The International Monetary Fund (IMF) has raised concerns about the potential risks that the upcoming general elections in December 2024 could pose to the progress made under its programme with Ghana.
The IMF’s statement highlighted that while Ghana’s medium-term outlook remains favorable, there are significant downside risks associated with the elections.
The IMF emphasized the importance of keeping Ghana’s domestic revenue mobilization agenda on track and tightening expenditure commitment controls to avoid policy slippages ahead of the elections. These measures are crucial to sustaining the macroeconomic stability and debt sustainability achieved so far.
“Keeping the domestic revenue mobilization agenda on track and tightening expenditure commitment controls is critical to avoid policy slippages ahead of the December 2024 general elections,” the IMF stated.
The IMF also stressed the need for Ghana to continue implementing the programme as planned, focusing on sustainable growth and poverty reduction. The statement noted that sustaining macroeconomic policy adjustments and reforms is essential for restoring long-term macroeconomic stability and debt sustainability.
Ghana’s Performance Under the IMF Programme
Despite concerns related to the elections, the IMF acknowledged Ghana’s strong performance under the programme. Ghana has made significant progress in meeting quantitative objectives, such as budgetary performance, and in implementing structural reforms.
These reforms are aimed at making the economy more resilient, improving public finances, and laying the foundations for stronger, more inclusive growth.
The IMF praised the Ghanaian authorities for their commitment to the programme objectives. “The authorities have so far demonstrated a strong commitment to the programme objectives, and we welcome Finance Minister Adam’s signaling of the government’s continued commitment to the policies under the programme,” the statement read.
IMF Deputy Managing Director Gita Gopinath commended the Ghanaian government and the Bank of Ghana for their decisive actions to contain inflation and rebuild foreign reserve buffers. However, she emphasized the importance of maintaining a tight monetary stance and enhancing exchange rate flexibility to support these efforts.
Signs of Economic Stabilization
Despite the challenging global economic environment, the IMF noted that Ghana’s reforms are showing positive results. Economic growth has proven more resilient than initially anticipated, and inflation is declining rapidly from its 2022 highs.
Additionally, the fiscal and external positions have improved, with the Bank of Ghana’s international reserves increasing.
The IMF applauded Ghana for providing the necessary financing assurances for the second review under the Extended Credit Facility (ECF) Arrangement. Ghana has also reached an agreement in principle with Eurobond holders on restructuring, consistent with programme parameters.
Background of the IMF Programme
In May 2023, Ghana secured an IMF programme to support its post-COVID economic recovery. The programme has three main objectives: which includes fiscal consolidation, Structural Reforms, and Inflation Control.
Implementing large and frontloaded measures to bring public finances back on a sustainable path through domestic revenue mobilization and efficient public spending. The programme also includes efforts to protect vulnerable populations.
Ambitious reforms aimed at supporting fiscal adjustment and enhancing resilience to shocks. These reforms focus on tax policy, revenue administration, and public financial management, as well as addressing weaknesses in the energy and cocoa sectors.
Measures to bring inflation under control, including raising interest rates and eliminating monetary financing of the budget by the Bank of Ghana. A flexible exchange rate policy is also being implemented to help rebuild international reserves.
As Ghana approaches its 2024 general elections, the IMF’s concerns highlight the subtle balance the country must maintain to ensure continued economic recovery and stability. The government’s commitment to the IMF programme and its efforts to implement necessary reforms will be crucial in navigating the potential challenges posed by the upcoming elections.
Maintaining tight fiscal and monetary policies, improving tax administration, and strengthening expenditure controls will be key to sustaining the progress made so far and securing a stable economic future for Ghana.
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