IMF cash inflow of $600 million in first tranche

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According to Dr. Mohammed Amin Adams, the Minister of State for Finance, the first installment of the $3 billion International Monetary Fund (IMF) support will be made available as soon as the fund’s Executive Board on May 17, 2023, approves the nation’s program.

According to him, the initial $600 million will be utilized to maintain the country’s budget as well as its balance of payments.

As soon as the nation completes the first phase of the program, the second tranche, totaling another $600 million, is anticipated to arrive in the Bank of Ghana’s accounts in November.

After each of the semi-annual reviews is satisfactorily completed, the remaining funds will be distributed in five tranches of $360 million each.

Numerous issues have plagued Ghana’s economy, including GH575.7 billion in unsustainable public debt and excessive inflation, which reached a 22-year high of 54.1% in December 2022.

Due to this, the nation turned to the IMF for assistance in July of last year. Although the government and the fund were able to come to a staff-level agreement in December of that year, a board-level approval—which will allow for the disbursement of the $3 billion support—depends on the nation’s ability to restructure both its internal and external debts.

The Ministry of Finance has finalized the domestic debt exchange program and deemed it a success; nevertheless, the deal had been delayed due to the restructuring of the external debt.

The country got excellent news last Friday when the Creditor Committee, which is co-chaired by China and France, gave it financial assurances, opening the door for the IMF Executive Board to now accept Ghana’s program.

Board seated

Dr. Amin Adams stated that the Executive Board of the Fund would meet on May 17, 2023, to discuss Ghana’s program, with approval coming soon after.

He claimed that the nation had met all of the fund’s standards and was therefore confident of receiving a program by Wednesday.

“We undertook a number of steps towards the expected approval of the programme, and have already satisfied all five prior actions required by the fund,” he said.

He listed the previous steps as the release of the COVID-19 audit report, the implementation of an adjustment to the electricity tariff, the signing of an agreement between the Ministry of Finance (MoF) and the Bank of Ghana to stop financing the central bank with money, and the adoption of the necessary laws to increase revenue.

“We also completed the Domestic Debt Exchange Programme (DDEP), with the exchange of Cocoa Bills and dollar-denominated bonds currently at an advanced stage,” the speaker added.

He said that in addition to formalizing the submission of the memorandum of economic and financial strategy to the IMF, the government had also started talks with its commercial creditors on the treatment of its debt.

According to all of these, he claimed, “we are in a perfect position to have our program approved at the board level.”

Restoring Equilibrium

According to the Minister of State, the IMF program will support structural reforms, assure debt sustainability, and assist in restoring macroeconomic stability.

He claimed that major structural reforms would be implemented as part of the program to overcome the bottlenecks, particularly in the management of public finances.

He added that it would “promote social protection programmes to safeguard the underprivileged and reduce public debt to sustainable levels by 2028.”

Dr. Amin Adams added that Ghana has already begun talks with the World Bank for a three-year development policy budget support program and that the program will help to unlock the much-needed funds from development partners.

When everything was said and done, he asserted, the nation would receive $300 million annually.

“This will complement what the IMF is giving us,” he said.

Political dedication

According to Dr. Amin Adams, the government was able to reach an agreement in a short amount of time thanks to a strong political commitment and assistance from the IMF and bilateral partners.

“We are hoping that the talks will start soon,” he said, “and we are looking to restructure a potential $5.4 billion with the Creditor Committee.

He added that talks had already begun in this regard and that the government was also looking to restructure a $14 billion debt with commercial creditors.

“A committee has been constituted to begin negotiations, and more than $13 billion of this $14 billion debt is in bonds.

We are sure that the IMF’s approval in the upcoming days would give the market and other stakeholders a positive signal,” he continued.

According to Dr. Mohammed Amin Adams, the Minister of State for Finance, the IMF’s Executive Board is expected to approve the country’s program on Wednesday, at which point the first tranche of the $3 billion in assistance will likely be issued.

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