Dr Mohammed Amin Adam, Minister of State at the Ministry of Finance has disclosed that Ghana has held discussions with the African Development Bank (AfDB) for liquidity support into its Financial Stability Fund has been positive.
The move, the minister said, is aimed at getting more funds into government’s $1.5bn Fund to provide liquidity support to participating banks of the recent Domestic Debt Exchange Programme (DDEP), which cost GHS8 billion in losses to banks.
“The discussion has been positive, but it’s premature to discuss the details as negotiation 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.”
Dr Mohammed Amin Adam
Meanwhile, the minister noted that Mr Ken Ofori-Atta, Finance Minister, hinted about the Government’s effort to get some liquidity support from AfDB into the Fund, which the World Bank had pledged some $250 million and $750 million from government coffers.
Dr Adam noted that the discussions with AfDB for financial assistance would also cover budget support to close the country’s GHS61billion budget financing gap. He made this known at the signing of an USD8 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 $3billion 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.”
Dr Mohammed Amin Adam
What the $600 would be used for?
Dr Adam added that part of the $600 million 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. By December, we should be spending cumulatively, GHS4bn 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.”
Dr Mohammed Amin Adam
Dr Adam stated that the Government is 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.”
Dr Mohammed Amin Adam
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.
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