STATEMENT ON GHANA’S NEW ENGAGEMENT WITH THE IMF
1. Rt. Hon. Speaker, I come before this House to provide an update on the substantial progress we have made in restoring macroeconomic stability and debt sustainability ahead of the original timeline.
2. This address will also announce a new chapter in Ghana’s engagement with the International Monetary Fund.
3. Mr. Speaker, this is a consequential moment in President Mahama’s Reset Agenda and, indeed, in the life of our Nation.
4. It signifies Ghana’s passage from crisis management to stability, from dependence on financial bailout to partnership in reform, and from uncertainty to renewed confidence in our economic future.
5. Mr. Speaker, to appreciate the significance of this moment, we must briefly recall the gravity of the crisis Ghana faced in 2022.
6. On 1st July 2022, the previous administration turned to the IMF for a financial bailout after their gross mismanagement of the economy had driven the country into fiscal, balance of payments and debt crises.
7. President Mahama, the then NDC flag bearer, acknowledged the decision as necessary, though a belated intervention to arrest the decline and to ease the severe hardship being borne by the Ghanaian people through no fault of theirs.
8. The scale of that crises was profound, if not traumatic:
• The cedi came under intense pressure;
• inflation rose to painful levels, investor confidence deteriorated sharply;
• external reserves were strained; and
• Ghana lost access to the international capital market.
9. As a result, credit rating agencies responded by downgrading Ghana’s sovereign rating, repeatedly, in 2022, to levels never seen in our country’s history:
• In February that year (2022), Moody’s downgraded Ghana to Caa1.
• In August, S&P downgraded Ghana to CCC .
• Again, in August, Fitch downgraded Ghana to CCC.
• And in September, Fitch again, downgraded Ghana to CC.
• Finally, in October 2022, Ghana lost access to the international capital market with Ghana’s Eurobond spreads widening to an all-time high of 3400 basis point.
10. This further deepened the economic and financial crises, to the point that COCOBOD was unable to secure a syndicated loan for the first time in many years.
11. Also, some domestic commercial banks could no longer obtain external funding or establish letters of credit, as international banks declined to confirm those instruments.
12. Mr. Speaker, on 5th December 2022, following the announcement that Ghana could not meet its maturing domestic debt obligations, the NPP administration introduced the Domestic Debt Exchange Programme (DDEP), imposing significant haircuts on domestic bondholders.
13. On 13th December 2022, Ghana formally requested debt treatment under the G20 Common Framework in order to restructure its bilateral debt portfolio of more than US$5 billion.
14. On 19th December 2022, the NPP administration again defaulted on the servicing of Ghana’s external commercial debt obligations.
15. The far-reaching haircuts affected:
• The Bank of Ghana;
• commercial banks;
• non-bank financial institutions;
• pension funds;
• insurance companies;
• individual bondholders; and
• even pensioners were not spared.
16. Mr. Speaker, ordinary Ghanaians bore the heaviest burden of that crisis. The consequences were felt across households, businesses, and institutions through:
• rapid depreciation of the cedi;
• runaway inflation of more than 50 percent;
• massive erosion of disposable incomes and savings;
• painful haircuts on domestic bondholders, including pensioners;
• punitive interest rates that constrained private sector activity;
• the imposition of nuisance taxes including E-Levy, Betting Tax, COVID-19 Levy and Emissions Tax;
• job losses, business distress, and weakened investor confidence; and
• a sharp rise in poverty and economic insecurity.