We’ll focus on reining in inflation and rebuilding Ghana’s foreign reserve buffers, says IMF

The IMF said an ambitious structural reform agenda is being put in place for Ghana to reinvigorate private sector-led growth

The International Monetary Fund (IMF) has said its support programme for Ghana will focus on reining in inflation and rebuilding the country’s foreign reserve buffers.

The executive board of the IMF approved Ghana’s request for a US$3 billion bailout to support the country’s economic recovery on Wednesday (17 May).

In a statement the IMF managing director, Kristalina Georgieva said: “The combination of large external shocks and preexisting fiscal and debt vulnerabilities precipitated a deep economic and financial crisis in Ghana. In response, the authorities have launched a comprehensive reform program, to be supported by the ECF-arrangement.

“It is focused on restoring macroeconomic stability and debt sustainability as well as implementing wide-ranging reforms to build resilience and lay the foundation for stronger and more inclusive growth. Capacity development and continued support by development partners would be critical for the successful implementation of the authorities’ programme.”

Georgieva said, “Fiscal consolidation is a core element of the programme. A substantial and front-loaded fiscal adjustment has started with the 2023 budget. Enhanced revenue and streamlined expenditure will be combined with policies to protect vulnerable households and create room for higher social and development spending in the medium term.”

“With a view to fostering lasting fiscal discipline, the authorities are also advancing reforms to enhance domestic revenue mobilization, strengthen public financial management, and tackle the deep challenges in the energy and cocoa sectors. The government has also launched a comprehensive debt restructuring, including both domestic and external debt, to place debt on a sustainable path. Effective collaboration by all parties involved would be critical,” she added.

The IMF chief added that, “Preserving financial sector stability is critical for the success of the programme. Given the adverse impact of the domestic debt restructuring on balance sheets of financial institutions, the authorities will devise and implement a comprehensive strategy to rapidly rebuild financial institutions’ buffers and exit from temporary regulatory forbearance measures.”

“Monetary and exchange rate policies under the program will focus on reining in inflation and rebuilding foreign reserve buffers. The Bank of Ghana will continue tightening monetary policy until inflation is on a firmly declining path and will eliminate monetary financing of the budget. The central bank will also enhance exchange rate flexibility and limit foreign exchange interventions to rebuild external buffers.

“An ambitious structural reform agenda is being put in place to reinvigorate private sector-led growth by improving the business environment, governance, and productivity.”

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