The IMF Bailout

IMF 1 jpeg

On July 1, 2022, the Government of Ghana announced it was heading to the International Monetary Fund (IMF) to seek an Enhanced Credit Facility (ECF) or what is commonly known as an “IMF Bailout”.

In the official communication from the Ministry of Information that day, the government’s decision was stated as follows “The engagement with the IMF will seek to provide a balance of payment support as part of a broader effort to quicken Ghana’s build back in the face of challenges induced by the Covid-19 pandemic and, recently, the Russia-Ukraine crises“.

After a long and arduous process, the IMF Board gave approval to the program on May 17, 2023. For the next three years, Ghana will for the 17th time, be under an IMF program. I took time to read the comprehensive one hundred-and-twenty-six-page country report and immediately felt a mixture of our harsh reality, sobering moments of the task ahead, and a little glimmer of hope that if we live up to and honor our commitments, we will begin to turn the corner in 2027.

Key Points to Note

The entire report reveals the extent of the difficulty we face as a country and the steps required to get out of it. I highlight the things that caught my attention reading the country report.

  1. The impact of the IMF deal on the plight of Ghanaians has been a worry since the government made this decision to approach the fund for a bailout. And rightly so if one thinks back to the days of the twin structural adjustment program (SAP) and economic recovery program (ERP), and the documented hardships that came with it. It is therefore a huge relief to see a clear assurance of social protection of the vulnerable under the program. In particular, the Livelihood Empowerment Program (LEAP) will serve as the key social protection anchor with a commitment by authorities to expand coverage. Anyone who recalls the famous PAMSCAD (Program of Action to Mitigate the Cost of Adjustment) in the 1980s will appreciate the use of LEAP to protect the vulnerable from any negative consequences of the program.
  1. The increasing financial cost of having state-owned enterprises. As the report rightly noted “SOEs are imposing a direct fiscal cost to the central government and are a major source of fiscal risks.” I often argue that the State must limit participation in direct economic activities because of its poor record. I believe the State must restrict itself to creating the enabling environment for economic enterprises to thrive. If the State must engage in economic enterprises, can it be in very few strategic areas of the economy? Also, I hope the State Interest and Governance Authority (SIGA) will be able to help us address this increasing fiscal risk.
  1. Then there is the picture pained of the Ghana COCOBOD and the accumulated losses it has incurred over the years. According to the report, the authorities have committed to a turnaround strategy. What will the turnaround strategy look like? Time will tell but when I read words like “cost rationalization” and “phasing out quasi-financial activities” I worry a bit. The quasi-financial activities especially (fertilizers provision, rural road development, etc.) have always been part of the State’s incentives to cocoa farmers and the sector. Will the program demand the State remove all forms of subsidies to the cocoa sector? How will this affect cocoa farmers and the sector in general? 
  1. The activities of the Central Bank came under scrutiny with reforms proposed to assure not just its independence, but to strengthen certain internal processes. I recall the governor once explaining that the central bank’s interventions had a key goal –to save the country and the economy during COVID-19. The Central Bank’s interventions may have saved the country in the short term but came at a cost. 

The Road Ahead

We must be prepared to make some exceedingly difficult choices and undertake some important structural reforms if this program is to succeed and help the country turn the corner in these challenging times. Hopefully, our commitment, especially to the reforms we have agreed to undertake remains unwavering over the next three years. It is the only way to make sure they will have long-lasting effects.

Hopefully, we can confidently answer the question “will this be the last time?” whenever it is asked in public conversations because of the demonstration of unwavering commitment.

As I think of the difficult choices ahead of us, I think of Election 2024. It is one of the risks to the program the IMF points out.

Will we resist the temptation and restrain ourselves in our spending habits? Or will we throw restraint out of the window because there is an election to win?

Time will tell.


John Osae-Kwapong (PhD.) is a Democracy and Development (D&D) Fellow at CDD-Ghana, Associate Provost for Assessment, Accreditation, and Institutional Effectiveness, Baruch College, The City University of New York.




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