According to the International Monetary Fund‘s (IMF) Africa Department Director, Abebe Selassie, Ghana has made the necessary tough economic decisions required to secure an IMF rescue package.
This is subject to bilateral creditors accepting assurances from the West African nation. Ghana's government has already increased taxes and imposed losses on domestic investors to meet IMF demands for a $3 billion loan.
Selassie stated in an interview that Ghana has done everything expected of them for the program, including a difficult domestic debt restructuring exercise.
The IMF's Executive Board will require written confirmation from bilateral lenders that they will provide relief to Ghana. China is a significant bilateral lender, accounting for roughly a third of Ghana's bilateral debt. The country's public debt at the end of November 2022 was 575.7 billion cedis ($50 billion).
The talks are being held under the Group of 20's Common Framework, which adds China and other countries to the Paris Club of sovereign creditors. The committee is expected to begin formal negotiations with Ghana over the next few days.
Selassie stated that if the IMF receives the necessary financing assurances, the Executive Board will go ahead quickly after that, within three to four weeks.
On March 27, Ghana's parliament unexpectedly increased interest rates to a record 29.5%, and five days later, a bill was passed to raise an additional 4 billion cedis ($353 million) in revenue this year.
The Finance Minister, Ken Ofori-Atta, stated that the fiscal measures and restructuring of cedi-denominated liabilities would help lower Ghana's public debt to 71% of gross domestic product (GDP) by 2028. The IMF stated that to qualify for support, the nation needs to be on track to drop to 55% by that year. Prior to the government's intervention, it had been projected to reach 109%.
Ghanaians are feeling the impact of the fiscal measures and the latest tax increases. Inflation has soared, and millions, such as Esther Annan, a street vendor in the capital, Accra, have seen their living standards drop.
Annan took out a micro loan to fund her cloth and bed-linen business in January but has missed weekly payments after local demand dried up, and interest rates increased. The Association of Ghana Industries‘ President, Humphrey Kwesi Ayim-Darke, said that the latest tax increases are an additional cost, and if the industry can no longer bear it, it will be compelled to cut costs, including labour and output.
Small and medium-sized companies, manufacturing, and agriculture are expected to be hardest hit due to their high-risk premium historically.
Three economists surveyed by Bloomberg have warned that a slowdown in credit growth and an expected drop in consumer spending could decelerate economic expansion this year.
Mark Bohlund, a senior credit research analyst with REDD Intelligence, stated that the downside risks to the government's 2.8% real GDP growth target for this year have increased on the back of the tightened monetary policy stance.
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