We are optimistic Ghana will secure IMF Board approval in quarter 1, 2023 – Fitch Solutions

Fitch Solutions, has expressed optimism of a likely International Monetary Fund Board approval for a programme for Ghana in the first quarter of 2023.

In its January 2023 Sub-Saharan Africa Macroeconomic Update, it said the country has made significant progress on the Domestic Debt Exchange Programme, a key condition for the $3 billion Balance of Payment support from the Fund.

Senior Country Risk Analyst at Fitch Solutions based in London, Mike Kruninger said “the first thing I should say is that, the IMF Executive Board approval will happen in the coming weeks”.

He, however, warned that should the approval fail to happen in quarter one of 2023, investor sentiments will remain weaker in the coming months, putting additional pressure on the cedi.

So in the first quarter of 2023, should this not happen, we will be expecting investor confidence to remain rather weak in the coming months which will put additional pressure on the exchange rate. So in that case, the currency will depreciate further more significantly than we currently anticipate”.

Kruninger added that “so what will happen in that instance is inflation will remain much higher for much longer. And this will then weigh on incomes, it will weigh on overall private sector activities”.

He concluded that Ghana’s growth rate will then be weaker than the 2.9% it projected.

So in this instance the economic wealth will become much weaker than the 2.9 percent that we are currently forecasting”.

IMF deal would improve Ghana’s external position, restore investor sentiment

Fitch Solutions had earlier said an IMF deal would help improve Ghana’s external and fiscal positions, restoring investor sentiment and easing pressure on the exchange rate.

It indicated that the government would make greater progress on fiscal reforms under an IMF deal.

We believe that an IMF deal would improve Ghana’s external and fiscal positions, restoring investor sentiment and easing pressure on the exchange rate”.

Ghana’s fiscal metrics haddeteriorated significantly since 2020, due to weak revenue inflows and high-interest expenditures, with its budget deficit narrowing only slightly to 8.6% of Gross Domestic Product (GDP) in 2022 (from 9.3% in 2021), much wider compared to the 10-year pre-pandemic average of a 4.9% deficit.

Under an IMF programme, we expect the government would make greater progress on fiscal reforms as the authorities seek to meet the targets to regain market access”, it pointed out.