IMF acknowledges Ghana’s efforts to manage economic challenges amid controversies
IMF Resident Representative in Ghana, Dr. Leandro Medina has acknowledged the ongoing efforts by Ghanaian authorities to navigate a complex economic landscape, characterized by challenges related to budget financing and domestic debt restructuring.
The view of Dr. Leandro Medina, as expressed, sheds light on the delicate balance the country is striving to strike between economic stability and fiscal responsibility.
His perspective revolves around the hotly debated topic of monetary financing of the budget by the Bank of Ghana (BoG). The consensus between Ghanaian authorities and the IMF team appears to center on the priority of avoiding direct monetary support for the government’s fiscal activities, a stance widely recognized to prevent inflation and other economic distortions.
This has led to the Ghanaian government’s commitment to eliminate such financing, a resolve that comes under the umbrella of an IMF-supported program.
However, he acknowledges the unprecedented challenges that beset the Ghanaian economy in 2022. A substantial budget deficit emerged, which the government struggled to finance due to the loss of access to both international and domestic capital markets.
In these circumstances, the BoG’s provision of essential financing to the government to meet its obligations emerged as a choice between averting a disruptive crisis or enabling the government to fulfill its commitments.
A noteworthy aspect of Ghana’s economic strategy is the domestic debt exchange, a central component of the authorities’ broader plan to restore macroeconomic stability and public debt sustainability.
According to the IMF Resident Representative in Ghana, Dr. Leandro Medina, the fund acknowledges that the Bank of Ghana participated in this debt restructuring effort, a move intended to distribute the burden among various stakeholders, including banks, financial institutions, pension funds, and individual debt holders.
This participation, however, led to a temporary reduction in the BoG’s net equity, a development that has raised concerns.
Crucially, the IMF emphasizes that its analysis indicates that the negative net equity position of the Bank of Ghana does not obstruct the central bank from effectively executing its policy mandates. Among these mandates is the vital task of guiding inflation back to its targeted rate of 8 percent in a gradual manner.
He is rather optimistic that the Bank of Ghana’s net equity will progressively improve over time, eventually returning to positive territory.
On the next step of the IMF programme with Ghana IMF Resident Representative in Ghana, Dr. Leandro Medina said “the next step will be the first review of the programme. An IMF mission is expected to visit Accra in September to formally assess performance with respect to the quantitative and structural objectives set out under the programme”
He added that based on a positive assessment and agreement with the authorities on the way forward, IMF staff will present the first review for the IMF’s Executive Board approval later in autumn. This would trigger a second disbursement of about US$600million, for a total of US$1.2billion in 2023.
As Ghana continues to grapple with the intricacies of maintaining economic stability and fiscal responsibility, the IMF’s nuanced view underscores the multifaceted nature of the challenges faced.
The delicate balance between avoiding monetary financing, facilitating necessary fiscal support, and pursuing long-term economic stability remains at the forefront of the country’s economic agenda.
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