- Talks with lender started in the capital, Accra, Wednesday
- Funds will help Ghana access capital markets, minister says
Ghana may seek as much as $1.5 billion from the International Monetary Fund to shore up its finances and win back access to the global capital markets.
The continent’s second-biggest cocoa and gold producer reversed a policy decision not to seek assistance from the multilateral lender as the outlook for world economy worsened. The final loan amount will be decided after initial assessments, Finance Minister Ken Ofori-Atta said in a phone interview, hours before talks began with the IMF in the nation’s capital, Accra.
It was a difficult decision but the right one “because the global outlook was really grim and its negative effects on the Ghanaian economy were glaring,” Ofori-Atta said. After Moody’s Investors Service cut Ghana’s rating the nation lost access to overseas capital markets and “hence our inability to get the needed dollars, which created balance of payment problems and a possible rundown of our reserves.”
The nation’s 17th move to tap the IMF may help President Nana Akufo-Addo’s administration avoid the fate of struggling Sri Lanka, which sought a bailout from the lender earlier this year after shunning support for months because of the austerity measures involved. Ghana has been battling to stabilize debt that has grown to 78% of gross domestic product at the end of March, from 62.5% five years ago.
“An IMF program will give the government’s reforms the credibility it was lacking, which opens up access to additional financing,” Yvonne Mhango, Renaissance Capital’s head of research for sub-Saharan Africa, said in an emailed response to questions. That access will depend on “the outcome of the IMF’s assessment, in particular the sustainability of Ghana’s debt,” she said.
The nation’s dollar bonds, which have been trading at distressed levels, jumped after the government announced its plan to seek support Friday. Investors were concerned Ghana won’t be able to refinance foreign debt after the pandemic and the war in Ukraine sent borrowing costs soaring.
Ghana’s 2026 eurobonds extended gains on Wednesday, rising 1.9% to 81 cents in the dollar, the highest since April. The yield fell 44 basis points to 15.89% by 3:21 p.m. in London.
(By Ekow Dontoh)