IMF Executive Board Concludes 2021 Article IV Consultation with Ghana

Ghana flag

Washington, DC, U.S//- The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Ghana on July 19, 2021.

Ghana was hit hard by the COVID-19 pandemic. The government response helped contain the pandemic and support the economy, but at the cost of a record fiscal deficit. The economic outlook is improving, even though risks remain, including from the evolution of the pandemic and rising debt vulnerabilities.

The pandemic had a severe impact on economic activity. Growth slowed to 0.4 percent in 2020 from 6.5 percent in 2019, food prices spiked, and poverty increased.

The fiscal deficit including energy and financial sector costs worsened to 15.2 percent of GDP, with a further 2.1 percent of GDP in additional spending financed through the accumulation of domestic arrears.

Public debt rose to 79 percent of GDP. The current account deficit widened slightly to 3.1 percent of GDP as the decline in oil exports was partially offset by higher gold prices, resilient remittances, and weaker imports.

The Ghanaian Cedi remained stable against the US dollar, partly due to central bank intervention, and gross international reserves remained at 3.2 months of imports.

External and domestic financing conditions tightened considerably at the start of the pandemic, but have improved since, and Ghana successfully returned to international capital markets for a US$3 billion Eurobond issuance in March 2021.

An economic recovery is underway. Growth is expected to rebound to 4.7 percent in 2021, supported by a strong cocoa season and mining and services activity, and inflation remaining within the Bank of Ghana target.

The current account deficit is projected to improve to 2.2 percent of GDP, supported by a pickup in oil prices, and gross international reserves are expected to remain stable.

The 2021 budget envisages a fiscal deficit of 13.9 percent of GDP in 2021, including energy and financial sector costs, and a gradual medium-term fiscal adjustment which would support a decline in public debt starting in 2024.

However, this outlook is subject to significant uncertainty, including from new pandemic waves and risks associated with large financing needs and increasing public debt.

Executive Board Assessment [2]

Executive Directors agreed with the thrust of the staff appraisal. They noted that the pandemic had a severe impact on Ghana’s economy, with slower growth, higher food prices, and increased poverty.

Directors commended the Ghanaian authorities for their proactive response to the COVID-19 pandemic, which mitigated its economic impact, but contributed to a record fiscal deficit and increased public debt vulnerabilities.

While there are encouraging signs of an economic recovery, they noted that it remains uneven across sectors. In this context, Directors stressed the importance of entrenching prudent macroeconomic policies, ensuring debt sustainability, and pressing ahead with structural reforms to deliver a sustainable, inclusive, and green economic recovery .

While noting that risks to Ghana’s capacity to repay have increased, Directors concurred that they are still manageable and that Ghana’s capacity to repay the Fund remains adequate.

Directors welcomed the fiscal adjustment envisaged in the 2021 budget. They stressed that fiscal consolidation is needed to address debt sustainability and rollover risks, as Ghana continues to be classified at high risk of debt distress.

To protect the most vulnerable, considerations could be given to more progressive revenue measures and a faster return to the pre-pandemic level of spending, with a shift towards social, health, and development spending. Directors also encouraged the timely completion of the planned audit of COVID‑19 emergency spending and new expenditure arrears.

Directors agreed that the monetary policy stance remains broadly appropriate, while noting that tighter policy would be needed if inflationary pressures materialize. Although gross international reserves are relatively high, Directors stressed the need to guard against erosion of external buffers and remain committed to a flexible exchange rate regime. Directors also encouraged the authorities to limit monetary financing of the deficit.

Directors noted that the financial sector cleanup had made the sector more resilient but stressed that banks’ growing holdings of sovereign debt creates risks and crowds out private sector credit.

In this regard, they took positive note of ongoing supervisory and regulatory reforms, which are important steps to protect financial stability . Directors also welcomed the improvements in the AML/CFT framework that allowed Ghana to exit the FATF “grey list”.

Directors emphasized that the authorities’ structural transformation and digitalization agendas are critical to support the recovery.

They noted that the structural transformation can be complemented by the ongoing energy sector review, diversification in tourism, and the digital transition, which has the potential to reduce corruption, boost tax revenues, and improve service delivery. Directors supported continued capacity development efforts in these areas.

It is expected that the next Article IV consultation with Ghana will be held on the standard 12-month cycle.

Ghana: Selected Economic and Financial Indicators, 2019–22
2019 2020 2021 2022
Act. Prel. Proj. Proj.
National accounts and prices (annual percentage change)
GDP at constant prices 6.5 0.4 4.7 6.2
Non-oil GDP 5.8 0.9 6.4 5.9
Oil and gas GDP 14.4 -4.6 -14.6 10.3
Consumer price index (p.a.)1 7.1 9.9 8.9 8.5
Central government budget (cash basis) (percent of GDP)
Revenue 14.3 12.9 14.9 15.0
Expenditure 21.8 28.2 28.9 25.4
o/w financial and energy sector costs 2.7 4.7 3.9 1.0
Overall balance2 -7.5 -15.2 -13.9 -10.5
excl. financial and energy sector costs 2 -4.7 -11.4 -10.0 -9.5
Primary balance2 -1.8 -8.8 -5.9 -1.4
excl. financial and energy sector costs 2 0.9 -4.1 -2.0 -0.3
Public debt (gross) 62.9 78.9 83.5 84.9
Domestic debt3 23.9 34.2 39.3 40.1
External debt 39.0 44.7 44.2 44.8
Money and credit (annual percentage change)
Credit to the private sector 4.7 10.6 8.6 7.8
Broad money (M2+) 21.6 29.7 22.1 13.5
External sector
Current account balance (percent of GDP) -2.7 -3.1 -2.2 -3.5
Gross international reserves (US$ millions) 6,607 6,962 7,494 7,435
in months of prospective imports 3.4 3.2 3.2 3.0
Net international reserves (US$ millions)4 5,247 4,559 5,212 5,285
in months of prospective imports 2.7 2.1 2.2 2.1
Memorandum items:
Nominal GDP (GHS millions) 356,544 383,486 446,662 510,652
Government debt excl. ESLA (% GDP) 61.2 76.9 81.9 83.5
Sources: Ghanaian authorities; and Fund staff estimates and projections.
1 The CPI was rebased in September 2019. The historical figures reflect assumptions by IMF staff.
2 Excludes discrepancy.
3 Includes Energy Sector Levy Act bond.
Does not subtract liabilities from currency forwards or swaps with residents.


[1] Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities.

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