GhanaInsightsMacroeconomic update

24 January 2024

Ghana’s IMF Programme: Wind in the Sail

In brief

  • Ghanaian authorities received a confidence-boosting verdict from the Executive Board of the International Monetary Fund (IMF) on 19th January 2024, which triggered the immediate disbursement of the much-needed USD 600.0mn, and unlocks other sources of multilateral inflows including the World Bank (at least USD 550.0mn) and the African Development Bank (USD 103.0mn).
  • Overall, we believe the IMF approval with its catalytic funding sources injects wind in the sail of the Treasury’s finances and keeps the Ghanaian Cedi afloat as the authorities seek to navigate the choppy waters of the upcoming 2024 elections.
  • Seemingly aligning with Ghana’s election year fiscal performance, it appears the IMF has taken a slightly conservative posture with a 0.2% of GDP slippage baked into its 2024 deficit forecast (5.0%) compared to the authorities’ target (4.8%). This forecast showed that the Fund expects revenue to underperform the authorities’ target by 0.1% of GDP while expenditure overshoots the target by a similar margin. In general, we align with the IMF’s conservative posture on fiscal outlook in the 2024 election year, reiterating our forecast FY2024 overall deficit (on commitment basis) at 5.4% and cash deficit at 6.3%.
  • Ongoing improvement in external position will cap FX swings, but external debt restructuring is key. We note a USD 300.0mn reduction in the cumulative BOP funding gap to USD 14.8bn (2023 – 2026) in the updated framework as fiscal adjustment continues to correct the macroeconomic imbalances, pending external debt operation. Adjusting the BOP financing gap for the programme-related multilateral inflows, the estimated residual external financing gap narrows to USD 10.1bn (vs USD 10.5bn initially envisaged) over the programme duration, 2023 – 2026.
  • Notwithstanding the slight narrowing, the residual BOP gap remains wide and underscores the importance of external debt restructuring in line with the IMF programme parameters to consolidate the fragile FX stability. Given the outcome of the bilateral debt negotiations, and subject to the comparability of treatment principle under the G20 Common Framework, we foresee Eurobond holders may be required to endure deeper cuts in debt service cash flows over 2023 – 2026.

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