State of economy: Is Ghana out of the woods yet?

Ghana and the International Monetary Fund (IMF) are currently engaged in discussions covering key economic issues such as tax cuts, revenue administration reforms, energy sector debt management, expenditure controls, and exchange rate stabilization. These talks are crucial for shaping Ghana's economic policies for the upcoming 2025 budget. Angeline Moseki, Economist at Africa FIC Research at Standard Bank Group, shed light on the monetary policy direction, inflation trends, and economic growth outlook in Ghana. The ongoing dialogue between Ghanaian authorities and the IMF aims to set the agenda for the country's economic future. The IMF is in Ghana this week for preliminary discussions to guide the formulation of the upcoming budget, especially after delays caused by last year's elections. Despite initial signals of potential tax reviews, the new administration remains committed to staying on track with the current IMF program. The focus is on meeting the program targets and ensuring economic stability. In terms of inflation, Ghana experienced a slight easing to 23.5% in January after four consecutive increases. The Bank of Ghana aims for an 8% inflation target with some flexibility. However, external factors like food inflation, influenced by a regional drought and currency fluctuations, contribute to inflationary pressures. The Bank of Ghana anticipated achieving the target in Q3 of 2025 but revised the timeline to Q4 due to prevailing conditions. The projections indicate a gradual decline in inflation to around 15.2% by the end of the year, possibly prompting rate cuts in the second half of 2025. The success of Ghana's IMF programs and debt restructuring efforts with creditors has put the economy on a more stable trajectory. The focus now shifts to fiscal outcomes, job creation, and improving livelihoods for Ghanaians. A key area of opportunity lies in fiscal consolidation, aimed at reducing borrowing and attracting investments. The government's commitment to economic stability and a business-friendly environment could attract more companies to invest in Ghana. The outlook for the exchange rate policy remains cautious after previous pressures on the local currency. The Bank of Ghana's interventions, supported by healthy reserves, aim to stabilize the exchange rate amid fluctuating demands. The possibility of issuing domestic bonds and the gold purchase program may further support currency stability. While external debt servicing obligations pose challenges, Ghana's strategic approach to balancing import cover requirements and market support is crucial. Overall, Ghana's economic landscape presents a mix of challenges and opportunities, requiring a delicate balance of policies and interventions to sustain growth and stability.