The Ghanaian government has reportedly changed its mind and will now seek a financial rescue package from the International Monetary Fund (IMF). The decision comes just days after residents took to the streets to protest rising inflation and rising economic hardships.
Ghana’s growing balance of payments deficit
After initially refusing to seek the support of the International Monetary Fund (IMF), the Ghanaian government has said it will now hold formal talks with the financial institution, a report said. According to the report, this decision of the government came after talks between President Nana Akufo-Addo and IMF Managing Director Kristalina Georgieva.
According to the report, the government’s face-off comes after Ghana’s inflation rate, which was above 27.6% in May, as well as the deteriorating economic situation, helped fuel street protests across the country in late June. Ghana’s apparent volatility also came less than two months after the central bank raised key interest rates by 200 basis points to 19%.
Apart from rising inflation rate, Ghana has to deal with negative balance of payments situation which rose to $934.5 million in the first quarter of 2022. In the first quarter of 2021, the country’s payment deficit stood at $429.9 million.
decision almost inevitable
Meanwhile, the analyst cited in the report praised Ghana’s decision, which he believes will help its economy. Commenting on the government’s decision to take a bailout package from the IMF, Razia Khan of Standard Chartered said it was “positive news”. Another analyst, Leslie Dwight Mensa of the Accra-based Institute for Financial Studies, said:
The decision was almost inevitable in view of the deteriorating economic situation and the threat of a balance of payments crisis due to the deteriorating external environment.
Mensa also indicated that talks with the IMF could potentially increase investor confidence in the country’s ability to meet its obligations. Meanwhile, another report quoted an IMF spokesperson as saying “the readiness of the institution to help Ghana restore macroeconomics stability; Protecting debt stability, promoting inclusive and sustainable development and addressing the effects of war and epidemics in Ukraine. ,
Ghana, which is West Africa’s second-largest economy and one of the continent’s largest producers of gold, is grappling with the effects of the global pandemic and is reportedly close to a debt crisis.
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