President Nana Akufo-Addo has said as the cedi keeps gaining in value against the dollar and other currencies of international trade, it is only fair that the Ghana Union of Traders Association (GUTA) and the Ghana Road Transport Coordinating Council (GRTCC), who increased prices when the reverse was the case, also reduce prices to reflect the current situation.
“I believe this is not only a fair request, but also a just one, and I urge all of you to join me in this clarion call so we can all have a more pleasant Christmas,” the president said on Sunday, 18 December 2022, when he delivered an address at the centenary celebration of the Ga Presbytery of the Presbyterian Church of Ghana, held at the Black Star Square, Accra.
Addressing the congregation, which included the Moderator of the Presbyterian Church of Ghana, Rev. Prof. Joseph Obiri Yeboah Mante, he stated that with appropriate policy, determination and hard work on the part of the government, things are beginning to turn around.
Transport fares are expected to go down by 15.3 per cent on Monday, 19 December 2022.
According to President Akufo-Addo, “the strengthening of the cedi has not happened by chance, but through the implementation of deliberate policies by government, in collaboration with the Bank of Ghana.”
These measures, he said, include “cedi liquidity tightening measures, resulting in the offloading of forex, as a store of value, by speculators; the improvement of forex flows from remittances and the mining sector; and the reaching of a staff-level agreement with the IMF for a US$3 billion package.”
The cedi keeps making significant gains in value against the dollar and other currencies of international trade right after the International Monetary Fund and the government of Ghana announced a staff-level agreement for a US$3-billion extended credit facility for the gold-producing West African country whose economy has been on a downward spin since the beginning of the year.
The cedi fell by more than 54% against the dollar this year.
Some few weeks ago, a dollar hovered around ¢15.
However, it started rallying in the lead-up to a joint announcement by the government of Ghana and the IMF on Tuesday, 13 December 2022 that a staff-level agreement had been reached for a three-year IMF-supported programme for Ghana.
According to the Bank of Ghana, the dollar is currently selling at ¢8.0055 from Thursday’s ¢9.3047 and Wednesday’s ¢10.4052 and being bought at ¢7.9975 from Thursday’s ¢9.2954 and Wednesday’s ¢10.3948.
Within a matter of two weeks, the cedi became the best-performing currency in the world after being the worst performer for a few months.
3-year, US$3-billlion IMF-supported deal
An International Monetary Fund (IMF) team led by Mr Stéphane Roudet, Mission Chief for Ghana, visited Accra during December 1 – 13, 2022, to discuss with the Ghanaian authorities the Fund’s support for their policy and reform plans.
At the end of the mission, Mr Roudet issued the following statement: “I am pleased to announce that the IMF team reached a staff-level agreement with the Ghanaian authorities on a three-year programme supported by an arrangement under the Extended Credit Facility (ECF) in the amount of SDR 2.242 billion or about US$3 billion”.
“The economic programme aims to restore macroeconomic stability and debt sustainability while laying the foundation for stronger and more inclusive growth. The staff-level agreement is subject to IMF Management and Executive Board approval and receipt of the necessary financing assurances by Ghana’s partners and creditors”, Mr Roudet said.
“The Ghanaian authorities have committed to a wide-ranging economic reform programme, which builds on the government’s Post-COVID-19 Programme for Economic Growth (PC-PEG) and tackles the deep challenges facing the country”, he added.
He said: “Key reforms aim to ensure the sustainability of public finances while protecting the vulnerable. The fiscal strategy relies on frontloaded measures to increase domestic resource mobilisation and streamline expenditure. In addition, the authorities have committed to strengthening social safety nets, including reinforcing the existing targeted cash-transfer program for vulnerable households and improving the coverage and efficiency of social spending”.
Additionally, he noted: “Structural reforms will be introduced to underpin the fiscal strategy and ensure a durable consolidation”.
“These include developing a medium-term plan to generate additional revenue and advancing reforms to bolster tax compliance. This will help create space for growth-enhancing measures and social spending”.
Efforts, he mentioned, “will also be made to strengthen public expenditure commitment controls, improve fiscal transparency (including the reporting and monitoring of arrears), improve the management of public enterprises, and tackle structural challenges in the energy and cocoa sectors. The authorities are also committed to further bolstering governance and accountability”.
To support the objective of restoring public debt sustainability, Mr Roudet said “the authorities have announced a comprehensive debt restructuring. Sufficient assurances and progress on this front will be needed before the proposed Fund-supported programme can be presented to the IMF Executive Board for approval”.
He stressed: “Reducing inflation, enhancing resilience to external shocks, and improving market confidence are also important programme priorities”, noting: “Accordingly, the Bank of Ghana will continue to strengthen its monetary policy framework and promote exchange rate flexibility to rebuild external buffers”.
