Ghana’s new president seeks to overhaul $3bn IMF deal

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Ghana’s president will ask a panel of experts to chart a new path for the country’s economy, as he seeks changes to the IMF agreement credited with bringing financial stability to the west African country three years after its default.

John Mahama will lead a two-day “national economic dialogue” in the capital Accra from March 3, bringing together participants from the private sector, academia, think-tanks and civil society. The session follows his pledge, upon taking power in December, to reverse years of economic drift, which resulted in Ghana’s 2022 debt default and its 18th IMF programme since independence.

High on Mahama’s agenda will be a review of the three-year, $3bn IMF programme agreed in 2023 under the previous administration. IMF officials visited Ghana this month to begin talks with the new government.

“We were not at the table when this agreement was drawn up,” Mahama told Bloomberg Television on the sidelines of this month’s Munich Security Conference. He has sought a “renegotiation” with the IMF, telling Reuters in December: “What we’re saying is [that] within the programme, it should be possible to make some adjustments to suit reality.”

Yet John Asafu-Adjaye, senior fellow at the Accra-based African Center for Economic Transformation think-tank, said Mahama had “no choice” but to continue with the fiscal discipline imposed by the IMF due to the conditions attached to the bailout.

These include keeping government spending in check, raising state revenue and halting central bank lending to the government. “They have said they want to review the agreement but I don’t think they have many levers to pull,” he said.

Analysts say Mahama, who was also Ghana’s president from 2012 to 2017, would want to work out a deal on debt restructuring. Ghana’s bilateral debt payments, halted in 2022, are set to resume next year.

Ghana’s finance minister Cassiel Ato Forson is set to introduce many tax cuts in his budget next month to promote growth, even as the country faces pressure to improve its tax intake. Ghana has a tax-to-GDP ratio of 13.8 per cent, below the African average of nearly 17 per cent.

The IMF declined to comment. But in its most recent review of Ghana’s programme, the fund called on the country to “enhance domestic revenue mobilisation and streamline primary expenditure”.

One way to increase state revenues would be to better enforce taxes such as the property levy that has been haphazardly collected, said James Dzansi, senior country economist at the IGC Ghana think-tank.

“The work we’ve done shows that with a little effort collection [of property taxes] can increase [between] 90 [and] 100 per cent within a year,” he said.

Ghana’s inflation rate, which reached a two-decade peak of 54 per cent in 2022, has since slowed to 23.5 per cent — although this still far exceeds the central bank target. GDP is forecast to grow 4.4 per cent this year, according to the IMF, an improvement on the 3.1 per cent in 2024 as Ghana emerges from its worst economic crisis in a generation.

But Ghana’s businesses remain worried about the depreciation of the local currency, the high cost of borrowing — which stands at about 40 per cent — and import levies that they say increase costs.

At the sprawling Abossey Okai, Ghana’s largest automobile parts market, traders said their reliance on imports had made the currency swing particularly painful.

“The agent we work with charges in dollars and that means we have to sell at a higher cost,” Kwabena Debrah, one auto-parts trader, said in his empty shop as he admitted business had slowed down. “We pass it on to the customers and they are not buying as they used to.”

A western diplomat in Accra said the “mood of the country has lifted” since the election, providing Mahama with a window of opportunity. Yet the president still faced a challenge in avoiding disappointing voters.

Clement Boateng, another auto-parts dealer and vice-president of the Ghana Union of Traders Association, said businesses were encouraged by Mahama’s pledge to streamline taxes but warned that there were still too many costs being levied.

“If you go to the harbour, there are 22 fees that you’re supposed to pay before your goods come out,” he said. “We complained to the previous government that the cost of doing business is too high in Ghana . . . but nobody listened to us.”