Early May 2023, the executive board of the International Monetary Fund (IMF) approved a $3 billion three-year loan programme for Ghana, allowing for an immediate disbursement of about $600 million and a potential path out of the country’s economic crisis.
This is the 17th time the country has chosen to take this bitter pill. The first time Ghana went to the IMF to seek economic salvation was in May 1966.
Minister of Finance, Ken Ofori-Atta, assures Ghanaians that this time round, the loan will be used, not only to finance the 2023 budget but also to help stabilise the weak economy.
Beyond the fear of job losses, freezes on public sector employment, and minimal wage
increments usually associated with such loans, this $ 3 billion IMF deal with Ghana is predicated on extensive requirements that include harsh ‘haircuts’ on investments imposed on Ghanaians to guarantee its successful implementation.
In this report, Fact-Check Ghana provides a breakdown of the IMF conditionalities that are attached to Ghana’s current bailout.
First, Why Does the IMF Have Conditions for Loans?
Well, once a country decides to borrow from the IMF, it means its government ostensibly agrees to adjust its economic policies to overcome the problems that led it to seek financial assistance in the first place. These policy adjustments are conditions for IMF loans because they help to ensure that the country adopts policies the lender considers strong and effective.
As part of the terms and conditions for receiving a bailout from the IMF, the government of Ghana is required to undergo specific reforms to meet the IMF conditions. This means Ghana has to restructure both its internal and external public debts.
The IMF conditionalities come in various forms under such phrases as ‘prior actions’,
‘Quantitative Performance Criteria’ (QPCs), ‘Indicative targets’, or ‘structural benchmarks.
With this bailout, Ghana is expected to meet the proposed structural conditionalities of prior actions and structural benchmarks between 2023 and 2024.
What Prior Actions Are Demanded of Ghana?
Prior actions are the steps a country agrees to take before the IMF approves financing or before it completes a review for a loan. The IMF does this to ensure that a programme will have the necessary foundation for success in the country. Prior actions may include fiscal revenue measures, clearance of external arrears, governance reform, and a banking sector restructuring plan.
To be eligible for the IMF bailout, Ghana had to meet these five (5) conditions:
1. First, enact legislation and or executive order necessary to achieve the 2023 fiscal
objective. This condition was for the government to put in place measures to help it to generate more revenue to help improve the country’s GDP including reducing public spending and increasing taxes. This means the country’s fiscal policies were previously inadequate and unsustainable.
2. Another requirement was for Ghana to implement an upfront electricity tariff
adjustment of at least 29%. This was expected to bring electricity tariffs closer to cost recovery and reduce the power sector shortfall. According to the IMF, the previous electricity tariffs were inadequate to meet the operational cost of generating and delivering electricity. Earlier in January 2023, the Public Utilities Regulatory Commission (PURC) said it considered changes in actual and projected Hydro-Thermal Generation Mix, Ghana Cedi-US Dollar Exchange Rate, Inflation, and Fuel Prices before increasing electricity tariffs.
The PURC recently raised electricity tariffs by close to 30 percent, bringing the cumulative increase in tariffs since mid-2022 to 57 percent. The raise was to help reduce the cost-recovery gap. In both January and May 2023, electricity tariffs have gone up twice. This increase in the cost of electricity will affect both households and businesses.
3. The IMF also required that all central government expenditures be integrated into
the budget planning and accounting systems. To this end, several important statutory funds such as the GETFund, Road Fund, and District Assemblies Common Fund have started reporting their spending budgets with the Ghana Integrated Financial Management Information Systems (GIFMIS), the central expenditure accounting and control system. One of the reasons for Ghana’s weakened fiscal framework is the persistent challenge in public financial management.
This new reporting action will strengthen GIFMIS and also strengthen budget execution, commitment control, and reporting of spending. It is also to promote transparency and efficiency, according to the IMF.
Per this action, all Internally Generated Fund institutions will begin using GIFMIS for Internally Generated Fund receipts, for receiving payment warrants, and for processing their expenditure.
4. The fourth condition was for a Memorandum of Understanding (MoU) to be signed
between the Ministry of Finance and the Bank of Ghana to eliminate the monetary financing of the central government. Monetary financing is the direct transfer of money from a central bank for a government to spend. This may involve the direct purchasing of new government debt (bonds) by a central bank. This eventually leads to a steep rise in the rate of inflation and an increase in public sector debt. The MoU will ensure that the government finds a more sustainable framework for borrowing money. The goal of this action is to address fiscal dominance, strengthen central bank
independence so that it can implement policies for macroeconomic stability, and enhance monetary policy transmission. In the case of Ghana, the government relied on borrowing money from the BoG.
5. The final IMF prior action was the requirement of a detailed audit of emergency
COVID-19 spending between March 2020 and June 2022. This audited report was actually published in January 2023. The Auditor General’s report was required to ensure that there was transparency and accountability of COVID-19 emergency spending.
The IMF has acknowledged that the government of Ghana has completed all five prior actions required to receive the loan facility.
Structural benchmarks
The other set of conditionalities required for the bailout are structural benchmarks.
Structural benchmarks are reforms that often cannot be quantified but are critical for achieving programme goals and are used as markers to assess programme implementation. Examples include strengthening tax administration, improving fiscal transparency, improving anti-corruption and rule of law, and reforming State-Owned Enterprises (SOEs) and their governance.
In order to qualify for the $3B loan, the IMF outlined some structural benchmarks that Ghana has to meet.
1. The IMF imposed a structural benchmark for Ghana to finalize the comprehensive
stocktake of payables accumulated by all Ministries, Departments, and Agencies (MDAs), design a payable clearance plan and lay out a structural reform plan to reduce the future accumulation of arrears.
