The ECF-backed stabilization program April 2015- March 2018
News date: 10th September 2018

Introduction
The rebasing of the national accounts in 2006 (made possible by improved methodology and data availability from the Population and Housing Census and the VAT Secretariat) revealed that Ghana’s (non-oil) economy was larger than previously thought and growing at an annual rate of one percent faster. In July 2010, Ghana was reclassified a lower middleincome
country (LMIC).

Hydrocarbon deposits in commercial quantities offshore Ghana were confirmed in 2007. Production commenced in late November 2010 at an average rate of 36,000 barrels per day. With only 42 days of production, output in 2010 totaled less than 1.5 million barrels. None of this was sold (exported) that year. The Ghana Statistical Service (GSS) estimated real GDP
originating from the sector at GHc65 million at constant 2006 prices. Officially, Ghana entered the oil era (commercial production) in the following year, 2011. Producing at an average rate of 67,000 per day, total output in the first year was about 24.5 million barrels.The oil was exported and yielded an amount of $2779 million for a share of 21.7 percent of total export earnings.

Ghana was among the earliest to reach Completion Point (at end-September 2006) in the HIPCI and MDRI processes. The accompanying debt relief and debt cancellation brought the debt to GDP ratio down to 26 percent. Given these developments, aid became increasingly scarce and less concessional. In particular, as depicted in Figure 2.1, the grants-to-GDP ratio
declined steadily from 3.7 percent recorded in 2007 to 1.5 percent in 2012. It fell sharply to less than 1.0 percent in the 2013-2014 period reflecting the standoff with DPs. Upon the agreement on the ECF-backed stabilization program, the DPs led by the World Bank and the EU resumed budgetary support and the ratio spiked to a one-off high of 2.0 percent in 2015.

There was a discernible feeling in public discussions, somewhat of an emerging ‘consensus’ among the political class, the intellectual elite, and labor unions that it was about time for Ghana to wean itself from donor dependence, learn to “stand on its own two feet” and in any case, be more assertive on matters of its socio-economic development. It was claimed
that if the costs of donor conditionality attached to aid were properly taken into account, aid may well prove “not so concessional after all”. For priority infrastructural projects, Ghana could borrow on commercial terms while bearing in mind that private markets may be expected to be harsher than DPs in their punishment of bad policies. Ghana issued its
first Eurobond of US$750 million at a coupon rate of 8.5 percent in late 2007.

Fund staff reported in 2009 that: discussions in 2007-08 on a program to be supported by the Policy Support Instrument (PSI) did not advance. Responsiveness to the Fund’s 2008 surveillance advice on fiscal management was also limited. The most fruitful areas of collaboration in 2007-08 centered on Fund staff advice on building access to global financial markets. (IMF Country Report No.09/256 August 2009 para 2 page 5).

Given the sharp deterioration in fiscal balances of election year 2012, the dearth of concessional aid resulting from the deteriorating relations with the Multi-Donor Budget Support (MDBS) Development Partners (DPs), - including the African Development Bank, the European Union and the World Bank - Ghana launched its own ‘home-grown medium-term
economic transformation strategy’ in 2013.


Source: CEPA