Economic outlook is currently uncertain, with concerns growing over the country’s foreign exchange reserves. The Director of Operations at Dalex Finance, Joe Jackson, has warned that Ghana is very likely to run out of foreign exchange if the $3bn IMF bailout deal does not pull through.
The country’s foreign reserves have declined to $5.9bn at the end of February 2023, providing for a mere 2.8 months of imports cover. This precarious situation has the potential to wreak havoc on Ghana’s economy, as it would mean that the government would not have access to any foreign exchange (dollars) to import fuel, which could result in serious challenges to the country’s power sector, including power outages, also known as “dumsor.”
Additionally, without access to foreign exchange, Ghana would not be able to import food and drugs to feed and cater for the health needs of the Ghanaian populace. Furthermore, the government may not have enough funds to pay public servant salaries and contractors’ arrears, which could worsen the economic situation.
The $3bn IMF bailout program, which Ghana is currently anticipating, could provide some relief to the country’s economic situation. The program has been delayed, with the IMF board approval pushed to May 31, 2023, after initially missing a March 31 deadline. However, Ghana has almost fulfilled all the prior actions and conditionalities imposed by the IMF to secure the $3bn bailout program. The only remaining conditionality is the restructuring of external debt.
The conditionalities include restructuring domestic debt, zero financing from the Bank of Ghana, a Covid-19 spending audit, an electricity tariff adjustment, key government funds moved to the Government Integrated Financial Management Information System (GIFMIS), three tax revenue improvement bills, and the restructuring of external debt.
The IMF program would also demonstrate to the international community that Ghana is committed to implementing sound economic policies and reforms. This, in turn, could improve investor confidence and attract more foreign investment to the country.
Ghana is facing significant economic challenges related to its declining foreign exchange reserves. The country’s ability to secure the $3bn IMF bailout program is crucial to mitigating the risks associated with the declining reserves and supporting the country’s economy. With Ghana almost fulfilling all the prior actions and conditionalities, the restructuring of external debt could be the final hurdle to securing the much-needed program. The IMF program would not only provide financial relief to Ghana but also demonstrate the country’s commitment to sound economic policies and reforms.