Ghana’s economy won’t contract despite pandemic, says IMF

The IMF prediction comes on the back of the BoG’s Composite Index of Economic Activity (CIEA) which tipped GDP to grow by between 2% and 2.5%

The International Monetary Fund (IMF) says it expects the economy still to see some growth at the end of the year, albeit smaller – essentially meaning there will be no contraction as previously feared.

In its Regional Economic Outlook (October 2020) report, the IMF projected that Ghana’s economy would grow at 0.9% in 2020, the same as the government’s revised target set out in the Mid-Year Budget Review. 

Despite the projection that the economy will not experience the dreaded contraction, especially after it did that by 3.2% the second quarter of the year, it will still be the slowest growth recorded in 37 years.

The IMF’s projection comes after a forecast by the Bank of Ghana’s (BoG) Composite Index of Economic Activity (CIEA), which has tipped GDP to grow by between 2% and 2.5% at the end of the year, given the rebound of activity in many sectors of the economy.

Keep debt in check

However, the Fund expressed concern over the worsening fiscal situation and the country’s ballooning public debt, which has been exacerbated by the pandemic. 

It projects the fiscal deficit to hit 16.4% of GDP at the end of the year, implying that Ghana will have to borrow more than the GHC44 billion (11.4% of GDP) which it had said will be needed to close the fiscal gap for the year.

Total public debt has also recently hit more than 62% of GDP – a figure the World Bank says puts the country at high risk of debt distress.

Responding to a question about the debt situation during the virtual launch of the report, Abebe Aemro Selassie, director of the IMF’s Africa Department, said it will require a swift policy response from the government to keep the debt level in check.

“This year, the policy response has been very supportive, as needs to be the case,” Abebe said: but, you know, going forward, it will be very, very important to make sure that policies revert … to making sure that there is much more focus on keeping debt stable and bringing it down gradually.

“So, I think much will depend on how quickly this policy recalibration takes place. And, given how high debt levels are in Ghana, I think the quicker that is done, the better,” he said.

Hard times

On the continental front, the Fund cautioned that policymakers will have to brace themselves for hard times ahead, as they will have to rekindle their economies with the fewer resources at their disposal.

“Indeed, without significant additional assistance, many will struggle to simply maintain macroeconomic stability while meeting the basic needs of their populations,” the IMF report says. “Fiscal policy, for example, will have to balance the immediate need to boost the economy against the need for debt sustainability.

“Monetary policy will need to balance the need to support growth against the need for external stability and longer-term credibility. Financial regulation and supervision must help offset the immediate demands of crisis-affected banks and firms, without compromising the financial system’s ability to support longer-term growth. 

“These efforts must be also weighed against the need to maintain social stability while also preparing the ground for sustained and inclusive growth over the long term,” the report says.


On the African Continental Free Trade Area (AfCFTA) agreement, the IMF said member states should put in the necessary resources to implement the deal as soon as possible, as this will make the continent globally competitive and provide a window of opportunity, given the disruptions to the global value chain caused by the pandemic.

“The COVID-19 crisis may prompt a significant reorganisation of global value chains, underscoring the potential of the African Continental Free Trade Area as an engine for the development of regional trade.

“An effective framework would not only reduce Africa’s vulnerability to global disruptions, but would boost regional competition and productivity, and promote food security.

“Trade under the arrangement was originally scheduled to start in July 2020 but has been delayed because of the pandemic. As the region moves into the recovery phase, authorities should resume their efforts to ensure implementation as soon as possible,” the IMF said.

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