The International Monetary Fund (IMF) Executive Board has approved Ghana's request for a $3 billion bailout to help the country's ailing economy. Following Ghana's acceptance of finance assurances from the Paris Club, the decision was made during the Executive Board's meeting on Wednesday.
International media giants Reuters and Bloomberg claimed that numerous people with direct knowledge of the situation verified Ghana's approval of the three-year extended loan arrangement.
On May 18, the International Monetary Fund will conduct a televised news conference to provide additional information at the conclusion of the IMF Executive Board meeting regarding Ghana's bailout request.
IMF Managing Director Kristalina Georgieva stated last Friday that the IMF Executive Board was considering approving the loan because Ghana's formal creditors had given the requisite funding assurances.
"We expect a deal on Wednesday. With the disbursement, there is going to be $600 million as a first tranche just immediately after the approval,” Minister of State at the Finance Ministry, Mohammed Amin Adam stated.
He stated that a second $600 million tranche is anticipated to be authorized following a positive first evaluation of the program, which is anticipated to take place in November or December, with the remaining funds being distributed in equal tranches of $360 million following semi-annual reviews.
According to him, the money will assist Ghana reach its goal of having foreign reserves equal to three months' worth of imports by 2026 by bolstering its financial position.
The IMF and the Ghanaian government agreed to a new arrangement under the Extended Credit Facility on December 12, 2022 at the staff level.
Ghana's government was compelled to turn to the IMF by its increasing debt crisis.
The government previously stated that it turned to the IMF for financial support because of a number of issues, including Ghana's dire debt situation, the CoVid-19 pandemic, negative consequences of the Russia-Ukraine war, the banking sector clean-up, and the energy sector's excess capacity payments.
Vice President, Dr. Mahamudu Bawumia, acknowledged that the government had few options for generating sufficient revenue in the face of the worsening economic challenges when he spoke at the launch of two new high-level information technology programs at Accra Business School at Baatson in Accra in July 2022. This ultimately led to the decision to seek assistance from the IMF.
“In the midst of this global crisis, Ghana’s fiscal and debt sustainability has worsened. Some commentators have argued that the expenditures by government alone could not be the reason for the large increase in the fiscal deficit of the debt stock. In fact, they are right.”
He said “Covid-19 expenditures alone were not the reason for the increase in Ghana’s debt stock by the end of 2021. In fact, as I stated in my April 7th lecture, in addition to COVID-19, there were two major items of expenditure that are critical to understanding the evolution of the fiscal deficit and the debt stock: the Banking Sector Clean-up (GH¢25 billion) and the Energy Sector Excess Capacity payments (GH¢ 7 billion),”
In addition, President Nana Addo Dankwa Akufo-Addo expressed confidence in Ghana's cooperation with the IMF, highlighting the latter's contribution to economic stability and progress saying IMF deal will spur economic growth
At the Abu Dhabi Sustainability Week in Dubai, Nana Akufo-Addo maintained his confidence in Ghana's future.
“We are working to grow the economy to a much faster rate this year our target being a 5.6 percent GDP growth rate. To enhance the prospect of a win-win situation for the private sector and the country in our case, we see our collaboration with the IMF to repair in the short term our public finance and give credibility to our balance of payment which has taken a severe hit in very recent times. I am very confident that we will emerge from this as a stronger and more resilient economy and advance towards our goal of reaching the Ghana Beyond Aid ”
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