Should Ghana secure a deal with the International Monetary Fund and implement it successfully, the gold-rich country would be able to contain some of its fiscal deficits, the World Bank has said in its April 2023 Africa Pulse report.

Ghana has reached a staff-level agreement with the IMF for a $3 billion extended credit facility.

The cocoa-rich country is yet to secure a board-level agreement.

President Nana Addo Dankwa Akufo-Addo had hoped it would have been clinched by March but that did not happen.

Ghana is still talking to China and the Paris Club to restructure its $5.7 billion external debt after struggling to restructure the country’s domestic debt through a debt exchange programme.

The World Bank report noted that inflation in many Sub-Saharan African countries has remained elevated—above central bank targets and above inflation in advanced economies and the global economy.

For 2023, for almost 70 per cent of the countries in the region, the projected rate of inflation is greater than 4 per cent (the benchmark rate measured by the rate of inflation of advanced countries in the same year), and 25 per cent of Sub-Saharan African countries will suffer from two-digit inflation rates in 2023, the report said.

Looking at the fiscal policy outcomes, almost 70 per cent of the region’s countries posted a larger average fiscal deficit in 2022–23 than the 3 per cent of gross domestic product deficit that separates countries with and without fiscal space, it added.

The report said about half of Sub-Saharan African countries face both high inflation (low monetary policy space) and wider fiscal deficits (low fiscal policy space).

Notable cases include Ghana, Nigeria, Malawi, Zambia, and Burundi, among others.

By contrast, six countries (of a sample of 45) have some monetary and fiscal space to address macroeconomic stability and support aggregate demand.

Most of these countries are oil producers, such as the Republic of Congo, Chad, and Gabon.

Rising international prices for crude oil and the strengthening of their currencies are providing macroeconomic space in these countries, the report explained.

“Still, efforts should be undertaken to improve macro resilience”, the World Bank advised.

It said the deficit in Ghana “will remain elevated throughout 2023 to 25, with the large deficit being compounded by severe financing constraints resulting from a limited ability to issue long-term domestic debt and a lack of access to international capital markets”.

However, it said a “successful agreement on, and implementation of an International Monetary Fund (IMF)–supported programme would help contain the deficit and provide the necessary financing, including via the ongoing debt restructuring negotiations”.

In Zambia, the report said “fiscal consolidation will eventually bring the deficit down to 6.9 per cent in 2025”.

The path to consolidation, it noted, “will be supported by improved tax efficiency measures and containing public expenditure by strictly adhering to priority projects, cutting wasteful subsidies, and strengthening procurement procedures”.

Finally, higher government spending in South Africa on social grants, wage pressures, tapering of global commodity prices, and weaker domestic growth will weigh on the budget deficit this year.

The fiscal outlook is compounded by the conditional debt relief arrangement for the state power utility Eskom, which raises financing needs by an average 1.1 per cent of GDP over the medium term.

The budget deficit is estimated at 4.2 per cent of GDP in 2022 and projected at 4.4 per cent in 2023.