Ghana will today receive $1 billion from the International Monetary Fund (IMF) as free unconditional money to be spent to support the economic recovery efforts.
The amount is the country’s share of the increased allocation of funds to the IMF by its 190 member countries.
Known as special drawing rights (SDR), the $1 billion, which will hit the account of the Bank of Ghana (BoG), has been accessed based on the value of shares that Ghana holds in the fund, which is SDR793 million.
As a result, the money will not come with the usual conditionalities that normally accompany financial supports from the Bretton Woods institution.
The money comes at a time when COVID-19 related expenditures have exacerbated the debt situation, widened the fiscal deficit and starved critical infrastructural projects of funds.
Impact
The Resident Representative of the IMF to Ghana, Dr Albert Touna Mama, who confirmed this to the Daily Graphic, said the “allocation is a ‘shot in the arm” for the Ghanaian economy.”
“This is a billion dollars in unconditional liquidity. It can be used to pay for health care, support the economic recovery or shore up the country’s foreign exchange reserves,” Dr Touna Mama said in an email response to enquiries from the Daily Graphic.
“This SDR allocation provides an alternative to borrowing because Ghana does not need to reimburse the fund,” he added.
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Sovereign decision
When asked how he expected the country to apply the funds, Dr Mama said the government was at will to decide on that.
“How SDRs are used is a sovereign decision and depends very much on Ghana’s priority areas and circumstances. Of course, the only expectation is that transparency and principles of good governance should be respected,” he said.
Since the beginning of the year, the IMF has been calling for a comprehensive audit of COVID-19 expenditures.
Dr Mama said the $1 billion injection into the Ghanaian economy followed the approval by the IMF Board of Governors that the SDR be increased to help make resources available to member countries in response to the ramifications of the COVID-19 pandemic.
The SDR was raised to SDR456 billion, equivalent to $650 billion, this month, making it the fourth of its kind and the largest in the fund’s 27-year history.
Dr Mama said the increment was befitting, given the unprecedented nature of the pandemic.
Expatiating on its impact on the economy, the Resident Representative said the allocation was not a loan as it represented Ghana’s share of the $650 billion worth in SDR reserve assets created by the fund and distributed to its members.
Impact on cedi
The Governor of the BoG, Dr Ernest Addison, said in a separate interview that the central bank was pleased with the development, given its expected impact on the cedi.
“You see that the cedi has been relatively strong with support from strong reserves of about five months of import cover. If we add this, that should raise it higher and make the currency much stronger. So we are pleased,” he added.
Background
When received, it will bring to $2 billion the total amount the fund has disbursed to the country since the outbreak of the COVID-19 pandemic in March last year.
In April last year, the IMF approved $1 billion for the country under its rapid credit facility (RCF) programme to enhance the country’s response to the pandemic.
The approval was not tied to the usual IMF conditionalities.
Conversely, the fund disbursed a grant of $925.9 million to Ghana over four years under the Extended Credit Facility programme that spanned 2015 to 2019.