Growth exceeds expectations, prompting the IMF to raise its target.

The International Monetary Fund (IMF) has praised the nation’s recovery and noted that this year’s growth has shown to be more resilient than initially projected.

Even though there is still a lot of work to be done and many obstacles to overcome, the fact that these measures are already yielding fruitful outcomes gives us great cause for optimism, according to Stéphane Roudet, head of the IMF’s Ghana mission.

He was speaking at a press conference last Friday, following the IMF’s successful initial assessment of how the nation was doing in relation to its Extended Credit Facility (ECF) program goals. IMF

According to Mr. Roudet, the Ghanaian economy is starting to come around, as seen by lowering inflation, a more stable relative exchange rate, improved fiscal flexibility, and increased gross international reserves.

“Growth in 2023 has proven more resilient than we were initially anticipating,” he added, adding that the turnaround signaled the return of macroeconomic stability.
A 1.5% increase in GDP was anticipated by year’s end, according to the ECF and IMF programs.

Context

Inflation reaching a 22-year high of 54.1% in December 2022 and an unsustainable public debt exceeding 93% of the nation’s productivity, as measured by GDP, have been the economy’s two most difficult years.

The administration publicly requested an IMF finance program in July 2022 in order to promote structural changes and aid in the nation’s economic recovery.

The extended credit facility program’s main goals include reinstating fiscal sustainability, stabilizing inflation expectations with low inflation, bolstering the exchange rate regime, regaining investor confidence, regaining market access, and releasing other financing options.

Four months after the program’s launch, it appears to be working as GDP growth has sharply recovered, averaging 3.2% in the year’s first two quarters.

The cedi has depreciated cumulatively by roughly 23.5% year-to-date compared to a cumulative depreciation of 37.6% during the same period in 2022, but inflation has decreased to 40.1% and the rate of depreciation has moderated since the beginning of the year.

In terms of finances, the primary balance on a commitment basis for the first half of the year was in surplus by around GH2 billion, as opposed to the aim of a GH4 billion deficit.

Gross International Reserves (GIR), a measure of the country’s ability to pay its import bill, were similarly at $2.1 billion, or $1.5 billion (0.6 month’s worth of import cover), as of the end of December 2022.

The domestic debt exchange program (DDEP), which saw the government exchange 12 new notes with longer tenors and lower coupon rates for old ones for GH82 billion, has come to an end.

The exchange of local bonds worth about $742 million that were denominated in dollars also saw a participation ratio of 91.7%; the exchange of cocoa bills worth about GH7 billion saw a participation ratio of 97.4%; and the exchange of treasury bonds held by pension funds worth about GH29.6 billion saw a participation ratio of 95.3%.

In the upcoming weeks, the government hopes to execute a Memorandum of Understanding (MoU) with the bilateral Official Creditor Committee (OCC) to restructure $5.4 billion in debt.

By the end of the year, the nation hopes to achieve a deal with its foreign commercial creditors to restructure its $14 billion in debts, $13 billion of which are bonds.

To be revised is growth

At the joint news conference held by the government and the IMF last Friday in Accra, Mr. Roudet said the growth for the remainder of the year was now anticipated to be greater than what was anticipated under the fund program.

Growth for the first half was over three percent, which illustrates the discrepancy between what is actually happening and what the program’s assumptions were.

“So yes, we will revise growth for this year, but we will share the exact details later,” he said.

However, Mr. Roudet emphasized that this was not the end of the road because the current inflation rate of 40.1% was still excessive and the IMF desired for it to fall much lower.

He claimed that although things were getting better and the economy was moving in the right direction, there was still work to be done.

Indications of tenacity

The administration would continue to work toward growth, said Ken Ofori-Atta, minister of finance, who also acknowledged that the economy was beginning to show indications of resilience.

He said that the government was making the kind of progress it hoped to.

He claimed that “the stability that the Ghanaian economy was sorely in need of has been achieved.”

The important economic indices, such as inflation and the exchange rate, are still declining and stabilizing, and there is a resurgence of confidence in the economy, according to Mr. Ofori-Atta.

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