Ghana Stabilizes Economy, Attracts $385M IMF Boost

Ghana has received a $385 million disbursement from the International Monetary Fund, marking the fifth review under its Extended Credit Facility program. This brings the total disbursement to approximately $2.8 billion since the program's inception in May 2023. The IMF Executive Board commended Ghana's progress, noting that macroeconomic stabilization is gaining momentum, with single-digit inflation for the first time since 2021 and strong economic growth.

The latest disbursement is a significant milestone in Ghana's economic reform efforts. The country has shown commitment to structural reforms and fiscal discipline, which has helped to improve its economic outlook. The IMF noted that all quantitative performance criteria for the fifth review were met, despite some delays in structural reforms.

Ghana's economic performance has been bolstered by a strong services and agriculture sector. Inflation has stabilized within the Bank of Ghana's target range, and the country's external sector has strengthened due to robust gold and cocoa exports. International reserves have also surpassed program targets, and the cedi has appreciated, contributing to improved debt sustainability.

Why the Standoff Happened

Ghana's economic trajectory took a difficult turn in recent years, including an external debt default that prompted the need for IMF support. The country has since undertaken a painful fiscal adjustment to stabilize its economy. This has involved stringent fiscal measures and structural reforms aimed at restoring economic stability and investor confidence according to analysis.

The IMF program required Ghana to reduce its debt-to-GDP ratio to 55 percent by 2028. However, progress has been faster than expected. Recent analysis by Barclays Plc suggests that Ghana is on track to achieve this target by 2025, three years ahead of schedule. The firm attributed this to stronger-than-anticipated economic growth and tighter fiscal discipline.

Ghana's debt stock increased slightly to GH₵755 billion (about $57.4 billion) in January 2025, primarily due to domestic borrowing and currency depreciation. However, the country's growing economy is easing the relative burden of debt. With nominal GDP projected to reach GH₵1.4 trillion in 2025, the debt-to-GDP ratio is expected to continue to decline.

What Analysts Are Watching

Barclays analysts have highlighted that Ghana's public debt could temporarily rise again if the government increases spending on major development projects. While the current fiscal adjustment has been effective, any significant expenditure increase could pose challenges to maintaining the debt trajectory according to analysts.

The 2026 budget aligns with Ghana's fiscal program objectives and incorporates developmental and security needs. Revenue mobilization and expenditure rationalization are key drivers of this strategy. Continued efforts to strengthen domestic revenue administration, improve public financial management, and enhance oversight of state-owned enterprises will be critical according to the IMF.

The Bank of Ghana has also taken steps to maintain financial stability. It has implemented a new structured foreign exchange operations framework to manage currency volatility and accumulate international reserves. In addition, the central bank has initiated a cautious monetary easing cycle, given the subsiding inflation pressures and appreciation of the cedi according to the IMF.

The government has also made progress in restructuring state-owned banks, closing gaps in crisis management, and addressing non-performing loans. These efforts are part of a broader initiative to improve financial stability and governance in the public sector. Continued focus on these areas will be essential to maintaining investor confidence and economic momentum according to the IMF.

Risks to the Outlook

Despite the positive developments, challenges remain. Structural reforms are still needed to create an environment conducive to private sector investment and to enhance governance and transparency. The IMF has emphasized the importance of continued reform efforts to sustain macroeconomic stability and debt sustainability.

Ghana must also address longstanding vulnerabilities, particularly in the energy sector. Resolving arrears and improving efficiency in state-owned enterprises will be critical to containing fiscal risks. Strengthening anti-corruption frameworks and enhancing public trust through transparent asset declaration practices are also important priorities according to the IMF.

While the government has made significant progress in its fiscal and structural reform agenda, the road to full recovery is still long. Maintaining discipline in public spending and ensuring the effective implementation of reforms will determine the sustainability of the current economic momentum. The country's ability to attract development partners and international investors will also play a key role in securing its economic future according to Barclays analysis.