The International Monetary Fund (IMF) has projected that the Bank of Ghana’s (BoG’s) net equity will improve significantly and eventually return to positive territory.
This comes after the loss of GH¢60.5 billion ($6billion) suffered by the Bank, due to the impairment of the Government of Ghana’s securities holdings, impairment of loans and advances granted to quasi-government and financial institutions, and depreciation of the local currency.
The BoG’s Board of Directors and Management have assessed the policy solvency implications arising from the loss and the group’s ability to generate enough income to cover its monetary policy operations and other operational costs.
The IMF highlighted that the Ghanaian authorities’ domestic debt exchange is a key element of their plan to restore macroeconomic stability and public debt sustainability.
The BoG participated in the DDE to share some of the burden the DDE places on government debt holders, along with banks, other financial institutions, pension funds and individuals. While the loss contributed to reducing the BoG’s net equity to a negative value, this will not prevent the bank from fulfilling its policy mandates and ensuring inflation gradually returns towards its 8-percent target.
The IMF added that central bank income is expected to cover monetary policy operational costs, and the BoG’s net equity is expected to improve significantly over time, eventually returning to positive territory.
The IMF’s 36-month Extended Credit Facility (ECF) arrangement for Ghana aims to restore macroeconomic stability, ensure debt sustainability, and lay the foundations for higher and more inclusive growth.
Ghana’s economic programme prioritizes large and frontloaded measures to bring public finances back on a sustainable path. This will mobilize more domestic revenue, improve the efficiency of public spending, and protect the vulnerable. The IMF-supported programme aims to boost social spending to improve socioeconomic outcomes and promote inclusive growth, while also improving governance and transparency and fighting corruption.
The IMF Executive Board approved, on May 17, 2023, an SDR 2.242 billion (about US$3 billion) ECF arrangement for Ghana, enabling an immediate disbursement equivalent to SDR 451.4 million ($600 million).
The remaining disbursement will occur in tranches every six months, following programme reviews approved by the IMF Executive Board.
Ghana is in the process of completing its domestic debt restructuring, and the next step regarding official bilateral debt is for the Official Creditor Committee for Ghana, under the G20 Common Framework, to reach agreement with the authorities on the specific modalities of how official creditors intend to deliver debt relief consistent with Fund-program parameters. The authorities are also engaging with their private creditors to seek relief on their external debt.
By Vincent Kubi