“As part of the authorities’ debt strategy, a domestic debt exchange has been launched. The authorities are committed to taking the necessary mitigation measures to ensure financial sector stability is preserved”, the Bretton Wood institute delegation head pointed out.
He said the IMF staff held meetings with Vice President Mahamudu Bawumia, Finance Minister Ken Ofori-Atta, and Bank of Ghana Governor Ernest Addison, and their teams, as well as representatives from various government agencies.
The IMF team has also continued to engage with other stakeholders.
The staff expressed their gratitude to the Ghanaian authorities, Parliament’s Finance Committee and all the private sector, trade union, and civil society representatives for their open and constructive engagement over the past few months.
For his part, Mr Ofori-Atta told journalists that the deal, once approved by the IMF Board, will help Ghana restore economic stability, tackle inflation and strengthen the Ghana cedi, Finance Minister Ken Ofori-Atta has said.
Addressing Journalists at a press conference on Tuesday, 13 December 2022, following the staff-level agreement, Mr Ofori-Atta said: “Truly, the eventual conclusion of the programme will assist us in our efforts to restore stability, tackle inflation, and strengthen our currency.”
“That is why the various ingredients of the programme should be supported by all Ghanaians and all stakeholders.”
Read Mr Ofori-Atta’s full speech below:
I will like to first of all thank the almighty God for providing the needed guidance to the GoG and the Fund to get us where we are today.
ii. I will also like thank HE the President for his leadership and direction throughout this period;
iii. Let me also express appreciation to the IMF in general and in particular the IMF MD and management, Stephane Roudet, IMF Mission Chief to Ghana and Leo Medina, and the indomitable spirit of the team for their commitment to Ghana during these challenging times;
iv. In addition, I will like to express appreciation to key stakeholders including Cabinet, Parliament, FBOs, CSOs, and members of Academia, for their invaluable contributions to the preparation of the Post-Covid-19 Programme for Economic Growth (PC-PEG) which has underpinned the IMF Programme negotiations; and
v. Last but not least I will like to express my sincere appreciation to the staff of MoF and BoG’s leadership under Governor Addison and the trusted Deputies for their hard work and sacrifices throughout this entire process.
Context
i. A lot of work has gone on behind the scenes for almost 6 months when Government formally announced its intention to engage the IMF for an IMF-supported programme, to enable us reach this Staff Level Agreement (SLA) today which paves the way for the IMF’s Management and Executive Board to approve Ghana’s programme request early next year.
ii. Since the announcement on 1st July 2022 to formally engage the IMF for an IMF-supported Programme, there have been three rounds of negotiations with the IMF interspersed with a number of virtual meetings in-between to ensure both the GoG and the IMF teams work around the clock to get the SLA by end Dec 2022.
iii. Against the backdrop of Staff Programmes, Ghana is indeed blessed to conclude our SLA within 5 months. This is historic in recent times relative to what we witnessed with Zambia, Chad and Ethiopia.
The IMF Programme
i. The GoG and the IMF teams have worked tirelessly to agree on key aspects of the IMF Programme at the Staff Level.
ii. Key deliverables over the period include:
a) Preparation of the Post-Covid-19 Programme for Economic Growth (PC-PEG);
b) A Medium-term macroeconomic framework;
c) Debt Sustainability Analysis (DSA) and Debt Management Strategy;
d) Structural reforms to address structural bottlenecks, improve competitiveness and promote efficiency and effectiveness;
a) Preparation of the Post-Covid-19 Programme for Economic Growth (PC-PEG);
b) A Medium-term macroeconomic framework;
c) Debt Sustainability Analysis (DSA) and Debt Management Strategy;
d) Structural reforms to address structural bottlenecks, improve competitiveness and promote efficiency and effectiveness;
i. Key fiscal measures, structural reforms, and the medium-term macro-fiscal framework in the 2023 Budget are aligned with the IMF-supported Programme. It is therefore crucial that we receive support from all stakeholders including:
a) Parliament to ensure that the 2023 budget including all revenue measures are passed; and
b) Creditors to ensure a successful debt operation
Truly, the eventual conclusion of the program will assist us in our efforts to restore stability, tackle inflation, and strengthen our currency.
That is why the various ingredients of the program should be supported by all Ghanaians and all stakeholders.
We can only get to the IMF Board if we get sufficient commitment from our creditors in support of the debt operation.
i. The 2023 Budget is anchored on increasing domestic revenue mobilization effort by 1.2 percentage points of GDP. On the expenditure side, the 2023 Budget proposes to reduce expenditures (on commitment basis) by about 2 percentage points of GDP from 2022 to 2023. Primary expenditures are expected to be reduced through a reduction in allocation on the Use of Goods and Services and Domestically Financed Captial expenditure on a commitment basis.
ii. These fiscal adjustments alone are not enough to address the country’s economic challenges, hence the ongoing debt restructuring aimed at restoring debt sustainability in the medium term.
iii. The 2023 Budget contains important social protection measures to support the most vulnerable including measures that seek to gradually increase the number of beneficiary households as well as the value of cash transfers under the LEAP. Other social protection programmes which will be prioritised under the programmes include the NHIS, the Capitation Grant, and the School Feeding Programme.
