Until now, Ghana had refused to seek IMF support to rescue an economy crippled by the pandemic, rampant inflation and currency depreciation.
Ghana, one of the largest economies in West Africa, will hold formal talks with the International Monetary Fund (IMF) on a support package, the government said, just days after hundreds of people took to the streets to protest the growing difficulties.
The cabinet gave its support to the decision in a meeting on Thursday, following a telephone conversation between President Nana Akufo-Addo and IMF Managing Director Kristalina Georgieva.
Until now, Ghana, the continent’s second-biggest gold producer, has refused to seek IMF support to rescue an economy crippled by the pandemic, rampant inflation and a depreciating currency, despite analysts warning that is close to a debt crisis.
The IMF did not immediately respond to a request for comment.
Analysts said the decision should help Ghana meet its challenges.
“Positive news given the succession of external shocks and growing challenges for Ghana’s economy,” Razia Khan, Standard Chartered’s chief economist for Africa and the Middle East, tweeted.
“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, an economist and research fellow at the Accra Institute for Fiscal Studies.
“The first gain for Ghana will be greater international confidence in the country’s ability and efforts to weather the crisis.”
Ghana’s dollar-denominated sovereign bonds rallied sharply with issues due in 2026 and 2027 jumping nearly five cents on 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 $934.5 million in the first quarter of 2022, compared with $429.9 million in the same period last year. last year.
Hundreds of people took to the streets of the Ghanaian capital Accra for two days this week to protest spiraling inflation and other ills. Growth slowed to 3.3 percent year-on-year in the first quarter of 2022, and inflation hit a record 27.6 percent in May.
The central bank raised its main interest rate by 200 basis points to 19 percent last month, the second increase this year to bolster macroeconomic stability.
