The International Monetary Fund (IMF) has advised the Government of Ghana to ensure its recently introduced fuel subsidy remains temporary and narrowly targeted, warning that prolonged intervention could jeopardise the country’s hard-won fiscal and economic recovery.
The caution is contained in the IMF Staff Report presented to the Fund’s Executive Board on July 27 ahead of the approval of Ghana’s Sixth Review under the Extended Credit Facility (ECF) programme.
The warning follows the government’s announcement of a GH¢2 subsidy on every litre of diesel for the month of August, a measure introduced to cushion consumers against rising fuel prices. The Ministry of Energy estimates that maintaining the intervention throughout the month will cost approximately GH¢500 million.
While acknowledging Ghana’s improving macroeconomic performance, the IMF stressed that fuel subsidies should not evolve into a long-term policy.
According to the Fund, any subsidy programme should remain temporary and carefully targeted to avoid reversing gains made under the country’s ongoing economic reform programme.
The IMF cautioned that extending the subsidy beyond its intended duration could reduce government revenue, widen the fiscal deficit and weaken efforts to restore debt sustainability and macroeconomic stability.
The government’s position, however, is that the measure is a short-term relief package.
Energy and Green Transition Minister John Jinapor has stated that the diesel subsidy will apply only for August and will be reviewed before any decision is made on its continuation.
He said the intervention reflects the government’s commitment to easing the financial burden on consumers while maintaining stability in the downstream petroleum sector.
The Minister added that authorities would continue to monitor market conditions and make policy decisions that protect the interests of Ghanaians.
Beyond the subsidy programme, the IMF noted that Ghana’s near-term economic outlook remains favourable but warned that significant risks continue to threaten the country’s recovery.
The Fund identified external challenges such as commodity price volatility, geopolitical tensions, including the conflict in the Middle East, and disruptions to global trade as key downside risks.
Domestically, it warned that policy slippages, delays in reforming state-owned enterprises and state-owned banks, as well as failure to safeguard the Bank of Ghana’s balance sheet, could undermine investor confidence and economic stability.
The report also revealed that the Bank of Ghana incurred losses equivalent to 1.5 per cent of gross domestic product under its Domestic Gold Purchase Programme.
In addition, the IMF highlighted the continued fiscal risks posed by several state-owned enterprises, citing persistent weaknesses in governance and operational performance.
As part of its Article IV consultations, the Fund said discussions with the government focused on sustaining fiscal consolidation beyond 2026, strengthening the energy sector, developments in the gold industry and improving the financial system’s resilience to fluctuations in gold prices.
Despite the cautionary outlook, the IMF upgraded Ghana’s debt distress rating from high to moderate risk, citing progress in external debt restructuring, stronger-than-expected economic growth, fiscal consolidation measures and the recent appreciation of the cedi.
The Fund noted that although Ghana’s debt sustainability indicators have improved significantly, the country still has limited room to service external debt and should continue to closely monitor foreign participation in the domestic bond market.
