Ghana-IMF Bailout: Terkper anticipates Board approval May-ending; Fitch Solutions however projects June
Former Minister for Finance, Seth Terkper has noted that a Board approval by the Directors of the IMF for $3bn bailout programme for Ghana this month is not feasible.
According to Terkper, the earliest date Ghana can secure a Board approval for its bailout programme is in the latter part of May 2023.
Speaking to journalists on Monday, April 3, 2023, the Executive Director of PFM Tax Africa averred given the fact that government has not concluded its external debt restructuring programme, coupled with the upcoming Spring Meetings to be hosted by the IMF and World Bank this month, Ghana is likely not have its request for a bailout programme granted.
“Securing a bailout programme in April is not feasible, because that is usually the time that the IMF and World Bank holds the Spring Meetings (sic).
“In May also, there is likely to be a rush of countries to the IMF to secure a programme, and most of these countries will at least have drafts for the IMF Board to look at before going onto the next stage of prior actions and approval process for a Board approval. And we (Ghana) don’t even have a draft for the Board to consider (sic)
“So in my view, we are likely to have the Board approval after the middle of May, getting closer to the end of the month. Unless of course things are expedited by the government, but if not, then we are likely to get the approval in the later part of May (sic),” he remarked.
Meanwhile according Fitch Solutions, Ghana is expected to secure a Board approval for its $3bn IMF bailout programme by the end of the second quarter of this year – June 2023.
The assertion by Fitch Solutions follows the failure of the government to secure a board approval at the end of March 2023 as promised despite the execution of the domestic debt exchange programme and passage of three tax revenue streams.
Making the assertion in its recent report on the Ghanaian economy, the agency noted that, the board approval of the bailout programme will among other things, unlock critical financial assistance, shore up the country’s foreign exchange reserves, improve investor confidence and aid the BoG complete its monetary policy tightening cycle.
“Our core view is that Ghana’s staff-level agreement with the IMF will receive executive board approval in Q223, which will unlock critical financial assistance, shore up the country’s foreign exchange reserves and improve investor confidence.
“These dynamics will likely lead to greater stability in the exchange rate, with currency weakness having been the key driver of inflationary pressures since 2022. This will reduce import costs and exert downward pressure on consumer price growth, allowing the BoG to conclude its monetary tightening cycle,” it stated.
Fitch Solutions however warned that, failure of the government to once again achieve a board approval in June, will result in further deterioration of the country’s foreign exchange reserves and a sell off of the local currency – cedi.
“If Ghana fails to obtain critical IMF funding by the end of Q223, the cedi would sell off again due to weak investor sentiment and falling foreign exchange reserves. In this scenario, inflation would increase, which indicates that the BoG would tighten monetary policy beyond our current forecasts,” it noted.
