The Executive Board of the International Monetary Fund (IMF) has approved a the long-awaited US$3 billion bailout for Ghana.
The 36-month Extended Credit Facility (ECF) program, is based on Ghana government’s Post COVID-19 Program for Economic Growth (PC-PEG), which aims to restore macroeconomic stability and debt sustainability and includes wide-ranging reforms to build resilience and lay the foundation for stronger and more inclusive growth.
The Executive Board’s decision will enable an immediate disbursement to of US$600 million to Ghana.
The Ghanaian government had to, among other things, subject various segments of citizens to its unpopular debt exchange program, which saw lots of government bond holders, including even pensioners, suffer haircuts that led to the depletion of gains expected from life-time investments.
Several affected groups, led by some very senior and renown retired citizens had to resort to picketing for days at the finance ministry just to get their life-time investments exempted from the inimical haircuts designed to position Ghana well to qualify for the IMF bailout.
The $3 billion bailout is here now, and it is expected to aid Ghana’s economic recovery from the debt crisis. This approval has boosted investor confidence, resulting in Ghana’s currency, the cedi, reportedly becoming the world’s top performer against the dollar.
As of Wednesday, May 17, 2023, the currency reportedly traded 1.7% stronger at GH₵10.8625 per dollar in Ghana. Additionally, Ghana’s Eurobond maturing in 2032 experienced a boost, rising 0.5 cents to 40.2 cents on the dollar. Investors had been wagering on the approval of the bailout.
The approved funding will serve to replenish Ghana’s foreign-exchange reserves, which have seen a significant decline of nearly 50% since their peak in August 2021.
The government is gearing up to receive an initial massive cash injection of $600 million, with an additional $600 million expected in November, followed by equal instalments of $350 million every six months, pending some critical reviews by the IMF.
Ghana is also set on securing an additional $900 million in budget support from the World Bank over the course of a three-year period.
Meanwhile, the country is rolling up its sleeves for some serious negotiations. It is currently in talks to restructure $13 billion of its debt. Notably, a bilateral creditors group co-chaired by China and France played a vital role in restructuring Ghana’s debt under the Common Framework, which ensures fair burden sharing.
