Ghana misses critical IMF targets

GHANA’S Finance Minister, Dr Cassiel Ato Forson, has disclosed to Parliament that the country has missed key performance indicators required for the upcoming fourth review of its International Monetary Fund (IMF) supported programme scheduled for April 2025. 

He said the primary balance on commitment basis, inflation rate and social protection spending for end-December 2024 have all fallen short of agreed benchmarks. 

Perhaps more concerning is his revelation that all structural benchmarks due by end-December 2024 are likely missed, suggesting a comprehensive failure to meet reform commitments.

End of year inflation target was missed as the 23.8 per cent recorded in December 2024 far exceeded the budget target of 15 per cent and the IMF central target of 18 per cent. 

This 5.8 percentage point deviation from the IMF target has triggered discussions under the Monetary Policy Consultation Clause, potentially leading to more stringent conditions or revised programme parameters.

The primary balance—considered the key fiscal anchor of the IMF programme—deteriorated from a deficit of 0.2 per cent of Gross Domestic Product (GDP) in 2023 to a deficit of 3.9 per cent in 2024. 

This represents a massive slippage of 4.4 percentage points from the targeted surplus of 0.5 per cent of GDP, undermining confidence in Ghana's fiscal management capabilities at a critical juncture.

Despite the painful sacrifices made by domestic bondholders, external creditors and taxpayers under the IMF-supported programme, Dr Forson characterised the economy as remaining "in distress," with little to show for the difficult adjustments already undertaken by Ghanaian citizens and investors.

Debt service 

The missed IMF targets come amid staggering debt service obligations, with domestic debt service payments projected at GH¢150.3 billion over the next four years and external debt service totalling US$8.7 billion during the same period. 

These obligations, heavily concentrated in 2027 and 2028, appear to have been structured in a way that postpones the most severe fiscal pressure to future years.

The finance minister's presentation revealed an alarming GH¢67.5 billion in government arrears to contractors and suppliers, representing 5.2 per cent of GDP, suggesting that expenditure control mechanisms implemented under the IMF programme have been ineffective or circumvented by the previous administration.

He said Ghana's fiscal performance in 2024 showed improved revenue collection but was undermined by significant expenditure overruns. 

While revenues exceeded targets by 5.3 per cent, total expenditure on commitment basis was 27.1 per cent above budgetary provisions, and primary expenditure exceeded targets by 35.3 per cent, reflecting weak commitment controls.

The overall fiscal balance on commitment basis for 2024 was a deficit of 7.9 per cent of GDP against a target deficit of 4.2 per cent, demonstrating substantial fiscal slippage that could complicate negotiations with the IMF during the upcoming review. 

On a cash basis, the deficit was 5.2 per cent against a target of 5.3 per cent, highlighting how cash accounting can mask deeper fiscal challenges.

SOEs liabilities 

Beyond the central government's arrears, additional liabilities include $1.73 billion owed to Independent Power Producers, GH¢68 billion owed by the Electricity Company of Ghana, and GH¢32 billion owed by the Ghana Cocoa Board, representing significant contingent liabilities that could further strain the country's relationship with international creditors.

Dr Forson said the Bank of Ghana was also seeking a bailout of approximately GH¢53 billion to address its negative equity position, suggesting that monetary policy institutions have also been negatively impacted by the fiscal challenges facing the country, potentially complicating inflation management efforts required by the IMF.

The finance minister expressed particular concern about GH¢194 billion in unauthorised contractual commitments made by various MDAs, representing about 16.5 per cent of GDP, which were executed without commencement certificates and authorisation, and without budgetary provision, violating the Public Financial Management Act that was strengthened under IMF guidance.

He said the new administration has inherited severely depleted financial buffers, with the debt service reserve dollar account holding just US$64,000 (compared to US$319 million in 2016) and the debt service reserve Cedi account containing only GH¢143 million (down from GH¢430 million in 2016), leaving little cushion for upcoming debt service humps.

Financing options 

Ghana's financing options appear severely constrained, with the government limited primarily to the treasury bill market following the debt restructuring programme, creating potential rollover risks for GH¢111.1 billion in short-term maturities that require weekly management.

Despite the debt restructuring that included a 37 per cent haircut on Eurobond principal, Ghana's gross central government and guaranteed debt stood at GH¢726.7 billion as of December 2024, representing 61.8 per cent of GDP. 

While this shows improvement from 68.7 per cent in 2023, the debt service burden remains dangerously high.