Ghana has requested aid from the International Monetary Fund to stem a plunge in its currency and close a large fiscal deficit, President John Mahama said Monday.
Mahama, in Washington for a US-Africa summit, said his country needs help to make structural adjustments, including to the huge government wage bill, so that it can balance its budget within a few years.
"The international capital markets... think there is a credibility gap unless you have the support of the IMF," he said.
"We want to work with them and see how we can turn this deficit around quickly."
Mahama did not give any details on how much money the country would seek from the IMF, which normally provides three-year loans while a country rights its finances but also has an emergency "Rapid Credit Facility" to help governments address sudden financial problems.
Once a shining example of economic growth in Africa, Ghana is struggling with high inflation and its currency, the cedi, has slumped 40 percent against the dollar this year.
Once a shining example of economic growth in Africa, Ghana is struggling with high inflation and its currency, the cedi, has slumped 40 percent against the dollar this year.
© AFP
Excavators work on a small-scale mining site on June 16, 2013 near Dunkwa-on-Offin, Ghana
© AFP/File Chris Stein
"The ultimate objective is to stabilize the cedi in order that domestic prices will be brought under control," Finance Minister Seth 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 percent.
Analysts at Capital Economics said Accra's budget deficit has widened to over 10 percent 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 percent of 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," compounded by "recent allegations that the Bank of Ghana is attempting to finance the deficit by printing money," Capital Economics said.
- 'Partners with the IMF' -
Mahama decided to turn to the IMF on Friday, after long denying Accra needed international assistance, following a crisis meeting with his economic team.
In Washington, he said the country is already "partners with the IMF" and working to make the kind of structural reforms that would likely come with a loan from the Fund.
"We are going to discuss and see how we can work together" to implement changes, he said.
"Much of what the IMF would prescribe, we are doing already."
Terkper said the move would help to restore investors' confidence in Ghana's economy.
"When you stabilize 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," he said.
"This will be the first program that we start discussion with the Fund that takes account of our transition into an economy that has become a middle-income country."
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 skepticism 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.