IMF urges deeper FX markets, reduced central bank role in Ghana

The International Monetary Fund (IMF) has called on Ghana to prioritise the deepening of foreign exchange (FX) markets while scaling back the footprint of the Bank of Ghana (BoG), as part of broader efforts to consolidate macroeconomic stability and sustain the country’s recovery.

In its latest assessment following discussions with Ghanaian authorities under the Extended Credit Facility (ECF) programme, the Fund said strengthening the BoG’s independence, discontinuing quasi-fiscal activities and entrenching market-based FX operations remain critical going forward.

The IMF noted that Ghana has taken decisive steps to safeguard financial stability, including the implementation of reforms to restructure state-owned banks, measures to close gaps in the crisis management and bank resolution framework, and a multi-pronged strategy to reduce non-performing loans.

It also acknowledged progress in governance and public sector efficiency, aligned with findings from the recently published IMF Governance Diagnostic Assessment. However, the Fund stressed that sustained efforts are required to improve transparency and oversight, particularly in relation to public disclosure obligations and the management of state-owned enterprises (SOEs) in the gold, cocoa and energy sectors.

According to the IMF, ambitious structural reforms aimed at improving the investment climate, strengthening governance and enhancing transparency are essential to raising Ghana’s growth potential and supporting sustainable job creation.

Following the IMF Executive Board’s consideration of Ghana’s programme, Deputy Managing Director Bo Li issued a statement highlighting both progress made and priorities ahead.

“Ghana’s performance under its ECF-supported reform program has been generally satisfactory. The authorities have shown strong program ownership by decisively implementing ambitious corrective actions after the 2024 policy slippages. These efforts, coupled with structural reforms, have driven a stronger-than-anticipated recovery in growth, brought inflation within the Bank of Ghana’s target range, and supported robust reserve accumulation. Going forward, continued reform efforts remain essential to maintain macroeconomic stability and debt sustainability, while addressing longstanding structural vulnerabilities.”

On fiscal policy, Mr Li noted that Ghana has made gains in strengthening its public finances but cautioned that discipline must be sustained.

“Ghana has made progress in strengthening its fiscal position. Looking ahead, staying the course of fiscal policy adjustment and creating room to enhance social programs is paramount to put public finances on a sustainable path and reduce financing needs, while cushioning vulnerable households from the impact of fiscal adjustment. Continued efforts to enhance domestic revenue mobilization and streamline primary expenditure are key in this regard and should be supported by steadfast implementation of reforms to strengthen tax administration, expenditure control and arrears management, and SOEs’ efficiency and governance. Forcefully addressing the challenges in the energy sector—including related to arrears—is critical to contain fiscal risks.”

The IMF also commended the BoG for recent monetary policy outcomes, while outlining areas for further reform.

“The Bank of Ghana has successfully brought inflation within its target range and rebuilt international reserve buffers, while cautiously easing the monetary policy stance. Looking ahead, strengthening central bank independence, discontinuing quasi-fiscal activities, and deepening FX markets, while reducing the Bank of Ghana’s footprint, remain priorities.”

On the financial sector, the Fund acknowledged ongoing recapitalisation efforts but warned that vulnerabilities persist, particularly within state-owned banks.

“The authorities have made progress in bolstering financial stability by continuing to implement banks’ recapitalization plans and initiating the recapitalization of key state-owned banks. However, vulnerabilities persist. To address these challenges sustainably, it is critical to strengthen governance in state-owned banks, fully leverage the bank resolution framework, develop contingency plans for banks that fail to recapitalize, ensure cost-effective resolution of legacy issues, and implement robust supervisory strategies to enhance credit and operational risk management.”

The IMF further welcomed the publication of the Governance Diagnostic Assessment, describing it as an important step towards strengthening accountability, but urged authorities to do more to restore public trust.

“The publication of the IMF Governance Diagnostic Assessment is most welcome, but more is needed to strengthen anti-corruption frameworks and bolster governance and public trust, including by fully aligning Ghana’s asset declaration to best practices.”

The Fund concluded that sustained commitment to reforms across fiscal, monetary, financial and governance fronts will be crucial for Ghana to lock in recent gains, reduce vulnerabilities and place the economy on a durable path of inclusive growth.