In brief
- As roundly expected by the market on 17 May 2023, the IMF Executive Board approved Ghana’s request for a 36-month fiscal adjustment and reforms programme with an Extended Credit Facility (ECF) of USD 3.0bn.
- The Board approval triggered an immediate disbursement of USD 600mn (20% of the approved ECF), which we believe has been received by the Bank of Ghana. Subject to a successful first review, the Fund will disburse an additional USD 600mn to bring total disbursements in FY2023 to USD 1.2bn. We anticipate the first review with its conditional disbursement to be concluded in November 2023.
- Our analysis of the indicative targets confirms a front-loaded approach to fiscal consolidation as expected. Essentially, the bulk of the revenue-based fiscal consolidation will be felt in 2023 before easing-off in the subsequent years.
- We observed a forecast spike in the spending ratio by 1.0% of GDP to 25.3% in 2024 before reverting to a downward path in 2025. Our analysis suggests that the IMF projects a jump in interest payment to 8.5% of GDP in FY2024 (vs 7.0% in FY2023). This will widen the pre-restructuring overall budget deficit by 0.5% of GDP to 8.0%, emphasizing the need for a timely debt restructuring agreement.
- Without debt restructuring, we observed a downwardly sticky debt-to-GDP ratio, declining at a slow rate of 2.0% of GDP per year from 2025 to 86.1% in 2027 after the front-loaded consolidation drives an initial decline of 6.1% in 2024. This will leave Ghana’s fiscal and debt situation on thin ice by the end of the IMF programme, unless the public debt is effectively restructured to lower interest payment and principal amortization. On external financing, the IMF estimates the total external funding gap at USD 10.5bn, averaging USD 2.6bn per year over 2023 – 2026. This funding gap indicates the total reliefs the Ghanaian authorities will target to secure under the debt restructuring negotiations with bilateral and commercial creditors.
Downloads
Download Full Report