Ghanaian officials are being called upon to firmly tackle ongoing issues in the energy and cocoa industries as part of initiatives to maintain the nation's continuous financial policy adjustments under the US$3 billion IMF assistance program.
This announcement follows the IMF's Executive Board approving the fourth review of its Extended Credit Facility (ECF), releasing an additional payment of US$367 million.
The economy experienced higher-than-anticipated growth in 2024 and the beginning of 2025, driven by strong performance in mining, agriculture, ICT, and manufacturing. Nevertheless, the main program's effectiveness declined towards the end of the previous year because of fiscal overspending before the election and postponements in structural reforms.
Early data indicated a significant increase in unpaid government debts before the December 2024 general elections, as inflation exceeded IMF projections. The indicator ended the year at 23.8 percent – 80 basis points higher than the prior period and more than twice the Bank of Ghana's desired maximum threshold.
Despite the obstacle, the new administration has implemented what the IMF referred to as "courageous corrective measures." Bo Li, Deputy Managing Director of the IMF, noted that officials are firmly dedicated to reinstating financial discipline and tackling the structural issues that caused the setbacks.
"Strongly tackling issues within the energy industry and associated unpaid bills is essential for limiting financial dangers," he said.
There is no doubt that the energy sector remains a major strain on public funds. State-run electricity companies are experiencing increasing unpaid bills because of problems with collecting revenue, old debts, and delays in adjusting tariffs to reflect actual costs.
The power sector is estimated to have accumulated debts of US$3.1 billion as of March 2025, with an estimated US$3.7 billion required to fully clear all outstanding arrears. Indeed, analysts think the situation presents a direct threat to the fiscal consolidation goals set out in the rescue program.
Likewise, the cocoa industry is facing challenges even though the price of the commodity has reached record levels. Global cocoa prices saw extreme fluctuations, reaching a high of more than US$10,700 per tonne in the first quarter of 2025 because of significant supply issues resulting from adverse weather conditions and disease outbreaks in Ghana and Côte d’Ivoire.
This represented a 60-year peak, fueled by concerns over an increasing global cocoa shortage. Nevertheless, prices are starting to decrease slowly – dropping to approximately US$8,400 per tonne. Elements like old trees, disease occurrences, smuggling into nearby nations, and worldwide price fluctuations have limited income from one of Ghana's major export products.
Nevertheless, although authorities are making every effort to restore macroeconomic stability, the IMF's statement of concern and caution directed at the government regarding its management of the cedi's stability deserves consideration.
The Institute for Economic and Research Policy Promotion (IERPP) agrees with the IMF's stance and additionally shows support for it.
During its fourth review under the Extended Credit Facility Agreement with Ghana, the IMF's Executive Board raised worries regarding the government's practice of injecting foreign exchange to prop up the cedi against major currencies, rather than letting market forces dictate the local currency's strength.
Even though the Bank of Ghana needs to keep a sufficiently strict monetary policy until inflation reaches its goal, it should lessen its involvement in the foreign exchange market and permit more exchange rate flexibility.
In a statement signed by its Executive Director, Prof. Isaac Boadi – who also serves as Dean of the Faculty of Accounting and Finance at UPSA – the IERP mentioned that it provided a comparable warning to the government, but its recommendations were ignored.
The IERPP noted that although this could make the currency appear stable in the short run, it misleads market conditions. Indeed, the IERPP criticizes the BoG for conducting its market activities in an arbitrary and unclear way.
A constructive exchange between the central bank and research institutions such as the IERPP regarding economic policy is essential; this lack of communication, we believe, is concerning—particularly since the IERPP claims that the BoG and the government clearly ignore both IMF and IERPP recommendations.
It would be beneficial if the central bank issued a statement to tackle these valid worries, as such actions frequently result in ambiguity and guesswork. We ought to let the currency rate be determined by real market conditions.
Provided by SyndiGate Media Inc.Syndigate.info).