The International Monetary Fund (IMF) has significantly downgraded its forecasts for economic growth in Ghana. In its latest round of economic forecasts, the IMF now believes the Ghanaian economy will grow just 1.6% in 2023. That’s down from its previous prediction of 2.8% growth back in October 2022.
The latest forecasts were published simultaneously with the IMF’s World Economy Outlook, which was released on April 11, 2023. The Ghanaian economy was not the only African economy to see its growth prospects diminish. The Nigerian economy is now expected to grow 3.2%, while the South African economy will only narrowly avoid recession, with 0.1% growth this year.
Growth Target Woes
The IMF struck a similarly cautious tone to the World Bank, imploring central banks throughout the Sub-Sahara Region to hold firm with interest rates to stave off inflation and prevent it from becoming endemic.
The IMF’s latest forecast means the Ghanaian government looks set to fall short of its growth target that was pegged at 2.8% within its 2023 Budget Statement published in November 2022. There has been increased attention paid to the global economic calendar, with nations around the world revealing the sharp rise in inflation that’s plaguing costs for businesses and consumers alike; none more so than those in Ghana.
All you need to know about Ghana’s inflation crisis
Ghana’s ongoing inflation issues have developed into one of the nation’s biggest economic dilemmas in decades. Ghanaians across the country are facing their own cost-of-living crisis, with households forced to delve deeper into their finances to cover the cost of everyday essentials.
In February 2023, Ghana’s rate of inflation was said to be as high as 52.8%. Effectively, the price of items has more than doubled year-on-year. The continual rise of basic commodities like foodstuffs, beverages, and cleaning products means households and small businesses are facing a weekly battle to maintain the status quo.
Critics of the Ghanaian government seem to be growing louder by the week too. Many feel the government, in particular the Presidency, has shown scant regard for the rampant nature of inflation. Based on a recent report, the Ghanaian Presidency’s operational enhancement outgoings cost the taxpayer almost 60 million Ghanaian cedi (GHS).
Between January-September 2022, the fuel bills of the Ghanaian Presidency also amounted to a staggering GHS 51 million. According to MP Okudzeto Ablakwa, the Ghanaian government had failed in its commitment to halve its fuel costs during the cost-of-living crisis. Even the government’s regional tours cost the taxpayer almost GHS 17 million, which was another kick in the teeth to citizens struggling to make ends meet.
An IMF bailout is in the offing for Ghana and its creditors
In December, the Ghanaian government opted to start a restructuring of its domestic debt, with a proposal to exchange $10.5 billion worth of local bonds for new bonds. As of September 2022, Ghana’s overall debt had reached GHS 467.3 billion, worth approximately $43.5 billion. The key to closing the country’s latest IMF bailout was determining its strategy for foreign debt, which included $13 billion worth of Eurobonds that had been trading at below 50 cents on the dollar for some time.
It is the 17th time that the Ghanaian government has had to go cap-in-hand to the IMF, which is proposing to lend $3 billion to the stricken nation. Ghana’s Finance Minister, Ken Ofori-Atta, confirmed the country’s foreign debt to overseas governments and state banks has now reached $5 billion. Ofori-Atta believes the country’s bilateral creditors would be prepared to offer debt relief to enable Ghana to access a fresh loan package from the IMF.
The so-called “Paris Club”, which consists of Ghana’s bilateral creditors hosted by the French Treasury, is “doing everything” it can to offer assurances to the IMF. Even the Chinese, who are reportedly owed $1.9 billion, are said to be keen to agree on a restructuring deal. The Ghanaian government has not been repaying its foreign debts for several months since obtaining outline approval for a fresh rescue package from the IMF.
The deal is likely to be contingent on a string of conditions being met, including a drive for increased revenues based on a hike of value-added tax (VAT), public utility tariffs, as well as the domestic debt restructuring we’ve already mentioned.
Ghana is by no means the only African nation to encounter such economic turmoil. Indeed, the IMF and the World Bank have both intimated that as many as three-fifths of all “low-income” nations have debt that’s already or potentially unsustainable.
The government of Zambia is in turmoil at present as it awaits the outcome of an IMF bailout. The aid has been delayed by several months as European nations and the Chinese quarrel over how to agree on its debt relief. In January 2021, Chad was yet another low-income African nation to seek an IMF bailout, but the approval process has also been unkind to the Chadians.
Categories: News
Source: thpttranhungdao.edu.vn/en/
