Despite spending more than anticipated, Fitch Solution has declared that Ghana’s International Monetary Fund Program would not be suspended nor terminated.

According to its latest assessment of Ghana titled “Positive Shift in Ghana’s Political Risk Profile Following IMF Programme Approval”, Fitch noted that there is a risk the government will fail to meet its IMF targets in 2024.

Since the beginning of this decade, election years have seen an average increase in total expenditure at a percentage of GDP of 3.0 percentage points, indicating the likelihood of some fiscal slippage in 2024.

Nonetheless, Fitch Solutions, said a higher-than-budgeted expenditure is unlikely to lead to a suspension of the IMF programme.

“Indeed, when public expenditure surpassed budgetary allocations in 2016 (an election year), the IMF board approved waivers for non-observance of performance criteria and decided to extend the arrangement by one year.”
Fitch Soultions

The UK Based Research firm further disclosed that the anticipated fiscal slippage in 2024 is unlikely to result in a loss of investor confidence, which – in turn – would weaken the cedi and drive up inflation and could lead to greater social unrest.

IMF Assistance Set To Strengthen the economy

More so, according to Fitch Solutions, the IMF’s assistance will help Ghana’s economy and, as a result, reduce the threats to social stability during the ensuing quarters.

Following the formation of an official creditor committee, the IMF approved Ghana’s $3.0bn Extended Credit Facility in May 2023, which led to an immediate $600 million disbursement, with another $600 million expected in the fourth quarter of 2023.

This, it believes, will help meet Ghana’s needs for external funding while also bolstering the nation’s foreign exchange reserves, which had dropped to $5.2 billion in April (2.5 months’ worth of import coverage).

“These developments have improved sentiment towards Ghanaian assets, with the cedi having strengthened by 8.0% in May [2023], which will reduce imported inflation over the coming months. Indeed, we believe that consumer price growth will remain on a downward trajectory through 2023 and 2024, easing pressure on household finances.”
Fitch Solutions

There has been a lot of controversies in line with the outcomes of rating agencies. President of Ghana, His Excellency Nana Addo Dankwah Akufo-Addo, contended that the “reckless behavior” of rating agencies has worsened Ghana’s economic situation, transforming a liquidity crisis into a solvency crisis.

However, Ghanaian financial analysts claimed that rating agencies were not careless or biased in their assessments of Ghana’s economy, adding that it is essential to acknowledge the potential limitations and biases of credit rating agencies.