The African Development Bank (AfDA) has given the green light for a $102.6 million grant to support Ghana’s Fiscal Consolidation and Economic Recovery Programme.
The initiative aims to reinforce recent fiscal consolidation measures and foster economic reforms, addressing the structural weaknesses exacerbated by global challenges such as the Covid-19 pandemic, global financial tightening, and geopolitical events like Russia’s invasion of Ukraine.
The grant, provided by the African Development Fund, the concessional lending arm of the group, is intended to enhance fiscal consolidation in Ghana and augment resource mobilization for government investments.
The programme spans a two-year period from 2023 to 2024 and is set to be executed through close collaboration between the Ghanaian government and the African Development Bank.
Notably, the program is designed to complement the existing International Monetary Fund (IMF) Extended Credit Facility, reflecting a multi-pronged approach to addressing Ghana’s economic challenges.
The IMF had already cited the possibility of the AfDB providing budget support in the form of grants, in addition to project financing that has already been included in the baseline support for the West African Country.
This financial support comes at a crucial juncture for Ghana, which is grappling with its worst economic crisis in a generation.
The country is actively engaging with bilateral and commercial creditors to restructure its debts, having been excluded from international capital markets due to escalating domestic debt costs.
The African Development Bank’s grant is positioned to play a vital role in facilitating economic recovery, enhancing public finance, boosting productivity, and fostering job creation.
Ghana and the IMF
Ghana has currently missed out on the November 1 timeline set in the International Monetary Fund (IMF) programme to get a second tranche($ 600 million) of the $3 billion bailout package.
This is due to the drag in negotiations between Ghana and its bilateral creditors to have a specific agreement on the debt rework.
Prior to the disbursement of the first tranche, the West African country secured a general financial commitment assurance from its commercial and bilateral creditors.
The second tranche however, according to the country representative of the IMF to Ghana, Stephane Roudet, requires specific commitment on the terms of the debt restructuring between Ghana and its external creditors.
This agreement is necessary for the IMF board to approve the first review and the disbursement of the second tranche.
Ghana’s external debt restructuring: What Ghana wants
The Ghanaian government plans to restructure around $10.5 billion of its external debt, which stood at nearly $30 billion in June 2023.
The eligible amount to be restructured however stands at $ 20.5 billion. The country has already submitted proposals to its commercial creditors seeking a haircut of up to 40% and additional debt rework with its bilateral creditors including China and the Paris Club.
As Ghana navigates through these challenges, the approval of the grant signifies a collaborative commitment between the African Development Bank and the Ghanaian government to address economic vulnerabilities and pave the way for sustainable growth.
Finance Minister Ken Ofori-Atta will be presenting Ghana’s 2024 budget on November 15, 2023, in parliament.