The International Monetary Fund (IMF) has approved the disbursement of US$1 billion to Ghana under the Rapid Credit Facility (RCF) to address the fiscal and balance of payments needs that the country is facing and also improve confidence in the economy.
The release of fund was subject to the decision of the Executive Board of IMF.
Ken Ofori-Atta, Ghana's finance minister had indicated to Parliament that following the COVID-19 pandemic, there will be a significant hit on the country’s non-oil revenue, which will lead to a revenue shortfall of up to GHC2.2 billion (approximately $377 million).
He said that “the anticipated decline in import volumes and values, as well as the slowdown in economic activities" justified the need for the loan, which comment has caught jaws dropping in an economy where the Government is promoting a "Ghana Beyond Aid" budget.
But the IMF has said that “The COVID-19 pandemic is already impacting Ghana severely. Growth is slowing down, financial conditions have tightened, and the exchange rate is under pressure".
“This has resulted in large government and external financing needs. The authorities have timely and proactively responded to contain the spread of the COVID-19 pandemic in Ghana and support affected households and firms,” the IMF remarked.
But external financing needs, it is clear that part of the loan will be used to pay interest on debts borrowed through the several Eurobond sales whose semiannual interest payments alone run into millions of US dollars. With imports slowing down, the government is unable to raise enough tax revenue to pay back those debts, hence the loan.
The Fund said that it was still monitoring Ghana’s situation and was ready to provide policy advice and further support as needed.
Many Ghanaians are shocked and questions will rage for months. Among the concerns will be the fact that taking a loan is not an issue but that this government has taken too many loans with very little to show for it.
Also, now that the debt to GDP ratio will clearly exceed the 70% threshold soon, will the government continue to borrow?
Are we not worse off now than ever?
Meanwhile, with about seven months to go for the next elections, this administration has not shown any significant development projects that will show that they have shifted gear to campaign mode.
Maybe this loan serves that purpose.
As for the issue of budget deficit exceeding 5% of GDP against the law passed by Parliament, nobody takes it seriously because there is no independent authentic way of verifying the figures, and some critics have said the GDP estimates are always known "several months after the fact", which means the figures do not arrive in time for decision making.
In all, the masses never believed Ghana could stop going to IMF and World Bank, and this is one more example. After three years of castigating the previous administration, this NPP administration has taken us back to IMF.
And the minority parties are sure to respond.
Ken Ofori-Atta, Finance Minister