The International Monetary Fund (IMF) has approved the disbursement of US$1 billion to Ghana to be drawn under the Rapid Credit Facility (RCF).
The money is to help Ghana address the “fiscal and balance of payments needs” and also help the country to improve confidence in its economy especially in the wake of the COVID-19 pandemic.
“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.
The Fund said it was still monitoring Ghana’s situation and is ready to provide policy advice and further support as needed.
Following the Executive Board’s decision, Mr. Zhang, Deputy Managing Director and Chair issued a statement, saying that;
“The COVID-19 pandemic is impacting Ghana severely. Growth is projected to slow down, financial conditions have tightened, and the exchange rate is under pressure.”
The statement further indicated that “the budget deficit is projected to widen this year given expected lower government revenues and higher spending needs related to the pandemic.
The Fund’s emergency financial assistance under the Rapid Credit Facility will help address the country’s urgent financing needs, improve confidence, and catalyze support from other international partners.”
“The authorities’ response has been timely, targeted, and proactive, focused on increasing health and social spending to support affected households and firms. The Central Bank has recently taken steps to ensure adequate liquidity, preserve financial stability, and mitigate the economic impact of the pandemic while allowing for exchange rate flexibility to preserve external buffers.
“The uncertain dynamics of the pandemic creates significant risks to the macroeconomic outlook. Ghana continues to be classified at high risk of debt distress. The authorities remain committed to policies consistent with strong growth, rapid poverty reduction, and macroeconomic stability over the medium-term. Additional support from other development partners will be required and critical to close the remaining external financing gap and ease budget constraints.”
Government runs to IMF for loan to aid COVID-19 fight
Ghana had earlier turned to the International Monetary Fund for financial support to aid in the COVID-19 fight.
The IMF in a press release on March 24, 2020, disclosed that the government had requested a rapid credit facility disbursement.
IMF’s African Department Director, Abebe Aemro Selassie is quoted as saying: “Last week, the IMF received Ghana’s request for a disbursement under the Rapid Credit Facility to help the country address the economic impact of the COVID-19 pandemic”.
“We are working hard to evaluate the authorities’ request and bring it forward for Executive Board consideration as soon as possible,” the statement added.
The Rapid Credit Facility (RCF) provides rapid concessional financial assistance with limited conditionality to low-income countries (LICs) facing an urgent balance of payments need.
IMF approves $500m in debt relief for 25 countries amid COVID-19 challenges
Meanwhile, the IMF has also approved an amount of US$500 million in grant-based debt service relief to 25 countries to help them deal with the negative impact of the COVID-19 on their various economies.
The fund’s Managing Director, Ms. Kristalina Georgieva in a statement on Monday said the grant falls under the IMF’s Catastrophe Containment and Relief Trust.
Countries that will benefit from the grant include Afghanistan, Benin, Burkina Faso, Central African Republic, Chad, Comoros, DR Congo, and The Gambia.
The others are Guinea, Guinea-Bissau, Haiti, Liberia, Madagascar, Malawi, Mali, Mozambique, Nepal, Niger, Rwanda, São Tomé and Príncipe, Sierra Leone, Solomon Islands, Tajikistan, Togo, and Yemen.