Minister for Finance Dr. Mohammed Amin Adam has cautioned against any panic-driven rush for dollars that can cause further depreciation of the Cedi depreciate against the major foreign currency in the country.
He said there is no need to rush and buy forex as there is an anticipated inflow of at least $2.32 billion into the economy by the end of this year.
“We expect total disbursements of at least US$2.32 billion before the end of the year to add to the significant foreign exchange reserves already built up by the BoG,” the Finance Minister stressed.
The Ghanaian currency is now hovering around GH¢14.5 to a dollar, up from GH¢13 due to panic buying of the foreign currency.
However, speaking during the Ministry of Finance’s Monthly Economic Update on Friday, Dr. Amin Adam highlighted multiple sources of dollar inflows, including disbursements from the IMF and World Bank, the Gold-for-Oil Programme, the Bank of Ghana’s (BoG) Gold for Reserves programme, and proceeds from the Cocoa Syndicated Funds.
He attributed the current exchange rate pressures to the strengthening of the US Dollar against major trading currencies, seasonal forex demand, and other temporary factors affirming that the government is implementing robust measures to ensure continued stability.
Dr. Amin Adam acknowledged pressures but remained optimistic about medium-term stability of the Cedi with a cumulative depreciation of 14.2% as of 20th May 2024, compared to 20.7% recorded in the same period in 2023.
He maintained that the Cedi is expected to be largely stable and improve into the medium-term as government completes its debt restructuring, make more progress on fiscal consolidation, and improve the country’s reserves over the same period.
Dr. Amin Adam who is also the Member of Parliament (MP) for Karaga in the Northern Region, detailed the progress made under the IMF-Supported Post Covid-19 Programme for Economic Growth (PC-PEG).
Following a successful second Review Mission by the IMF in April 2024, Ghana secured a Staff Level Agreement (SLA), paving the way for the IMF Executive Board to consider and approve the disbursement of a third tranche of $360 million in June, bringing total disbursements to $1.56 billion.
“The positive results of the first and second reviews of the implementation of the IMF-supported Programme testify that we are achieving the Programme’s objective of restoring macroeconomic stability and debt sustainability,” the Finance Minister added.
He noted the resilience of the economy, citing a 2.9% GDP growth in 2023, surpassing both the original projection of 1.5% and the revised projection of 2.3%.
Dr. Amin Adam gave the assurance that the Ministry of Finance was working closely with the BoG to implement measures to address the perennial depreciation of the Cedi, including fast-tracking fiscal consolidation, intensifying the Gold-for-Oil and Gold for Reserves programmes, and strategic FX interventions by the central bank.
Update on IMF Programme
It will be recalled that in the Finance Minister’s first monthly press update on 26th March 2024, he indicated that one of the priorities of Government for the rest of 2024 and beyond was to stay course on the implementation of the US$3 billion 3-year IMF supported Post Covid-19 Programme for Economic Growth (PC-PEG).
He also notified the media that Ghana will be hosting an IMF Mission from 2nd to 12th April 2024 to undertake the 2nd Review of the implementation of IMF-supported PC-PEG following the approval of the Programme in May 2023 and the completion of the 1st review of the Programme in January 2024, both of which resulted in a total disbursement of US$1.2 billion (1st and 2nd tranches).
Dr. Amin Adam announced that the second Review Mission by the IMF Staff was successfully concluded on 13th April 2024, enabling Ghana to reach a Staff Level Agreement (SLA) on the 2nd Review with the IMF.
“With the SLA now secured, it is expected that the Executive Board of the IMF will sit on Ghana’s 2nd Review for consideration and approval sometime in June to unlock the 3rd tranche of US$360 million, bringing the total disbursements to US$1.56 billion,” the Minister added.
According to him, the 2nd Review Mission which was conducted with end-December 2023 as the test date was based on key performance indicators, including six Quantitative Performance Criteria, three Indicative Targets, and one Structural Benchmark that was due at the end of December 2023, as well as four Structural Benchmarks due at the end of March 2024 since the program is also forward-looking.
“The Fund assessed Ghana’s performance under the 2nd review as very strong, as most of the Quantitative Performance Criteria (QPCs) and Indicative Targets (Its) adjudged by the Fund Staff were met. In addition, Ghana satisfied all five (5) but one structural benchmark due by end-December 2023 and end March 2024. The assessment also shows great strides in our social protection interventions to mitigate the cost of adjustment on the poor and vulnerable,” he added.
Targets achieved
Dr. Amin Adam noted that by the end of 2023, government achieved the following targets under the Programme, subject to the approval of the IMF Executive Board:
i. Minimum Net International Reserve (cumulative change) of US$988.2 million;
ii. Zero Central Bank borrowing;
iii. A ceiling (cumulative) of GH¢4.3 billion for the primary deficit on commitment basis;
iv. Zero accumulation of external debt payments;
v. A non-concessional borrowing limit of US$66.2 million in Present Value terms; and
vi. Zero collateralized borrowing by the Central Government and SOEs.
He said in addition, Ghana achieved the following Indicative Targets (IT):
i. A minimum of GH¢114.19 billion for Non-oil public revenue; and
ii. A minimum of GH¢4.07 billion in Social spending.
Issues being assessed
Dr. Amin Adam indicated that the Indicative target of a ceiling of zero Net change in the stock of payables of the central government and of payables to IPPs are still being assessed and the assessment will be completed before the IMF Executive Board meeting on the second review.
“We have also implemented the following structural reforms under the 2nd Review of the IMF-supported programme:
i. expanded the GIFMIS infrastructure to include over 280 IGF-reliant institutions;
ii. published on PURC’s website the final report of the first quarterly audit of ECG’s single account;
iii. BoG and MoF have designed and will soon begin the implementation of a credible, comprehensive, and cost effective plan that seeks to address NIB’s challenges; and
iv. developed a centralized inventory of all ongoing and planned public investment projects that have been approved by the Cabinet,” he stressed.
Restoration of macroeconomic stability
Dr. Amin Adam said the positive results of the first and second reviews of the implementation of the IMF-supported Programme testify that government is achieving the Programme’s objective of restoring macroeconomic stability and debt sustainability, building resilience through the implementation of strong and wide-ranging structural reforms, and laying the foundations for stronger and more inclusive growth, while protecting the poor and vulnerable.
“We are now seeing signs of macroeconomic
stability and economic recovery:
i. growth turned out to be more resilient and robust in 2023 than initially programmed as GDP grew by 2.9% compared to the original projection of 1.5% and the revised projection of 2.3%. We expect growth to continue its upward trajectory to average 5% in the medium-term as we implement our growth strategy under the PC-PEG, supported by the revival of Ghana’s industrialization drive, modernization of agriculture with a focus on value-addition to create economic and employment opportunities, and SME growth and financing;
ii. inflation is declining”.
