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As Ghana receives an IMF Executive Board approval, let’s look at the letter Finance Minister, Kenneth Ofori-Atta and Governor of Bank of Ghana, Dr Ernest Kwamina Yedu Addison wrote to Kristalina Georgieva, the IMF boss for a bailout package.
Below is the letter.
Dated: May 1st, 2023
Dear Madame Georgieva:
Following three years of strong and sustained macroeconomic performance, Ghana has
been hit by major external shocks over the period 2020-22. These have heightened pre-existing
vulnerabilities and pushed the economy into crisis. In particular, the twin impacts of the COVID-19 pandemic and the war in Ukraine have weakened public finances significantly and contributed
to a rapid and steep increase in inflation. These shocks have also been compounded by a
tightening of financing conditions both globally and locally, which in turn, have compromised
efforts at attaining fiscal and debt sustainability. These developments have eventually resulted in
a loss of international market access and increasing difficulties in rolling over maturing domestic
public debt instruments, thus accelerating the negative feedback loop of decreasing international
reserves, Cedi depreciation, rising inflation, and plummeting investor confidence, and making our
public debt unsustainable.
Faced with this difficult situation, we have laid out a strong program to restore
macroeconomic stability and lay the foundation for strong and more inclusive growth. Key areas
of focus of our Post-Covid-19 Program for Economic Growth (PC-PEG) include ensuring public
finance sustainability while protecting the vulnerable, bolstering the credibility of monetary and
exchange rate policies to reduce inflation and rebuild external buffers, preserving financial sector
stability, and taking extraordinary steps to promote entrepreneurship and private investments
(domestic and FDI) to establish a dynamic export-driven economy and accelerate growth as a
strong platform for the AfCFTA, while also ensuring further improvements in governance and
transparency of the public sector.
We have already taken several important steps as part of the PC-PEG. Parliament has
approved the 2023 budget which has jump-started our ambitious and frontloaded fiscal
consolidation program, including through ambitious revenue measures. We have also launched
and now implementing a comprehensive debt operation, which, together with our fiscal program,
will put public finances and debt back on a sustainable path. We have taken steps to strengthen
expenditure commitments controls. We have raised electricity tariffs as an essential step toward a
full cost-recovery pricing regime, with a view to reducing the energy sector financial shortfall and
ensuring the financial sustainability of the energy sector. The government and the Bank of Ghana
have signed a Memorandum of Understanding (MOU) to end monetary financing to help reduce
inflation. The Bank of Ghana has also tightened its monetary policy stance significantly in recent
months and is committed to maintaining the appropriate policy stance to help steer inflation
back to the medium-term target band of 8 ± 2 percent. As part of our efforts to enhance fiscal transparency and public sector accountability, the Auditor General has prepared and published
an audit report on COVID-19 spending.
To support our objectives, we wish to request a 36-month arrangement under the
Extended Credit Facility (ECF), with access at 304 percent of our SDR quota (SDR 2.242 billion) to
be disbursed as budget support. Along with support from development partners and financing
provided through the comprehensive debt restructuring that has been launched, the proposed
financing arrangement will cover our fiscal and external financing gaps as we embark on a multi-year adjustment effort.
We believe that the policies and actions set out in the attached Memorandum of
Economic and Financial Policies (MEFP) underpinned by the PC-PEG will enable us to achieve our
program objectives. The proposed arrangement will be monitored through a series of
quantitative performance criteria and indicative targets. It also includes a series of prior actions
and structural benchmarks covering reform areas that are critical to bolster macro-economic
performance and continuous performance criteria related to exchange restrictions and multiple
currency practices in the context of the Article VIII. The government is committed to providing
the IMF with information on the implementation of the agreed measures and the execution of
the program, as provided for in the attached Technical Memorandum of Understanding (TMU).
Should further measures be necessary, we will consult in advance with the IMF on their
adoption, in accordance with applicable IMF policies. We are committed to working closely with
IMF staff to ensure that the program is successful, and we will provide the IMF with the relevant
information necessary for monitoring our progress.
We fully recognize the importance of completing an updated safeguards assessment of
the Bank of Ghana before completion of the first review under the ECF. An IMF mission to
conduct the safeguards assessment took place over March-April 2023. The Bank of Ghana
provided Fund staff with all necessary information in preparation for that mission.
Consistent with our commitment to transparency in Government operations, we agree to
the publication of all the documents submitted to the IMF Executive Board in relation to this
request.
Sincerely yours,
/s/
Kenneth Ofori-Atta
Minister for Finance
/s/
Ernest Kwamina Yedu Addison
Governor, Bank of Ghana
Cc: Secretary to the President, Jubilee House, Accra
