Ghana was drowning in debt just a few years ago. It still struggles with significant levels of existing debt, but has finally started to turn the corner thanks to an International Monetary Fund (IMF) austerity program. Ghana entered into a three-year program under the guidance of the IMF aimed at getting its economy back under control, and has announced that, despite early success, it will not quit its current program.
"We remain optimistic about this three-year program and will ensure that all program reviews are successfully completed through to 2017, given the enormous benefits to the economy," Seth Terkper, Ghana’s Finance Minister said on Monday.
Ghana is the world's second largest exporter of cocoa and does strong trade in gold and oil. With the downturn in commodities, Ghana’s economy found itself increasingly underwater with its debt. At the end of 2015, Ghana’s debt equated to 71% of its gross domestic product (GDP). This led the African nation to finally seek the assistance of the IMF.
The multilateral economic organization proposed a three-year austerity program, which Ghana signed in April 2015. The austerity program is aimed at fixing the nation’s deficit spending, reducing its high public debt, and countering a rate of inflation that was consistently above the government’s target range.
Pursuant to the austerity program, Ghana would receive $940 million (US) from the IMF upon successful completion of the program. To date, the IMF has given Ghana just $228 million in two installments. A third payment was scheduled for June, but has been delayed due to fear that Ghana might overshoot its spending targets thanks to the upcoming presidential election later this year.
Some analysts have feared that sitting President of Ghana, John Mahama, might start an uptick in government spending as part of his bid for a second term. The race is expected to be a tight one with Mahama’s primary opponent, Nana Akufo-Addo. Finance Minister Terkper somewhat assuaged these fears, however, during a press conference on Monday.
"Ghana will not quit the IMF program, elections or no elections," Terkper said. He went on to note that Ghana was in the process of creating draft legislation aimed at restricting the central bank’s ability to lend to the government. This would essentially codify a requirement to force the government to observe the austerity program regardless of which candidate wins the election in November. The legislation will go before the Parliament later this week.