IMF Board hesitant to approve bailout programme over $5bn budget deficit – Prof Bokpin asserts
The International Monetary Fund’s Executive Board is reportedly hesitant to approve Ghana’s $3 billion bailout, citing the country’s significant budget deficit. Economist and Professor Godfred Bokpin noted that Ghana’s 2023 budget deficit alone amounts to $5 billion, exceeding the IMF bailout by $2 billion.
He further explained that Ghana’s recent courting of the US’ favour in pursuing an IMF bailout may have played a role in securing a staff-level agreement, but that the size of the deficit is a critical issue that the IMF cannot overlook.
The IMF’s reluctance to approve Ghana’s bailout underscores the challenges facing the West African country as it seeks to shore up its struggling economy. Ghana has been hit hard by the Covid-19 pandemic and has seen its fiscal deficit widen significantly in recent years.
The country’s budget deficit stood at 11.7% of GDP in 2020, up from 4.8% in 2019. The government’s spending has also increased significantly, exacerbating the country’s fiscal challenges.
The IMF has long been a key partner for Ghana, providing loans and technical assistance to help the country address its fiscal and economic challenges. However, the Fund’s recent hesitation to approve Ghana’s bailout highlights the significant hurdles the country still faces.
In particular, Ghana’s large budget deficit remains a major concern, with the country struggling to find ways to close the gap and stabilize its finances.
According to Professor Bokpin, the deficit alone amounts to $5 billion, which is more than the amount of the IMF bailout. This means that even if the IMF approves the program, it would still not be sufficient to address Ghana’s fiscal challenges.
As he notes, “the IMF knows very well that without assurance of either debt relief or fresh funding from Ghana’s multilateral and bilateral partners, the program can only achieve limited effect.”
The challenge for Ghana, therefore, is to find ways to close the budget deficit and stabilize its finances. This will require a concerted effort on the part of the government to rein in spending, increase revenue, and seek out new sources of financing.
It will also require the support of multilateral and bilateral partners, who will need to provide Ghana with the necessary resources to address its fiscal challenges.
Ghana’s fiscal challenges remain significant, and the country will need to work hard to address them. The IMF’s hesitation to approve Ghana’s bailout underscores the size of the challenge, and highlights the need for concerted action on the part of the government and its partners.
