$3.2bn for 3yrs
There is good news for Ghana. The International Monetary Fund and the World Bank in Washington, DC are prepared to give the Ghana government a "tentative allocation” of funds totalling $3.2 billion over the next three years. But, still to be made clear to Ghanaians are the conditions that the country has to meet before the funds will be made available.
President JEA Mills announced to Africans on BBC World last week that multi-billion-dollar facilities will come without conditionalities. But, information available to The Statesman does not support this optimism from the Head of State.
President Mills also told the world that investors welcome “transparency,” explaining his zeal in announcing to the world that “the NPP left behind empty coffers” and a budget deficit of 15 percent.
But, with fears of utility bills shooting up as subsidies for VRA and poor consumers are under threat, and equally worrying signs of a three-year virtual freeze on public sector wages and salaries, Ghanaians are demanding greater transparency from the new government of social democrats on whatever conditionalities the Bretton Wood institutions are attaching to the funds they are dangling before the nation's eyes.
$2.2 billion of the amount is expected to come from the World Bank, with $1 billion of it said to be monies which the previous government was not able to claim.
The Statesman has learnt that the conditions (and bureaucracy) attached to them made it difficult for the NPP government to claim it. Despite President Mills' assurance, there is no indication that conditions have been relaxed.
The remaining $1 billion from the IMF is far from certain, according to our checks.
It is described as “a possible precautionary standby arrangement of not less than US$1 billion to support Ghana's foreign exchange reserves.”
Just before leaving for Washington for the Spring Meetings with the Bretton Wood institutions, Finance Minister, Kwabena Duffuor criticised the NPP for doing the same thing he was going to America to negotiate the $1bn for - of spending foreign reserves to shore up the cedi. Dr Dufuor accused the NPP of irresponsibly using about $1.2bn over the last couple of years to shore up the cedi.
Also, The Statesman has learnt that the $1bn loan, if we ever get it, would be charged at a market-based interest rate (currently 1.5 percent, but potentially higher), and with an unusually short repayment period (less than 5 years).
Our sources say that at the high-powered meetings in Washington, the Ghanaian delegation agreed that by the next budget, subsidies for electricity and petroleum products will be totally removed. Some essential social interventions may also be threatened.
They also agreed to put a virtual 3-year freeze on real public sector wages. It was argued that the projected 11.2% wage increase this year would have no significant budgetary effect since it is well below the average annual inflation target of 15%.
In Washington, the delegation met with the World Bank's Managing Director and the Regional Vice President, both responsible for Africa, the International Finance Corporation Vice President and the Country Teams for Ghana.
$1.2 billion has been allocated to Ghana for Budget/Sector Support Programmes and Projects for the ensuing three-year period. Of this amount $450 million had been earmarked for budget support for the next 3 years, with an additional amount of $75 million already allocated to Ghana.
Government's hope that $375 million out of the tentative allocation to Ghana of $525 million over three years can be frontloaded by this July is yet to receive confirmed approval.
Also, the Ghanaian delegation met with the Executive Director in charge of Ghana at the IMF, the Director of the African Department and the Deputy Director of the Fiscal Affairs Department of the IMF, where details of the release of the $1bn to shore up the cedi was discussed.
Following the G-20 meeting in March 2009, agreement was reached to increase the SDR allocation by the IMF to all member countries. This allocation for Ghana is estimated at SDR 283 million (US$420 million at current exchange rates), and is expected to become available in the third
The IMF's preparedness to support the Ghana government's macroeconomic adjustment programme is where pressures for reducing the fiscal deficit can be most found, with calls for serious checks on expenditure.
Preliminary indications are that the Fund's support could be in the order of around $600 million over a two- to three-year period, which together with the additional SDR allocation, would boost Ghana's gross foreign exchange reserves by around $1 billion.
The Minister of Finance and Economic Planning, Kwabena Duffuor, led Ghana's delegation to the biannual meeting of the Breton Woods institutions which took place from April 21 to 27, 2009.
Other members of the delegation were the Governor of the Bank of Ghana, Paul Acquah; the Head of Research of the BoG, Ernest Addison; the Chief Director of the Ministry of Finance and Economic Planning, Nana Juaben-Boateng Siriboe; the Director, Policy Analysis and Research Division of the ministry, Kwabena Oku Afari, and the acting Director, Aid and Debt Management Division of the ministry, Yvonne Quansah.