Former Finance Minister Mr. Seth Terkper has expressed confidence in Ghana’s ability to secure a waiver from official creditors to facilitate the approval of a third tranche of US$360 million for the country. Mr. Terkper, who led Ghana’s 16th International Monetary Fund (IMF) loan-support program in 2015, acknowledged the challenges but remained optimistic, stating, “it may be difficult, though not impossible to secure another waiver because these are major waivers.”
Speaking at a virtual media briefing on Friday, April 26, Mr. Terkper, currently serving as the Executive Director of a consulting firm, Public Financial Management (PFM) Tax Africa Network, emphasized the importance of ongoing negotiations. Ghana has reached an interim agreement with its official creditors but has yet to finalize a Memorandum of Understanding (MoU) for debt treatment aligning with the program’s parameters.
Although the MoU is not a prerequisite for the third tranche disbursement, the IMF has stressed the importance of reaching an agreement with official creditors. Mr. Terkper clarified that these waivers are not minor fiscal discrepancies but significant issues, suggesting that the reported challenges are manageable.
Mr. Terkper’s optimism stems from Ghana’s previous success in securing waivers from key creditors such as France and China during the initial stages of the loan-support program, similar to the process during the first review.
He urged the government to take decisive actions to establish sufficient buffers for debt repayment and curb the accumulation of debt. “If you do not allocate funds for debt repayment during times of growth, it’s an illusion; you can never diminish your debt accumulation,” stressed the former Finance Minister. This proactive approach, he emphasized, is crucial because the country’s revenue is not expected to increase significantly by the end of the three-year program, and current expenditure projections may not suffice for debt sustainability and economic resilience.
Ghana’s total revenue and grants were 15.8 percent of Gross Domestic Product (GDP) in 2022, projected to decline slightly to 15.7 percent in 2023, and then increase to 16.7 percent in 2024. By 2025, revenue is forecasted to rise to 17.3 percent, followed by 18.2 percent in 2026, and 18.1 percent in 2027, before declining to 18.0 percent in 2028. Conversely, expenditure, which accounted for 27.7 percent of GDP in 2022, is expected to decrease to 20.4 percent in 2023, with a slight uptick to 21.7 percent in 2024, before decreasing again to 21.6 percent in 2025. In 2026, expenditure is projected to increase slightly to 21.8 percent, followed by reductions to 21.2 percent in 2027 and 21.1 percent in 2028, according to the program’s estimates.
Mr. Terkper attributed this scenario to uncertainties surrounding the completion of the domestic modernized and automated tax system (Integrated Tax Administration System, ITAS), as well as the lack of ambition in the program to increase the tax-to-GDP ratio by two percentage points.
“Ghana must take proactive steps, such as establishing a reliable debt repayment mechanism like the Sinking Fund, to address its financial obligations,” he suggested.
He further advocated for the government to utilize the Energy Sector Recovery Act (ESLA) to settle debts owed to Independent Power Producers (IPP), while emphasizing the importance of the Bank of Ghana’s commitment to maintaining zero financing of government expenditure.
