Fitch Solution has stated that Ghana’s International Monetary Fund Programme will not be suspended despite a higher-than-budgeted expenditure.

According to its latest assessment of Ghana Titled “Positive Shift in Ghana's Political Risk Profile Following IMF Programme Approval”, the UK-based firm said there is a risk the government will fail to meet its IMF targets in 2024.

Since the start of this decade, total expenditure as a share of GDP increased by an average of 3.0 percentage points during election years, signalling that some level of fiscal slippage is likely in 2024.

Nonetheless, Fitch Solutions, said a higher-than-budgeted expenditure is unlikely to lead to a suspension of the IMF programme.

“Nonetheless, higher-than-budgeted for expenditure is unlikely to lead to a suspension of the IMF programme. Indeed, when public expenditure surpassed budgetary allocations in 2016 (an election year), the IMF board approved waivers for non-observance of performance criteria and decided to extend the arrangement by one year”, it pointed out.”

 As such, anticipated fiscal slippage in 2024 is unlikely to result in a loss of investor confidence, which – in turn – would weaken the cedi and drive up inflation and could lead to greater social unrest, it added.

IMF assistance to improve economic conditions

Furthermore, Fitch Solutions, said it believes that IMF assistance will improve economic conditions in Ghana and therefore limit risks to social stability over the coming quarters. 

Following the formation of an official creditor committee, the IMF approved Ghana’s $3.0bn Extended Credit Facility in May 2023, which led to an immediate $600 million disbursement, with another $600 million expected in the fourth quarter of 2023.

This, it believes, will shore up the country’s foreign exchange reserves, which had fallen to $5.2 billion in April (2.5 months of import cover), and help meets Ghana’s external financing needs. “These developments have improved sentiment towards Ghanaian assets, with the cedi having strengthened by 8.0% in May [2023], which will reduce imported inflation over the coming months. Indeed, we believe that consumer price growth will remain on a downward trajectory through 2023 and 2024, easing pressure on household finances”, it added.