CHAPTER ONE

INTRODUCTION

1.1 Background

The end of the World War II in 1945 ushered in the creation of the United Nations (UN) to foster peace and security in the international system1 and with it was the establishment of the Bretton Woods Institutions- World Bank (WB) and International Monetary Fund (IMF).2 The aim of the ‘twin’ institution was to reconstruct the disintegrated world economy after the war and to promote international economic cooperation. International Organizations (IO’s) assist states to come together and overcome the challenges affecting them and in the case of the IMF, it ensures global stability in the international monetary and financial system.3 The IMF was established in 1945 and currently has a membership strength of 189 states. The IMF is keen on facilitating international trade, promoting exchange stability, and assisting states to correct their Balance of Payment (BoP) problems.4 The IMF is also known as the Fund.

Ghana has been a member of the IMF since September, 1957 and has benefitted from several technical and financial assistance. Notable IMF programmes Ghana has benefitted from include the Stand-By Agreement (SBA) in 1966, the Structural Adjustment Programme (SAP) in 1983, the Enhanced Structural Adjustment Facility (ESAF) in 1989, the Highly Indebted Poor Countries (HIPC) initiative which was rolled out in collaboration with the WB in 2002. In 2009, Ghana again benefitted from the Poverty Reduction and Growth Facility (PRGF) from the IMF.

Ghana’s macroeconomic performance over the recent years has been mixed. After recording a Gross Domestic Product (GDP) growth rate of 14 percent in 2011 largely driven by inflows from the oil and gas, GDP growth declined drastically to 4 percent in 2014 amidst huge public debt and Balance of Payment (BoP) deficit. At a benchmark revenue projection of US$93.34 a barrel for 2014, crude oil prices declined to US$82 a barrel in September 2014 which caused a revenue shortfall. The 91-day Treasury bill rate increased to 25.5 percent in September 2014 compared to

21.59 percent the previous year. As at the end of December 2013, inflation rate stood at 13.5 percent. This increased to 17 percent in 2014.5

On currency volatility, the cedi depreciated by 31.19 percent against the US dollar in the first nine months of 2014, compared to 4.12 percent recorded same period in 2013.6 Furthermore, on sectoral analysis, Industry sector growth declined from 7.3 percent in 2013 to 4.6 percent in 2014. Similar decline in Services sector was recorded; it grew at 4.59 percent in 2014 as compared to 9.6 percent in 2013. In the Agriculture sector, growth recovered marginally from 5.2 percent in 2013 to 5.3 percent in 2014.7

The economic headwinds aforementioned accounted for a bailout request from Ghana to address the risks to the country’s medium term economic prospects in August 2014. On 3rd April, 2015, IMF’s Executive Board approved a “three-year arrangement under the ECF for Ghana in an amount equivalent to Special Drawing Right (SDR) 664.20 million (180% of quota or about US$918 million) in support of Ghana’s medium-term economic reform”.8

The programme was approved with the following broad objectives:

• “To restore debt sustainability, rebuild external buffers through fiscal adjustment and alleviate fiscal dominance of monetary policy.
• To strengthen public finances and fiscal discipline through structural reforms.

• To restore financial sector stability.

• To protect social spending”.9

As of September, 2017, US$565.2 million had been disbursed out of the US$ 918 million after completion of four (4) reviews with the rest tied to the remaining reviews.10

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