According to sources familiar with the situation, the International Monetary Fund (IMF) is pressuring Ghana’s government to stop borrowing from the Bank of Ghana.
According to one of the sources, the IMF is requesting that the two entities sign a commitment to zero financing, which Ghana must meet in order to secure final approval for a $3 billion IMF bailout.
According to one source, this decision would halt Bank of Ghana loans to the government totalling approximately 40 billion cedis ($3.2 billion). Last year, central bank lending to the government of Ghana increased significantly as investor concern about the state of the country’s public finances led to a drop in demand for its domestic bonds.
Bank of Ghana lends to the government
The Bank of Ghana stepped in to provide budget funding and roll over maturing loans. According to the source, the agreement would also prevent state-owned enterprises such as the Ghana Cocoa Board, which owes approximately 7 billion cedis, from obtaining additional central bank financing.
The Bank of Ghana said last week that an auction of cocoa bills worth 940 million cedis was “severely” undersubscribed after it declined to buy the instruments issued by the board.
Ghana is currently restructuring an estimated 467 billion cedis in loans and has been locked out of international capital markets since borrowing costs rose last year due to investor concern about Ghana’s public finances.
Last year, Ghana obtained a staff-level agreement for a $3 billion IMF bailout, but final approval by the IMF board is contingent on the completion of so-called “prior actions,” which have not been made public.
The country is also negotiating a restructuring plan for its local and external debt in a bid to show that it can make its loans more sustainable, another requirement to tap IMF funding. Ghana is aiming to reduce its debt to 55% of GDP by 2028, compared to the IMF’s estimate of 105% in 2022.