Ghana’s discussions with the African Development Bank (AfDB) for liquidity support into its Financial Stability Fund have been positive, Dr. Mohammed Amin Adam, Minister of State, Ministry of Finance, has said.
The move, he said, was aimed at getting more funds into the government’s $1.5 billion Fund to provide liquidity support to participating banks of the recent Domestic Debt Exchange Programme (DDEP), which cost GH¢8 billion in losses to banks.
“The discussion has been positive, but it’s premature to discuss the details as negotiations continue. At the right time when we have definite numbers in terms of how much they’re able to support us with, we’re happy to let the public know.”
Mr. Ken Ofori-Atta, Finance Minister, had hinted about the government’s effort to get some liquidity support from the AfDB into the Fund, which the World Bank had pledged some $250 million and $750 million from government coffers.
Dr. Adam told the Ghana News Agency on Tuesday evening that the discussions with AfDB for financial assistance would also cover budget support to close the country’s GH¢61 billion budget financing gap.
He said this in an interview on the margins of the signing of an US$8 million Memorandum of Understanding (MoU) by a five member-Constituency, aimed at increasing domestic revenue at AfDB’s annual meetings in Egypt.
The Government’s quest to shore up liquidity comes amid its $3 billion loan-support programme of which the first tranche of $600m [equivalent to 2.6 months of import cover] had been from the International Monetary Fund (IMF).
“Already the Bank of Ghana (BoG) has announced that with the $600 million that came through their account, our international reserve has been boosted from $5.1 billion to $5.7bn, so, that’s strengthened our balance of payment position,” the Minister said.
He added that part of the $600 would be used to support the implementation of government’s priority projects and programmes in the 2023 budget with a focus on social interventions.
Some sectors that the IMF loan, together with tax revenue would go to support include the Livelihood Empowerment Against Poverty (LEAP), free Senior High School (free SHS), National Health Insurance Scheme, and capitation grant.
“We negotiated as part of the IMF programme, solid social investments and these government programmes are not going to be interrupted. By the end of June, we should spend GHS2bn on social intervention,” Dr. Amin said.
“By December, we should be spending cumulatively, GH¢4bn in social intervention, and there’s going to be timely releases with a minimum spending of guaranteed resources so that the poor and most vulnerable people in society are uplifted,” he emphasised.
He said the Government was being cautious not to overtax businesses, which are critical to economic growth and individuals even as it implemented measures to increase domestic revenue.
“While it will require significant effort to increase domestic revenue, not just in terms of taxing of businesses and incomes of people, we’re also looking at ways of expanding the tax net so that a few people do not continue to be burdened by taxes,” he said.
Ghana’s 17th IMF bailout programme comes on the back of an economic crisis induced by the COVID-19 pandemic, Russia-Ukraine war and internal structural problems, which the Government has promised to address soon.
It is doing so though the $3bn IMF Extended Credit Facility (ECF) hinged on the government’s homegrown Post COVID-19 Programme for Economic Growth (PC-PEG) to make the Ghanaian economy more resilient to withstand future shocks.
By Francis Ntow, Sharm El Sheikh (Egypt)
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