Bailout outcomes start to emerge – Ofori-Atta solicits support from the public for reforms

The International Monetary Fund (IMF) initiative has begun to produce positive results, according to Minister of Finance Ken Ofori-Atta, who also urged all Ghanaians to work hard to put comprehensive changes into place.

While listing the encouraging results, he highlighted that “the real work of adjustments, re-alignments, and the return to a path of steady economic growth has just begun” and included improvements in the foreign reserve and current account positions as well as decreases in the rate of inflation and treasury bills.

In order to urgently restore the walls of the country, Mr. Ofori-Atta said, “Let us brace ourselves for the necessary reforms, notably in expenditure control, non-arrears accumulation, revenue growth, ECG collections, and Energy Sector reforms.

The Post COVID-19 Programme for Economic Growth (PC-PEG), now supported by the three-year Extended Credit Facility (ECF) agreement with the IMF, was based on clear aims, robust policy, and structural measures, according to the Finance Minister. Ofori-Atta

He emphasized that the program’s goal was to provide a credible fiscal consolidation plan that was supported by high spending efficiency and robust domestic revenue mobilization.

Although it had considerably prepared the path for the implementation of an ambitious and well-thought-out program of reform for the economy and country, Mr. Ofori-Atta stated that securing the IMF programme was not the end to the current issues.

Targets

The program’s objectives through 2028 include firmly controlling inflation expectations, maintaining financial stability, and reducing public debt to manageable levels by adhering to two legally binding constraints: an external debt service to revenue ratio of 18% or less and a public debt to gross domestic product (GDP) ratio of no more than 55%.

While preserving social protection and improving targeting to preserve the efficacy of important initiatives, the program also intends to increase economic competitiveness, with exports exceeding 37% of GDP in the medium term.

According to him, the IMF program supported by PC-PEG aimed to support a credible fiscal consolidation plan that was built on strong domestic revenue mobilization and high spending efficiency over the medium term.

According to him, the government intends to achieve a primary surplus on a commitment basis of 1.5% of GDP by 2025 to 2028, which is the crucial fiscal anchor for the program.

Reforms

In a subsequent update, Mr. Ofori-Atta stated that the program will allow the nation to reduce budgetary risks, including those posed by state-owned businesses (SOEs), as well as permit the deepening of structural reforms in targeted sectors, such as energy and cocoa.

The Finance Minister stated that the government’s own Public Financial Management Strategy to shift from “central government to general government operations” was consistent with the structural reform objective.

The Ghana Cocoa Board (COCOBOD), the Electricity Company of Ghana (ECG), other SOEs in the energy sector, and other quasi-state institutions, whose operations had a significant and direct fiscal impact on our economy, are among the key state institutions that this shift facilitates clear oversight over, according to the minister.

According to the ministry, non-central government activities account for around 25% of the estimated debt load, primarily SOEs like COCOBOD and those in the energy sector.

In this time of widespread change, Mr. Ofori-Atta said, “Our ability to institute better governance standards of these institutions to address their liabilities and promote their growth will be significantly improved.”

He emphasized how important it was to stick with the comprehensive and forceful structural reforms that had been agreed upon in order to solve fundamental flaws and increase resilience in important areas.

The reforms address tax administration and policy, financial stability, plans for the financial sector, statutory fund reviews, governance, and corruption, as well as debt management, fiscal credibility, and the restructuring of SOEs in the energy and cocoa sectors.

Energy Industry

In order to eliminate the financing gap in the sector by at least $2.95 billion during the timeframe, Mr. Ofori-Atta emphasized that the sector had been given priority for complete changes.

He explained that due to the existing circumstances of SOEs and independent power producers (IPPs) in the sector’s value chain, legacy debt in the energy sector had grown to roughly $2 billion as of the end of the previous month and there would be an estimated $5.9 billion financing gap between 2023 and 2025.

Cabinet is anticipated to accept the measures outlined in the amended Energy industry Recovery Plan (ESRP) before the end of this month in order to reduce losses in the energy industry sustainably.

The framework for allocating energy sector subsidies, a framework for inter-utility debt settlement on a quarterly basis, and a mechanism to enforce the rules of the Cash Waterfall Mechanism (CWM) and Natural Gas Clearinghouse (NGC) are just a few of the implementation decisions that make up the reform’s pillars.

The reforms in the cocoa industry will lessen and eventually end COCOBOD’s annual losses and debt.

“The reforms in the cocoa sector include the implementation of a turn-around strategy, to be approved by Cabinet by end-June 2023,” stated Mr. Ofori-Atta.

According to him, the plan “is expected to address cocoa pricing issues, COCOBOD oversight challenges, introduce cost rationalization measures, and phase out quasi-fiscal spending.”

Positive impact 

Mr. Ofori-Atta noted that the economy has begun to benefit from the ECF and the front-loaded fiscal adjustments in the 2023 budget, noting that inflation, which peaked in December of last year at a 22-year high of 54.1%, has since fallen to 42.2%.

With a year-to-date depreciation rate of roughly 21.9% as of last Friday, down from the 50% reported in December 2022, the cedis devaluation has also substantially stabilized.

The rate on 91-day Treasury Bills had also decreased to 20.6% from 35.5% at the end of last year, and Gross International Reserves had increased to $5.7 billion at the end of last month following the payment of the first tranche of $604 million following the IMF Programme’s approval, according to Mr. Ofori-Atta.

At the end of March this year, the current account balance improved from a negative 2.2% of GDP at the end of December last year to a positive 0.9% of GDP.

Additionally, the trade balance increased from 0.9% of GDP at the end of January to 2.2 per

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