Impact on Ghana’s economy should gov’t exit IMF programme


Ghana’s economy faces a dire consequence should government discontinue the three-year Extended Credit Facility (ECF) programme approved by the International Monetary Fund (IMF) which is set to be completed in 2017.

At the end of a successful completion of the 3-year programme, a total amount of USD 918 million will be disbursed to Ghana to support its Balance of Payment.

Objective & Benefits of the IMF Programme

A successful review and completion of the 3-year ECF programme among others should first and foremost restore debt sustainability and macroeconomic stability to foster a return to high growth and job creation through agriculture and infrastructure investment, while protecting social spending.

Secondly, to strengthen the BOG’s monetary policy framework, while taking measures to ensure its full effectiveness and to rebuild external buffers for the country.

The IMF programme will also boost grant disbursement from development partners, improve macroeconomic stability, support the credibility of Government’s policy and boost investor confidence in the economy.

Some Economic Highlights

Exchange Rate; The cedi has fairly enjoyed some stability against the US dollar and the Euro with a cumulative rate of depreciation being 0.02 percent and 2.7 percent respectively although it appreciated 1.6 percent against the Pound Sterling within the period January to June 2016 compared to a cumulative depreciation rate of 16.9, 16.3 and 9.2 percent against the US dollar, Euro and The Pound Sterling respectively in the same period of year 2015.

Inflation; Inflation still remains high at 18.4 percent as at June ending 2016 although it was 19.7 percent at beginning of year 2016.This high rate of inflation is as a result of the increase in utility prices and food stuffs.

Monetary Policy Rate (MPR) as maintained at 26 percent by the MPR Committee is still high since November 2015 making cost of borrowing high and access to credit very difficult, this is impacting on businesses negatively.

Impact of Discontinuing the IMF Programme on the Economy

Any decision by government to discontinue or halt the full and successful implementation of the IMF programme will affect the macroeconomic stability the country has enjoyed since the beginning of this year. The stable exchange rate, inflation and interest rate over the half year period has increased the investor confidence in the economy. In the event that government discontinues the IMF programme as speculated by some stakeholders will derail the boost of confidence investors have in the economy currently most especially this being an election year.
Furthermore, the restrain on excessive government expenditure by the programme conditionality to restore debt sustainability and macroeconomic stability will not be achieved.

On the other hand, there is evidence to support claims that government mostly over spend during electioneering year which plunge the economy into a state of macro instability after each election. Fortunately, as part of the review criteria, government is expected to control its expenditure for a successful full implementation of the ECF programme.

Moreover, one of the core objectives of the 3-year Extended Credit Facility (ECF) by the IMF programme is to strengthen the BoG monetary policy framework and to take measures to make it more effective and efficient. Consequently, if government halt the IMF programme as speculated, there is a high possibility of continues laxity in the monetary policy of BoG to truck and forestall happenings such as;

Firstly, the $250 million that the Ministry of Finance ordered to be transferred to an account in a private bank which no benefit came to government.

Secondly, the exchange rate hikes and steep depreciation of the cedi which most believe is as a result of lack of prudent forex management by BoG.

The regulatory lapses in managing Microfinance Institutions (MFIs) like the DKM case which saw a number of Ghanaians loosing thousands of Ghana cedi and other similar failures in monetary policy management. All this and many other such cases would be prevented.

The third review of the programme criteria which is said to be successful as stated by the Minister of Finance, expected Parliament to review the Bank of Ghana Act to set a new Zero limit on monetary financing to the government and public institutions. This action will prevent the Central Bank from financing government and State Owned Enterprises or Institutions.

On the flip side of the programme, Government can’t be and won’t be sustainable and profitable; there will always be cases where social welfare is more important than having profit.

Government is designed to look after the welfare of its citizens (how this is done and whether it is done well is a whole another question), and business is designed to disregard it in favor of profit. That is why some stakeholder and economic analyst have suggested that the financing of SOEs by government should be faced out gradually. An example is the Electricity Company of Ghana (ECG).


Government has come under intense pressure and fire from some citizens and stakeholders to halt the IMF programme reasons being that it is not value to the people of this country. Unfortunately that cannot be done considering how far we have come with the implementation of the Extended Credit Facility (ECF) Programme. I rather recommend that, government engage the IMF on the zero financing of government by BoG since that is what has sparked the brouhaha and the bone of contention. A slow pace facing off of the initial 10% ceiling of borrowing by government from BoG will go a long way to help government sustain the economic stability of the country. Government should negotiate for a 5year period to face off the 10% financing cap from BoG since some economic projections were made based on this financing lead by the Central Bank.


A successful full implementation of the IMF programme will go a long way to drive growth in all sectors of the economy and help to restore investor confidence in the country. Our macroeconomic stability and debt sustainability goals set, if achieved would foster growth and infrastructural development.

Strengthening of the country’s monetary policy and prudent management of the macroeconomic indicators most especially interest rate will propel and realize a sharp growth in the the private sector and for businesses that import more of its products.

By Jelili J. AFOLABI | [email protected]

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