Bank of Ghana Governor Calls for IMF Reform Amid Mounting Fiscal Pressures
The Governor of the Bank of Ghana, Dr. Ernest Addison, on behalf of the governors of African central banks, has urged the International Monetary Fund to maintain flexible support mechanisms and postpone planned interest rate charges on poverty reduction funds as the continent grapples with mounting debt distress and infrastructure gaps.
Speaking at the 2024 Africa Caucus Meeting in Washington, Bank of Ghana Governor Dr Ernest Addison, representing his fellow African governors, highlighted that approximately half of Sub-Saharan African countries are either at high risk of debt distress or already in it as of late 2023.
The continent faces an annual infrastructure financing gap of $108 billion, according to African Development Bank data cited in the speech, with total infrastructure needs reaching $170 billion per year. This shortfall comes as African nations struggle with weak domestic revenue collection and limited access to international capital markets.
“The timing for the resumption of charging interest rates on the International Monetary Fund’s (IMF) Poverty Reduction and Growth Trust (PRGT) funds is inappropriate as most PRGT-eligible countries are still facing significant challenges,” Addison said, referring to the IMF’s Poverty Reduction and Growth Trust. The statement signals growing concern about the Fund’s planned implementation of a tiered interest rate structure.
The African governors called for a review of the IMF’s surcharge policy, warning against adding financial burdens to countries already facing fiscal challenges. With the expiration of the Food Shock Window and rising food insecurity across the continent, they emphasised the need for emergency financing through Catastrophe Containment and Relief Trust resources.
The governors pushed for better coordination between the IMF and World Bank in developing resilient fiscal policies, urging consideration of Africa’s diverse needs. They specifically called for programmes that account for regional specificities to ensure sustainable reforms don’t disproportionately impact vulnerable populations.
“The IMF should leverage its catalytic role and convening power to deepen dialogue with regional MDBs for additional concessional finance and grants,” Dr. Addison stated, highlighting the need for enhanced support for countries facing debt challenges.
The appeal comes as African nations seek solutions to mounting debt problems through mechanisms like the Global Sovereign Debt Roundtable (GSDR). Ghana’s Central Bank Chief emphasised the need for swift, fair, and effective debt resolution, whether under or outside the G20 Common Framework.
A key focus was the call for greater private sector participation in debt restructuring efforts. He advocated for ensuring comparability of treatment in debt resolution initiatives while also exploring innovative financing solutions such as blended finance and debt-for-climate swaps through an enhanced resilience and sustainability facility.
The meeting highlighted the multiple challenges facing African economies, from the lingering effects of the pandemic to geopolitical tensions and climate-related shocks. These factors have contributed to a rising ratio of interest payments to revenue since the early 2010s, compromising investment in essential services.
Meanwhile, Dr Addison said, African governors are committed to implementing domestic reforms, including medium-term fiscal consolidation, improved public financial management, and strengthened governance, emphasizing that success would require increased international cooperation and support from development partners.
He called for enhanced technical support to strengthen institutional capacity, proposing a stronger partnership between the IMF and the Africa Peer Review Mechanism to boost fiscal governance and economic reforms across the continent.
The statements came during the annual meeting with IMF Managing Director Kristalina Georgieva, whom Addison praised for her “outstanding leadership and support to Africa.” The gathering focused on the theme “Overcoming Fiscal Challenges in Africa,” reflecting the urgent need to address the continent’s financial stability concerns.
