Ghana awaits test results from IMF in hope for U$400m cash

Ghana’s faith of passing another International Monetary Fund (IMF) review test will be determined in the middle of this month, when the Executive Board of the fund meets to take a decision on how the economy fared under the three-year Extended Credit Facility (ECF) programme.
This follows successful round of consultation between the IMF staff team and the country’s economic managment team, comrprising the President, John Dramani Mahama, the Finance Minister, Mr Seth Terkper, the Governor of the Bank of Ghana, Dr Abdul-Nashiru Issahaku, and other senior government officials.

The meeting of the IMF Executive Board is needed to determine whether or not the country will qualify for another third round of disbursement from the US$918 million- backed ECF, which was approved in April 2014 to help stabilise the economy and ensure policy credibility.

The Graphic Business has, however, learnt from sources close to the discussion that the country’s chances of securing another approval were bright under the latest review. This could yield a disbursement of US$400 million compared to the US$114.6 that was disbursed under the second review in January, this year.

The apprpval and successful disbursement of the US$114.6 million brought total disbursements under the arrangement to about US$343.7 million.

The IMF Mission Chief for Ghana, Mr Joël Toujas-Bernate in a statement after he led a follow-up IMF staff team in Accra last week said:  “Assessed the implementation of the programme to be broadly satisfactory and identified a few areas where further work and discussions were needed before the third review under the Extended Credit Facility-supported programme could be completed. Since then several important legislations have been adopted by Parliament, including the Banks and Specialized Deposit-Taking Institutions Bill, the Deposit Insurance Bill, the Public Finance Management Law and the Amended Bank of Ghana Act. The authorities have also initiated discussions to address pressures that have emerged in the main State Owned Enterprises (SOEs) in the energy sector. 

Implementation of prior actions

 But Finance Minister, Mr Terkper is confident of a positive outcome of the discussions as a result of a comprehensive and expedited approach to the implementation of certain initiatives.

 He explained that “to expedite action towards the ultimate completion of the third review by satisfying these new prior actions, several of which are structural in nature, government gave the completion of these activities its top priority. This resulted in the extension of the last sitting of Parliament and the passage of all the bills, notably the PFM and the BoG Amendment bills, as required by the IMF”.

“As clearly demonstrated by the government's own initiative to impose levies to restructure or refinance the energy sector debt, beginning with the restructuring of a substantial portion (GH¢2.2 billion) of VRA’s debt, Ghana has started taking action to address the financial situation of the SOEs. 

“In the view of the government, this is key to removing the danger that the debt poses to our banks which did the lending and preparing the energy SOEs for the gas era. Hence the ongoing restructuring of the energy sector SOE debt, which involves 12 major domestic banks, substantially addresses the concerns of the IMF,” he added.

Quantitative performance

Mr Terkper said given the time that had elapsed since the third review mission was conducted, the IMF team was provided with updated data and an update of fiscal and monetary data, as well as progress in implementing the SOE debt restructuring plan. 

He said the team was informed of the validation of the legacy debt to be paid from the energy levies.

He said as requested by the recent IMF mission, the government would expand the scope of the energy sector audit validation programme to cover the future viability of the power sector SOEs, based on a review of business plans.

 “It is important to note that the third review considers economic performance up to the end of December 2015. During the period under review, Ghana met three out of the four fiscal quantitative performance criteria, in spite of a challenging economic environment. 

The quantitative performance that was not met related to the wages and salaries payment over-run. The over-run was as a result of higher-than-anticipated payments for category 2, 3 and 4 allowances.

 “The recent concerns raised by the IMF relate to certain elements of the laws recently passed by Parliament. While this reflects the sovereign and independent view of the Parliament of Ghana, the mission has been assured by the government of its willingness and commitment to bring any of these to the attention of the Cabinet and Parliament and, in general, ensure the success of the programme,” Mr Terkper said.

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