Ghana's economic stability path will be painful – IMF boss

The International Monetary Fund (IMF) has signalled that Ghana’s path to economic stability will be a painful one, but remains optimistic about the country emerging resilient from the current challenges.

The Fund has, therefore, encouraged Ghanaians to be moderate with their expectations of the government and continue to be sacrificial as the country implements its US$3 billion loan-support programme.

Ghana’s economy post-COVID-19 pandemic, saw government introduce some taxes and levies, including a COVID-19 Health Recovery levy, Electronic Transactions Levy (E-levy), and Sanitation and Pollution levy.

The government recently announced a 15 per cent Value Added Tax (VAT) on residential electricity consumption as well as an emissions levy, as part of its revenue generation drive.

The announcement, however, received uproar among Ghanaians, leading to its suspension by the government for discussions with the IMF on the way forward.

Speaking about the government’s engagement with the Fund on the electricity and emissions taxes, Ms Kristalina Georgieva, Managing Director, IMF, pleaded with Ghanaians to embrace the “painful reforms” by the government.

She said this during a media engagement as part of activities for her first visit to Ghana, and expressed her optimism about the country’s ongoing reforms bringing relief to citizens.

Recounting the experience of her country some three decades ago, Ms Georgieva said, “My own country [Bulgaria] in the 90s went through a much more severe collapse.

“Here [in Ghana], we’re talking about inflation of about 54 per cent. Inflation in Bulgaria was over 1000 per cent, and the measures to bring back macroeconomic measures were extremely painful,” she said.

She stated that he was in talks with the government to ensure that the policies implemented are favourable and contributed to reducing the country’s debt levels and entrenching macroeconomic gains.

“We understand that the people in Ghana have been impacted and for the low-income household, any additional cost is a problem that is very difficult to bear. We have to look at the fiscal position of government, there are different measures that we can adopt to achieve this,” Ms Georgieva stated.

She noted that Ghana’s current economic challenge “is not as dramatic,” but required that the government remain focused on the implementation of the loan-support programme.

The IMF Managing Director indicated that by having a strong economic fundamental and macroeconomy, institutions, governance, and no corruption, Ghana would be able to have a resilient economy and high standard of living.

She asked the government to prioritise reducing expenditure, increase revenue generation, and invest more in education and infrastructural development across the country.

“What we know is that the government cannot spend more than it generates, and it’s much better to spend money on education and infrastructure than for debt service,” Ms Georgieva said.

Ghana is implementing a three-year US$3bn Extended Credit Facility (ECF) programme with the IMF under the country’s Post-COVID-19 Programme for Economic Growth (PC-PEG).

The programme is aimed at restoring macroeconomic stability and debt sustainability, build resilience, and lay the foundation for stronger and more inclusive growth.

So far, the country has received the sum of US$1.2 bn in two tranches from the IMF, and is expected to conduct a second review of the implementation of the programme in April 2024.