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10.03.2009 General News

$300m respite for economy from World Bank

The World Bank has offered to front-load credits and grants, worth $300 million to help stabilise, the Ghanaian economy, following an appeal made to that effect by the Finance Minister, Dr Kwabena Duffuor.

This means that moneys due for disbursement to the country in the next couple of years will be disbursed now because of the peculiar economic challenges facing the country.

According to the Finance Minister, the economy needs the $300 million front-loading from the International Development Association (IDA) of the World Bank, as the highest entitlement for the country has been an average of $100 million annually.

Having overrun its budget by about 14.9 per cent, the country needs to take certain measures, including requesting donor partners to front-load funds, to cushion the economy and cool off the financial heat.

Dr Duffuor, therefore, made the request through the visiting Vice-President of the World Bank, Africa Region, Mrs Obiageli Ezekwesili, who is in the country for a three-day visit.

Mrs Ezekwesih said Ghana's offer had already been accepted by the bank and would be effected through the medium of the 2009 budget statement to enable the country to stabilise its economy.

She said she was in the country to listen to and know the vision of the leadership for economic development for the next four years and identify how the hank could support.

"We are already exploring the front-loading prospects and your 2009 budget is a key medium with which to do that,” she said, adding that the disciplined economic management outlined in the budget was heart-warming.

She will hold meetings with the ministries of Energy, Food and Agriculture and Water Resources, Works and Housing as part of measures to have a first-hand understanding of the country's macroeconomic challenges which border on twin fiscal and balance of payment deficits that have resulted in rising inflation and a worsening exchange rate parity.

Inflation has risen from 18.13 per cent in December last year to 19.86 at the close of January this year.

The bank has some projects ongoing with those ministries which it wants to continue as a strategic help to the country. The support includes over $85 million for the energy sector and $25 million support for agriculture under the three-year Food and Agriculture Development Project (FASDEP II) which is in its second year of disbursement.

Dr Duffuor informed the World Bank team, which also included the Country Director, Mr lshac Diwan, that remittances from Ghanaians abroad had started drying up, as the figure dipped to $115 million in January this year, compared to the $165 million in the same period last year, a variance of $50 million.

If the trend continues or worsens, the country could be losing more than $600 million of remittances this year.

Inward remittances have been one of the consequences that analysts had projected would hit African and emerging economies hard as a result of the global financial crisis caused by a collapse of the mortgage market for lower-class citizens (sub-prime mortgage market) in the United States.

The Finance Minister said the 2009 budget was against the background of reducing the deficit to the region of 9.4 per cent, which he said was a dire challenge which the economic managers were determined to achieve.

"The situation does not make for a one-off adjustment, although the budget is very rigid, and that is why we need the support of all our partners particularly to front-load credits to us," he stated.

Mr Diwan had earlier this year been quoted by the Graphic Business as saying that the bank was ready to dialogue with the government in critical areas of the economy and offer concessionary assistance, including disbursing credits and grants before they were due.

Mrs Ezekwesili said the bank considered Ghana as a role model with a lot of lessons and that in the global scheme of things Ghana's outfit was working with its partners to ensure that the country did not lose the path to growth and poverty reduction.

Further support for the Ghanaian economy is said to hinge on an assessment to be made by an International Monetary Fund (IMF) mission in May this year, which will examine the country's compliance with certain macroeconomic benchmarks that as a member, it had agreed with the fund and the bank.

These include poverty reduction strategy credit the Medium-Term Expenditure Framework (MTEF) and public expenditure management.

The Poverty Reduction Support Credit (PRSC) covers the period 2006 to 2009 in support of implementing selected reforms to promote private sector-led growth, encourage vigorous human development and strengthen governance.

The PRSC will also contribute to guarding government programmes aimed at protecting the consumption level of the poorest in the face of the recent acceleration in food price inflation and sharpening their focus.

"Facilities such as the development policy loan should help inject some more resources into the economy and I don't see how this could not be advanced," Mrs Ezekwesili said.

She was quick to add, however, that the country needed to work closely with the fund to complete the assessment to enable the resources to flow.

"The budget has been al1iculate in getting economic stabilisation which is key to stopping the rising inflation and the exchange rate escalation which can derail the economy of the gains in the past eight years," she said.