Ghana’s 2024 Elections may test fiscal discipline under new IMF program

Ghana’s presidential election next year presents a test for whether the government will stick to economic reforms outlined under a $3 billion International Monetary Fund bailout package.

The West African nation is scheduled to hold elections in December 2024. That’ll be midway through the three-year program approved last month that provided an immediate disbursement of $600 million, with further payments to be made subject to regular reviews by the fund.

“One of the weaknesses in Ghana over the years has been these election-related spending cycles,” Abebe Aemro Selassie, who heads the IMF’s Africa Department, said in an interview at the Africa CEO Forum in Abidjan, Ivory Coast. “That I think has done a lot to undermine confidence in public accounts in Ghana.”

President Nana Akufo-Addo, whose government negotiated the IMF funding package, is serving his final term in office. Next year’s elections will be contested between a yet-to-be identified candidate from the ruling party, and the main opposition leader, John Mahama, who led the country from 2012 to 2017.

Ghana’s dollar debt gave investors a 7% return last month as the government clinched a deal with the IMF on May 17. That return compared to an average loss of 0.8% for emerging and frontier peers in a Bloomberg index.

Akufo-Addo signaled last month that his administration will keep a tight rein on expenditure in the months leading up to the vote.

The government plans “a very disciplined approach to the implementation of the IMF program” over the next 18 months as it seeks to “bring some growth back into the economy, some relief back to our population” in order to convince voters that it’s worth continuing to support his party, he said in an interview May 24 at the Qatar Economic Forum.

Ghana is a regular client of the IMF — this is its 17th request to the fund. The country ended its last program in 2019 with a waiver from the fund. The government’s decision to aggressively tap Eurobond markets in 2020, so soon after that program ended, spooked investors and led the agencies to revisit their ratings. Ghana was priced out of global markets last year and has since suspended most external debt payments while it seeks to restructure a chunk of its $49 billion of public liabilities.

“We do hope that particularly in a context when the economic situation is so dire, that the polity will recognize the importance of the reforms that are on the table and continue to advance that,” Selassie said.

Source: bloomberg