Until now, Ghana had refused to seek IMF support to rescue an economy crippled by the pandemic, rampant inflation and a depreciating currency.
Ghana, one of West Africa’s largest economies, will hold formal talks with the International Monetary Fund (IMF) on a support package, the government has said, only days after hundreds took to the streets protesting mounting hardship.
The cabinet gave its support for the decision at a meeting on Thursday, following a phone conversation between President Nana Akufo-Addo and IMF Managing Director Kristalina Georgieva.
Until now, Ghana, the continent’s second-biggest gold producer, had refused to seek IMF support to rescue an economy crippled by the pandemic, rampant inflation and a depreciating currency, despite analysts warning it is close to a debt crisis.
The IMF did not immediately respond to a request for comment.
Analysts said the decision should help Ghana deal with its challenges.
“Positive news – given the succession of external shocks, and the increasing challenges for Ghana’s economy,” tweeted Razia Khan, chief economist for Africa and the Middle East at Standard Chartered.
“This decision was almost inevitable, given the worsening economic situation and the threat of a balance of payments crisis due to the deteriorating external environment,” said Leslie Dwight Mensah, Economist and Research Fellow at the Institute for Fiscal Studies in Accra.
“The first gain for Ghana will be improved international confidence in the country’s capacity and efforts to weather the crisis.”
Ghana’s dollar-denominated sovereign bonds rallied sharply with issues up maturing in 2026 and 2027 jumping nearly five cents in the dollar to trade at their highest level since May.
Central bank governor Ernest Addison said in May that Ghana faced an overall balance of payments deficit of $934.5m in the first quarter of 2022, compared with $429.9m in the same period last year.
Hundreds took to the streets in Ghana’s capital Accra for two days this week to protest against spiralling inflation and other woes. Growth slowed to 3.3 percent year-on-year in the first quarter of 2022 and inflation hit a record of 27.6 percent in May.
The central bank raised its main interest rate by 200 basis points to 19 percent last month, the second rise this year to buttress macroeconomic stability.