High debt, low revenue dominate Day 2 of IMF-gov't discussions

BY: Maxwell Akalaare Adombilla

Ongoing discussions with the International Monetary Fund (IMF) entered day two Thursday with the country's debt and revenue situations taking center stage.

While discussions on the debt centered on its high levels and how to reduce it, those around the revenue revolved around the issues limiting optimal collections and how the Ghana Revenue Authority (GRA) could be supported to enhance mobilisation.

Graphic Online sources said the technical meetings featured presentations featuring experts from the Ministry of Finance, the Bank of Ghana (BoG) and the GRA on the status of the debt and the general resource mobilisation and allocation strategies of the government in recent times, reports Maxwell Akalaare Adombilla.

The meetings came after an earlier one with the Vice President and Head of the Economic Management Team (EMT), Dr Mahamudu Bawumia, during which Dr Bawumia and his team updated the visiting IMF Mission with data on the economy, government policies and programmes and the nature of challenges facing the economy and the support sought.

$3Bn deal

Thursday’s meetings followed the opening of formal discussions between the IMF, led by its Mission Chief, Carlo Sdralevich, and the government on Tuesday in Accra towards securing an economic support programme to revitalise the economy and address the debt challenges.

The government is seeking the support of the fund to prosecute a three-year programme that it dubbed the Enhanced Domestic Programme (EDP).

Sources had told the paper that a successful deal could inject up to $3 billion into the economy.

The meetings on the debt and revenue situations followed an earlier one between the IMF team and the Vice President and Head of the Economic Management Team (EMT), Dr Mahamudu Bawumia.

More details

Giving details, the sources said the technical meetings with the MoF and GRA featured presentations and exchange of data from the government side but interspersed with questions and clarifications from the IMF team.

The Treasury and Debt Management Division of the MoF also used the opportunity to explain the country’s debt raising strategy to the fund staff, with emphasis on how global conditions affect its participation in the international capital market for borrowing purposes.

On the revenue side, the sources said the performance of key tax handles were discussed, with the IMF Mission seeking more clarity on the Electronic Transfer Levy (E-Levy), among other taxes that were found to be under-performing.

Debt situation

Although an age-old problem, the pace of the debt build-up moderated in 2017 and 2018 under a fiscal consolidation programme that was supervised by the IMF under the $918 million extended credit facility (ECF) programme.

From 2019, however, faster than planned prosecution of expenditures in the midst of weak revenues led to a strong debt build up that caught the attention of BoG at the time.

In July 2019, the central bank Governor, Dr Ernest Addison, said in a press conference that the pace of fiscal consolidation had slowed down mainly reflecting gaps in revenue mobilisation while the pace of spending had increased.

“This could pose risk to macroeconomic stability, if not addressed,” he added.

From 56.8 per cent of gross domestic product (GDP) in 2016, the debt-to-GDP ratio fell to 55.5 per cent in 2017 before peaking at 76.1 per cent of GDP in 2020.

It ended last year at 81.8 per cent of GDP, according to the IMF.

The fund also projected in its February 2022 Fiscal Monitor Report that the debt-to-GDP ratio would end this year at 84.6 per cent, the highest in recent times.

Weak revenues

While the debt accumulation quickened, revenues have been sluggish as efforts to revamp collections and the introduction of new handles failed to yield the needed results.

Since 2017, the government has not met any of its annual revenue projections although new tax handles have been introduced, ostensibly to increase collections.


Last Thursday, President Nana Addo Dankwa Akufo-Addo directed the Finance Minister, Mr Ken Ofori-Atta, to open discussions with the IMF towards securing a programme to support the economy.

It followed the emergence of the COVID-19 pandemic and the Russia/Ukraine war, which worsened the country’s preexisting economic challenges, resulting in increased debt accumulation, rising inflation, a weakening cedi and the depletion of international reserves.

A credit downgrade earlier this year also led to the country being denied access to the international capital market to borrow, at a time when domestic revenue mobilisation had weakened.

Following the directive, an IMF Team, led by its Mission Chief, Carlo Sdralevich, arrived last Sunday and have been holding discussions with the government side with the hope of gathering sufficient data for negotiations to begin.

Since independence, the country has resorted to the IMF for support 17 times, the most recent being a $918-million facility that ended in 2019.

In 2020, the fund also supported the government with $1 billion free unconditional loan to quicken the economy’s recovery from the COVID-19 pandemic.