The African Center for Energy Policy (ACEP) is casting doubts on the effectiveness of financial assistance the International Monetary Fund (IMF) provided to Ghana during the COVID-19 economic downturn.
Despite receiving a substantial allocation of Special Drawing Rights (SDRs) totalling approximately US$1 billion in 2021, the anticipated macroeconomic stabilization has yet to be realized, according to ACEP’s research figures.
Maybel Acquaye, the Head of Monitoring and Evaluation and Senior Policy Analyst at ACEP, critiqued the results of the IMF’s aid. “The funds were intended to provide significant fiscal space and support economic stability.”
“However, our preliminary findings suggest that the macroeconomic condition of Ghana deteriorated despite the allocation.”
Maybel Acquaye disclosed these in a presentation at a media engagement on Ghana’s utilization of the IMF Special Drawing Rights (SDR) allocation organized by ACEP on Monday, April 22.
The allocation, which was provided unconditionally as part of an IMF initiative to bolster economic recovery globally, was aimed at enhancing Ghana’s economic recovery trajectory, which showed promising signs of stabilization before the pandemic.
Ghana, which holds a 0.15% quota in the IMF, was expected to use these funds to support its national economy. Contrary to expectations, the economic indicators worsened.
“The Cedi depreciated against the dollar, increasing from a 4.1% depreciation rate in 2021 to a staggering 30% in 2022. Inflation also surged dramatically from 7.5% in May 2021 to 54.1% by December 2022, and the fiscal deficit widened to 9.9% of GDP, missing the 6.7% target.”
Although there was an improvement in the debt-to-GDP ratio from 76.1% in 2021 to 71.2% in 2022, the balance of payments swung into deficit, reaching a shortfall of US$3.6 billion.
The country also faced multiple credit downgrades, edging closer to potential default and was subsequently locked out of the international capital market.
Madam Acquaye attributed the economic downturn to several factors, including the absence of a well-defined medium-term fiscal plan as advised by the IMF, failure to implement timely debt restructuring measures, and the inability to adjust preannounced initiatives considering the prevailing circumstances.
The ACEP Senior Policy Analyst, in light of these developments, is calling for public and expert input on how Ghana can better utilize future financial windfalls such as SDR allocations to ensure that such funds are deployed effectively to avoid repeating the shortcomings in the current economic strategy.
Source: Thenewsbulletin24