Concluding Remarks
iv. We are optimistic that the 2023 Budget adjustment strikes the right balance between determination and pragmatism.
v. Already, the economy is responding positively to the news of GoG and the IMF reaching an SLA and we are eager to leverage this momentum to the very moment when the IMF Executive Board approves the Programme request. We are already seeing significant improvements in the exchange rate with the Ghana cedi recovering against major currencies.
vi. We hope that Ghanaians will continue to support all efforts to restore macroeconomic stability and promote robust and inclusive growth.
vii. We are confident as a resilient people, and we shall rally to support this great enterprise, restore macroeconomic stability and promote robust and inclusive growth. The world is looking at us, and I know we can do it.
viii. To God indeed be the glory for the great thing he hath done within 5 months. I am certain that God who began the good work will continue until it is finally finished – Greater things He will do. For we shall gather the harvest with joy.
ix. These indeed are both times for a ‘Joseph’ recovery and a ‘Nehemiah’ rebuilding
x. Let us continue with courage, the spirit of love for each other and self-discipline to go through this together.
xi. Thank you and God Bless.
FAQs about Ghana’s IMF programme
Ghana and the IMF have reached a staff-level agreement on a new programme. What does it mean? What are the next steps?
The staff-level agreement with Ghana is for a three-year programme supported by an arrangement under the Extended Credit Facility (ECF) of about $3 billion.
The approval by IMF management and the Executive Board in the period ahead is contingent on receiving financing assurances from Ghana’s partners and creditors.
What will be the objectives of the IMF program with Ghana?
The goal of the government’s economic programme is to restore macroeconomic stability and debt sustainability while protecting the vulnerable, preserving financial stability, and laying the foundation for strong and inclusive recovery.
To support the objective of restoring public debt sustainability, the authorities have launched a comprehensive debt operation.
Why did Ghana request an IMF programme?
Ghana’s fiscal and debt vulnerabilities worsened fast amid an increasingly challenging external environment. During the COVID-19 pandemic, Ghana’s public debt increased significantly.
At the same time, the government’s efforts to preserve debt sustainability were not seen as sufficient by investors, leading to credit rating downgrades, the exit of non-resident investors from the domestic bond market, and ultimately Ghana’s loss of access to international capital markets.
These adverse developments, further exacerbated by price and supply-chain shocks from the war in Ukraine, have led to a large exchange rate depreciation, a surge in inflation (40.4 per cent year on year in October) and pressure on foreign exchange reserves.
Against this backdrop, the government requested assistance from the IMF in early summer and a staff-level agreement was reached in December 2022.
The programme will support Ghana in implementing policies that restore macroeconomic stability and ensure debt sustainability while protecting the most vulnerable parts of its population.
It would help create the conditions for inclusive and sustainable growth and job creation.
Such a program would also help alleviate exchange rate pressures and provide a catalytic effect on additional sources of financing.
When will a new Debt Sustainability Assessment (DSA) be published?
When an IMF member country requests financing, the Fund assesses whether the country’s policies are consistent with debt sustainability.
This assessment is based on a Debt Sustainability Assessment (DSA) conducted jointly by the IMF and World Bank to determine whether the government is able to meet all its current and future payment obligations.
It a forward-looking exercise that needs to take into account the authorities’ policies.
In the case of Ghana, the DSA document will be presented to the Board at the same time as the programme request.
The government of Ghana recently announced a domestic debt operation and standstill. Is it consistent with IMF policies? What are the IMF’s views?
Together with efforts to bring the government deficit down, the authorities have announced a comprehensive debt operation to ensure debt sustainability.
We welcome policies to ensure the sustainability of public finances, including the planned fiscal adjustment and medium-term policies to lay the foundation for strong and inclusive growth while protecting the vulnerable.
The authorities’ debt operation aims to achieve a moderate risk of debt distress over the medium term under the IMF-World Bank low-income countries’ debt sustainability framework, which is an objective we welcome.
However, the choice and nature of debt operations between Ghana and its creditors are sovereign decisions.
Will the program result in a cut in social programmes?
Protecting the vulnerable is a core objective of IMF programmes. In general, IMF-supported programs seek to boost social spending to improve socioeconomic outcomes and help promote inclusive growth.
It is important that social spending measures be adequate, efficient, and financed sustainably to achieve this.
