Ghana Second Resilient Recovery Development Policy Financing

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The objective of the Second Resilient Recovery Development Policy Financing Program for Ghana is to restore fiscal sustainability; support financial sector stability and private sector development; improve energy sector financial discipline; and strengthen social and climate resilience. This operation is part of a package of coordinated financial assistance from international partners in response to the current socio-economic situation, with supported reforms complementary to the International Monetary Fund’s (IMF) Extended Credit Facility (ECF) program. Ghana is emerging from a severe macroeconomic crisis. Since the discovery of oil and gas resources, Ghana’s economy experienced repeated cycles of fiscal expansion followed by sharp adjustments. Prior to the recent crisis, access to the Eurobond market provided financing opportunities but also amplified macroeconomic volatility and heightened vulnerability to sudden external shocks. Structural weaknesses such as weak revenues, expenditure overruns, and significant energy sector shortfalls, led to a challenging macroeconomic environment, culminating in a sudden loss of access to external financial markets and ultimately a full-blown fiscal-debt crisis in December 2022. By then, the fiscal deficit and public debt had become unsustainable, inflation had risen to over 50 percent, and the balance of payments was under acute pressure, with the currency in a free fall. Against this background, reforms supported by DPF2 are intended to help the authorities maintain momentum on macroeconomic stabilization while deepening their structural reform commitments. The reforms supported by the operation include strengthening domestic revenue mobilization, controlling expenditures, safeguarding financial sector stability, removing impediments to private investment, strengthening the energy and cocoa sector financial and operational position, enhancing social protection programs, and mainstreaming climate adaptation and mitigation policies. Important progress on reforms and results has been made with the support of this DPF series thus far, although state-owned enterprise (SOE) reforms in the energy and cocoa sectors have faced challenges.