Levy (Amendment) Bill, which proposes a GH¢1 increase in the levy on petroleum products, aiming to generate an additional GH¢5.7 billion in revenue.
Similarly, the cocoa sector is also under pressure, despite record prices for the commodity. In 2025, global cocoa prices experienced unprecedented volatility, peaking in the first quarter at over US$10,700 per tonne due to severe supply shortages caused by poor weather and disease outbreaks in major West African producers like Ghana and Côte d’Ivoire.
This marked a 60-year high, driven by fears of a deepening global cocoa deficit. However, from April through June, prices began to ease gradually—falling to around US$8,400 per tonne—as forecasts pointed to an 8 percent year-on-year improvement in production and improved weather conditions.
Despite the decline, prices remained significantly higher than historical averages. Domestically, production and export volumes have fallen below expectations. 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.
Currently, the government is working to reverse the trend by reviewing the structure of COCOBOD operations and have begun steps to cut costs, enhance procurement transparency, and increase farmer incentives to reduce cross-border leakage.
The IMF has made it clear that improving the performance of state-owned enterprises (SOEs), particularly in energy and agriculture, is integral to the broader fiscal reform agenda. In its latest review, the Fund underscored the need for enhanced public financial management and tighter budget controls to ensure that spending commitments align with available resources.
The central bank has also taken action to support macroeconomic stability, tightening monetary policy to combat inflation and rebuild reserves. The Bank of Ghana has implemented additional supervisory measures targeting weak and undercapitalised banks, with a focus on recapitalisation and governance reforms. Officials say a risk-based monitoring framework has been escalated to identify systemic vulnerabilities in the financial sector.
Efforts to restructure public debt are also progressing. The government has secured a Memorandum of Understanding with official bilateral creditors under the G20 Common Framework and is now moving to finalise the necessary bilateral agreements. It is also engaged in talks with commercial creditors on terms consistent with the principle of comparability of treatment.
As a result of these developments, Ghana has seen a modest improvement in its international credit ratings, with agencies citing stronger fiscal signals and debt restructuring progress. Nonetheless, the IMF emphasised that the path to full macroeconomic stability remains fragile and dependent on continued reform.
“Improving tax administration, strengthening expenditure controls, and improving SOEs’ efficiency are of the essence to underpin durable adjustment,” Mr. Li stated.
The Fund reiterated that tackling energy sector inefficiencies and boosting cocoa sector performance will be decisive in safeguarding Ghana’s fiscal reform efforts and in preventing a repeat of the slippages that undermined performance in 2024.
