Ghana’s Economic Recovery Faces New Risks – IMF

Ghana remains exposed to fluctuations in international gold, cocoa and crude oil prices, with the International Monetary Fund (IMF) warning that domestic economic challenges could also threaten the country’s financial stability.

The warning follows the IMF mission’s review of Ghana’s first Policy Coordination Instrument (PCI), which assessed the country’s economic performance, ongoing reforms and ability to withstand external economic pressures.

According to the Fund, although Ghana has made progress in stabilising its economy, significant vulnerabilities remain. These include geopolitical tensions, tighter global financial conditions and unpredictable movements in the prices of key export commodities.

The IMF noted that Ghana’s dependence on gold, cocoa and oil revenues leaves the economy vulnerable to developments in international markets. A substantial decline in the prices of these commodities could affect export earnings, government revenue, foreign exchange availability and the country’s ability to build stronger financial reserves.

Beyond external pressures, the Fund identified several domestic risks that could undermine the country’s economic recovery.

These include significant domestic debt rollover requirements, fiscal pressures within the energy, cocoa and gold sectors, as well as lingering weaknesses in the financial sector.

The concerns come despite improvements in some key economic indicators and progress under the government’s economic reform programme.

IMF highlights importance of stronger economic safeguards

To protect the country’s economic gains, the IMF has emphasised the need for prudent monetary policy, greater exchange rate flexibility and stronger foreign exchange reserve buffers.

It also recommended building a sinking fund to support the repayment of maturing government debt and reduce potential pressure on public finances.

The Fund further stressed that consistent implementation of ongoing reforms would be essential to maintaining investor confidence and protecting the economy against unexpected shocks.

Ghana’s economic reform programme makes progress

Despite the risks, the IMF described Ghana’s performance under the Policy Coordination Instrument as broadly satisfactory, noting that most quantitative targets under the latest review had been met.

The authorities have also introduced corrective measures in response to the recent decline in foreign exchange reserves. These include transferring foreign exchange intermediation from the Bank of Ghana to GoldBod and implementing higher gold sale requirements for large-scale mining companies.

Structural reforms are also progressing, including changes to the governance of the cocoa sector, quarterly electricity tariff adjustments and improvements to customs and excise legislation.

However, the IMF says outstanding reforms must be completed on schedule, including the delayed publication of the audit of the Electricity Company of Ghana’s collection accounts.

Governance and accountability remain critical

The Fund has also called for stronger governance, improved oversight of state-owned enterprises and the adoption of the Conduct of Public Officers Bill.

It believes that greater transparency and accountability, alongside the publication of the second National Ethics and Anti-Corruption Action Plan, would help strengthen public trust and encourage private investment.

The IMF’s latest warning highlights an important challenge facing Ghana: maintaining economic stability while reducing its exposure to commodity price fluctuations, domestic debt pressures and weaknesses in key economic sectors.

While recent reforms have helped improve the country’s economic outlook, the Fund says sustained policy discipline and stronger financial safeguards will be necessary to protect those gains.