Asking IMF For Bailout Shows Ghana's Deeper Economic Problems

Ghana is again seeking assistance from the International Monetary Fund (IMF) to enable the country to meet its payments to the rest of the world and restore the health of government finances. It is the second time in the past three years and 17th since independence in 1957 that Ghana has turned to the IMF for help, writes Theophilus Acheampong for The Conversation.

The latest foray reverses the current administration's earlier stance that it would avoid approaching the multilateral body because of the conditions that come with its assistance. Ghana's finance minister Ken Ofori-Atta said in May 2022 that government was "confident in its homegrown solutions such as the e-levy in getting the economy to recover ... seeking a bailout from the IMF is not an option".

Real GDP growth slowed from an average of 6.9% from 2017-2019 to 0.4% in 2020 during the pandemic but picked up to 4.7% in 2021. Rising prices have forced the Bank of Ghana to raise its policy rate by 4.5 percentage points to 19% by May 2022 in an attempt to tame inflation. The local currency - the cedi - had depreciated by almost 20% against the US dollar as of June 2022, making imports more expensive, forcing prices of goods and services upwards.

Acheampong writes that Ghana should firstly use the IMF programme to negotiate some debt restructuring with commercial and multilateral creditors. Secondly, it must implement fully any agreed structural reforms to put the economy on a sound footing. Thirdly, the country must aggressively grow and diversify its small open economy to reduce reliance on primary commodities such as cocoa, gold and oil.