ACCRA — Ghana has requested a bailout from the International Monetary Fund (IMF) to stem a huge slump in its currency, Finance Minister Seth Terkper said Monday.
Once a shining example of economic growth in Africa, Ghana is struggling with high inflation and its currency, the cedi, has slumped 40% against the dollar this year.
"The ultimate objective is to stabilise the cedi in order that domestic prices will be brought under control," Terkper told local Joy FM radio.
Ghana has become the second country in sub-Saharan Africa to request help from the IMF this year after Zambia turned to the Washington-based body in June. Despite large oil deposits and a wealth of raw materials such as gold and cocoa, growth has been hit by government overspending and inflation is now running at 15%. Capital Economics said Accra’s budget deficit has widened to over 10% of economic output because of a sharp rise on current expenditure such as public sector wages and subsidies.
The current account deficit has ballooned and now stands at over 12% of gross domestic product (GDP), despite the ramping up of Ghana’s oil exports over the past years.
"This in turn has led to an increase in public sector debt levels," said Capital Economics, compounded by "recent allegations that the Bank of Ghana is attempting to finance the deficit by printing money".
President John Mahama decided to turn to the IMF on Friday after long denying Accra needed international assistance following a crisis meeting with his economic team on how to shore up the cedi.
Terkper said the move would help to restore investors’ confidence in Ghana’s economy.
"When you stabilise the cedi you are also looking at a situation where investors do see a more predictable economy as they bring their investments into the economy," Terkper said.
"This will be the first programme that we start discussion with the Fund that takes account of our transition into an economy that has become a middle-income country," he added.
The first African country to gain freedom from colonial rule, Ghana has seen rapid economic growth since it started exporting gold, cocoa and oil in 2010.
But falling prices for the yellow metal, government overspending and difficulties in raising Ghana’s oil production beyond 100,000 barrels per day have prompted scepticism among investors and lenders.
In March, ratings agency Fitch warned that Ghana could face a credit downgrade due to its rising debts and depreciating currency.