The International Monetary Fund (IMF), a Bretton Woods organization, has increased the yield on its Special Drawing Rights (SDR) by approximately 210 basis points (2.1%). This means that Ghana and other countries requesting loans from the IMF will pay an additional lending rate. This was implemented on Jan 06, 2022.
The SDR interest rate which was previously 0.89% has now been increased to 2.99% with the value of one US dollar being 0.753983. Following the increase in SDR’s interest rates, IMF member countries will have to pay more for loans from the Fund.
As of October 2022, Ghana’s outstanding loans to the International Monetary Fund decreased slightly to 1.28 billion SDR/ $1.68 billion from the previous quarter. Also, Ghana ranks top in Africa for having the highest indebtedness to the Bretton Woods organizations according to the Fund’s Quarterly Finances.
In December last year, the International Monetary Fund (IMF) reached a staff-level agreement with the government of Ghana on economic policies and reforms to be backed by a new three-year arrangement under an Extended Credit Facility (ECF) of about US$3 billion. This marks the country’s 17th IMF program since gaining independence in 1957.
This government promised a “Ghana Beyond Aid” during the 2016 general elections but has taken a sudden policy reversal by seeking a bailout from the IMF after driving the economy into a crisis.
How Did We Get Here as A Country?
Internal factors that have led us to the IMF include poor economic policies which have resulted in high public debts and the poor performance of the cedi due to high imports. All these have contributed to Ghana’s current poor economic state. Some external factors are the aftermath of the COVID – 19 pandemic and the Russian-Ukraine war which disrupted worldwide economies leading to high inflation rates and a global economic crisis.
The government is still working to revive our struggling economy. All is not rosy yet, although we have recently seen an appreciation of the Ghana cedi. How long will we continue to seek external aid to run our economy? With the increased interest rate for the IMF’s SDR, the government must be more cautious in its spending and put in practical steps to stop borrowing.
Priscilla Fumadorh
Priscilla is an entrepreneur and a creative communicator who loves to communicate through writing. She is passionate about national economic issues and does not miss a chance to offer her opinions on them for the good of the country.
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