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The International Monetary Fund’s board granted approval for the initial review of Ghana’s loan program on Friday, resulting in the immediate disbursal of approximately $600 million under its $3 billion bailout initiative, as announced on Friday.
This decision follows the gold, oil, and cocoa producer’s successful negotiation to restructure $5.4 billion of loans with its official creditors, a pivotal step toward unlocking the second tranche of IMF funding.
The IMF stated, “All quantitative performance criteria for the first review and almost all indicative targets and structural benchmarks were met.”
The Fund acknowledged that the reform efforts by Ghana’s authorities had contributed to enhanced growth, reduced inflation, and increased international reserves. The IMF forecasts a 2.3% growth for the Ghanaian economy in 2023 and a further increase to 2.8% in 2024.
In a joint briefing with Ghanaian authorities post-announcement, Stéphane Roudet, IMF Mission chief for Ghana, confirmed that the tranche would be accessible to the central bank within hours.
‘SHOT IN THE ARM’
Ghana sought financial support from the IMF in 2022 amidst its most severe economic crisis in decades, compounded by escalating public debt-servicing costs.
Leslie Dwight Mensah, an economist at the Institute for Fiscal Studies in Accra, remarked, “The board decision, along with the imminent release of funds, is a shot in the arm for the economy, especially the exchange rate, which remains vulnerable to fluctuations in sentiments and central bank reserve capacity,” in an interview with Reuters.
The second tranche is expected to trigger $550 million in additional World Bank funding, according to Ghana’s Finance Ministry. This includes $300 million in budget support, which the World Bank officially confirmed on Thursday, and $250 million allocated for a fund supporting financial sector stability.
During the briefing, Finance Minister Ken Ofori-Atta disclosed that the World Bank was scheduled to convene on Jan. 23 to approve these disbursements.
The West African nation, grappling with a default on most external debt due to soaring servicing costs, also needs to secure a relief deal with private holders of approximately $13 billion in international bonds.
Ofori-Atta expressed that official discussions with these bondholders would commence as early as next week, with a potential agreement reached by mid-March.
Responding to inquiries about whether the subsequent tranche of $360 million hinged on Ghana reaching this agreement, the IMF’s Roudet commented, “what is important is the government engages in good faith discussions… We hope good progress can be made in the next few weeks.”
Ghana aims to restructure two-thirds of its external debt, which stood at about $30 billion at the close of 2022.
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