Government of Ghana announced it will be going to the International Monetary Fund (IMF) for financial support. The team from the IMF touched down yesterday to start the week long engagement with Ghana.
A statement issued on Friday, July 1, 2022, and signed by the Information Minister, Kojo Oppong Nkrumah, revealed that President Nana Akufo-Addo has instructed his Finance Minister to commence formal engagements with the IMF, inviting the Fund to support an economic program put together by the GoG.
This eleventh hour decision by the Akufo-Addo led administration came as a surprise to many, especially because the New Patriotic Party (NPP) government had refused to seek a bailout from the IMF despite the economic crisis in the last six months.
However, the NPP government’s change of mind to seek support from the Bretton Wood institution is a result of the following four key reasons as outlined by Citi FM journalist, Bernard Avle.
The country’s economic fundamentals and fiscals have been described as weak because our income/revenue is far less than our expenditure.
Also, Ghana’s total public debt stock stands at GH¢391.9 billion as of the end of the first quarter of 2022, translating to a debt to GDP of 78 percent.
The cedi is also struggling against major foreign currencies like the dollar and pound sterling.
Its currently one of the worst, if not the worst-performing currency among African currencies.
Poor credit from international markets
Ghana has had to turn to the IMF because it has lost credibility with all international rating agencies.
By virtue of this, the country’s economy is not trusted and we cannot borrow money because rating agencies have not given strong endorsements of Ghana’s economy.
Another reason why Ghana is said to be going to the IMF is because of global issues.
The West African country like many other countries across the world is suffering from the effects of the coronavirus pandemic and its resulting economic downturn.
The war in Ukraine has also disrupted global supply chains. The conflict has contributed to an increase in the price of gas, oil, and agricultural raw materials.
Russia and Ukraine, supply almost one-third of the total imported wheat on the African continent.
Structure of the economy
Ghana’s economy is primarily small and not diverse enough. The country’s over reliance on imported goods and services, and the export of its resources like gold and cocoa in raw form put us at the mercy of happenings on the global market. Shocks or events like the Russia/Ukraine war affects us badly.
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