In simple terms, accumulated payables refer to the total amount of money that a company owes to its suppliers or creditors for goods or services received but not yet paid for. It represents the unpaid bills or invoices that have accumulated over a period of time. Accumulated payables can include expenses such as raw materials, utilities, rent, or any other obligations that the company has incurred but has not yet paid.
The IMF wants to get clarity on the current situation regarding the stock of payables of the central government (including statutory funds) and ensure that payables are cleared with appropriate prioritisation and in a timely manner. This indicates that MDAs were not prioritizing payments based on urgency and importance, thus, causing some institutions problems related to the accumulation of payables. With this condition, there will now be a clearance plan to address this challenge.
2. The IMF is also requiring Ghana to finalize a strategy to strengthen the financial
sector and rebuild financial institutions’ buffers in collaboration with the Fund’s staff. The IMF’s team will work with Ghana to ensure that the government is doing the needful to strengthen the financial sector. They will work on a strategy that will lay out steps and timelines to address the impact of the domestic debt exchange (DDEP) and the ongoing macroeconomic challenges on the financial system. They will also complete the legacy tasks from the 2017-19 financial sector cleanup. The objective of this condition is to promote financial stability and bolster financial
sector contribution to medium-term growth. This condition is due this month.
3. The government is required to publish the updated Energy Sector Recovery Plan,
after Cabinet approval, with well-identified measures and timelines in the following areas: (i)removal of subsidies, (ii) reduction in transmission and distribution losses, (iii) improvement in recoveries, (iv) a credible solution to cut idle capacity cost (including excess capacity as well as reserve margin), and (v) improvement in operational performance of SOEs. These will have to be established in consultation with staff from the IMF. This is to reduce losses in the energy sector.
Ghana’s energy sector is beset with difficulties in finances and operational losses. This condition is to sustainably reduce losses in the energy sector.
4. The government must publish a strategy – after cabinet approval – to streamline
statutory funds. The strategy must have:
(i) Key findings of the review process for each statutory fund
(ii) Assessment of whether these funds served the stated purpose, and
(iii) Well-articulated reasons to support retaining statutory funds (and not merging them under the line ministry – this should justify why the line ministry cannot serve the objectives of statutory funds).
Statutory funds are funding from government sources. They can be grants, contracts, and initiatives. In Ghana, statutory funds include the NHIS, GETFUND, and District Assemblies Common Fund. However, the IMF wants Ghana to be more flexible and dynamic in its fund regulations. The IMF says this should reduce budget expenditure rigidities.
5. The government must publish a medium-term revenue strategy – approved by
cabinet – that is consistent with the agreed fiscal adjustment under the program, that delivers a permanent non-oil public revenue increase of at least 1.5 pp of GDP over the 2024-27 period and clearly identifies measures related to tax policy, compliance, and administration (with estimated yields and timelines). These will have been established in consultation with Fund staff.
6. The government must approve plans of all banks, negotiated during the previous
quarters, to rebuild capital buffers and initiate corrective actions on institutions whose plans are not deemed credible. With this, banks in Ghana would have to submit their plans for recapitalisation. The banks are expected to raise some GH¢400 million to remain in business despite the negative effect of the Domestic Debt Exchange Programme on their operations.
7. Government must introduce an indexation mechanism of the benefits under the
Livelihood Empowerment Against Poverty (LEAP), approved by the Cabinet. The LEAP
programme is a cash transfer programme introduced by the Government of Ghana (GOG) in 2008 for extremely poor and vulnerable households. This indexing mechanism is to ensure that the value of the benefit is not eroded by inflation. In essence, the IMF wants the government to put measures in place to maximise the LEAP programme. In this economic instability, the poor and vulnerable are likely to be affected by some of the conditions and measures the government will put in place, but authorities are to step up efforts to better target social spending towards the most vulnerable households and to strengthen the social safety nets.
8. Ghana is also required to operationalize the Integrated Tax Administration System to incorporate the following:
(i) Procurement of the system,
(ii) Data migration from other portals (including E-VAT and GITMIS),
(iii) Appraisal of the current situation and verification of requirements (data checks)
(iv) Implementation of the functionality of VAT
(v) Implementation of the functionality of CIT, and
(vi) Implementation of the functionality of PIT.
The IMF is, therefore, requiring Ghana to upgrade the tax system so that all persons
eligible to pay taxes will be captured. Data will also be migrated from other portals including E- VAT and GITMIS.
9. Finally, the government of Ghana is required to expand GIFMIS infrastructure to 265 IGF-reliant institutions with all the available functionalities. Ghana received the first tranche of $600 million of the IMF bailout in May 2023. If the conditions for the loan facility are met, the country will receive subsequent tranches by the time the three-year programme ends in 2026.
Disbursement of $ 3 billion loan facility 2023-2026
| Availability | Millions in US Dollars | Conditions |
| Board Date (1st Tranche) | 600 | Board approval of the Extended Credit Facility |
| November 1, 2023 | 600 | Observance of end-June 2023 performance criteria and completion of first review |
| May 1, 2024 | 360 | Observance or end-December 2023 performance criteria and completion of the second review |
| November 1, 2024 | 360 | Observance of end-June 2024 performance criteria and completion of third review |
| May 1, 2025 | 360 | Observance of end-December 2024 performance criteria and competition of the fourth review |
| October 31, 2025 | 360 | Observance of end-June 2025 performance criteria and completion of fifth review |
| April 16, 2026 | 360 | Observance of end-December 2025 performance criteria and completion of sixth review |
| TOTAL | $3,000 |
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