Ghana is set to receive $3 billion from the IMF for its Balance of Payment (BoP) support between 2023 and 2026, and this bailout package is to be distributed in installments.

The first installment of $600 million has already been received, and the country aims to access the second tranche by the end of 2023, contingent upon meeting all requirements.

Prior to the first disbursement, Ghana had to secure financial assurance from its external creditors, a requirement fulfilled before the IMF Executive Board approved the payment.

Under the three-year ECF programme, the Ghanaian government plans to restructure around $10.5 billion of its external debt, which stood at nearly $30 billion in June 2023.

There are differing opinions on the conditions for receiving the second tranche of $600 million, which would bring the total disbursement to $1.2 billion after the Fund's first review.

Ghana's Information Minister, Kojo Oppong Nkrumah, stated in an interview with JoyNews that he does not believe an agreement with external creditors is a prerequisite for the disbursement of the second installment.

“I don't think that if we look at the fine print, that agreement is a condition precedent for accessing the next tranche” the minister expressed.

Reacting to the Minister’s assertion, Professor of Finance at the University of Ghana Business School, Godfred Bokpin, said he had not seen anywhere in the IMF programme that makes reaching an agreement with external creditors a precondition for accessing the second tranche of disbursement.

“I haven't seen it anywhere, maybe I've not read the document well enough. I haven't seen anywhere where it is stated that reaching an agreement with external creditors is a precondition to us getting the second tranche,” he said.

Earlier, the International Monetary Fund (IMF) Mission Chief for Ghana, Stephane Roudet had disclosed to JoyNews in an interview that government must secure the required financing assurance from external bilateral creditors before its board can approve the next tranche of funds for the country.

“Just like we got the financing assurance before Ghana secured the IMF programme, this financing agreement from the external creditors is needed before the IMF board approves the first programme review” the Mission Chief stressed.

Prof. Bokpin said Mr. Roudet’s comment came as a surprise to him.

“When I saw that statement from the Mission Chief…I became a bit quiet because from all my work and insight…I never come across something like that.”

The professor mentioned that he had spoken with certain members of Ghana's official creditor committee, who informed him that reaching an agreement with them was not a requirement for the second tranche disbursement.

“I interacted with some of the reps on the official creditor committee we've had some kind of engagement and also with external commercial…and I've put these things across a couple of times whether it's really a precondition, and the answer was no…unless there are other things behind the scenes that probably is not in the public purview for which reason this is a precondition, other than that, it has been my considered view that if you look at the structural benchmark, the indicator of targets and the rest of them; in the first review, this is slightly low hanging fruit, and therefore as a country, we should be able to meet those targets and get the next tranche of the IMF supported program.”

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Given the differing opinions, it is crucial to examine the IMF's stance on the actions Ghana needs to take in order to secure the second tranche of disbursement.

What does the fine print say?

On page 72 of Ghana’s IMF programme titled “REQUEST FOR AN ARRANGEMENT UNDER THE EXTENDED CREDIT FACILITY”, it is indicated that completion of the first review of the programme will grant Ghana access to the second tranche of $600 million. This implies that without the successful completion of the first review, it is highly unlikely for Ghana to acquire the additional $600 million.

Who can pass the first review?

According to the Fund’s Press Release (PRESS RELEASE NO. 23/339) on October 6 2023, “Ghana will have access to about US$600 million in financing once the review is approved by IMF Management and formally completed by the IMF Executive Board.”

What will make IMF Executive Board approve the first review?

According to the same IMF press release, for Ghana to “ensure timely completion of the review, the country needs official creditors to quickly reach agreement on a debt treatment in line with the financing assurances they provided in May 2023.”

IMF Managing Director

In less than 3 days after the contrasting opinions on what Ghana must do to gain the second tranche, the IMF’s Managing Director, Kristalina Georgieva congratulated Ghana on the recent staff-level agreement on the Fund-supported program’s first review. She however stressed that the Fund is “counting on bilateral creditors reaching an agreement on debt relief soon to move the review forward.”

The IMF's directive is explicit: Ghana is required to secure financial assurance from its external creditors before gaining access to the subsequent $600 million tranche. Reaching this agreement with creditors is anticipated to elevate the total disbursement under the Fund's program to $1.2 billion. Additionally, Ghana's debt arrangement with foreign creditors is projected to release approximately $2.5 billion in 2023 alone, aiding in bridging Ghana's Balance of Payment deficit.