IMF programme: All set for positive third review

Finance Minister Seth Terkper

Ghana is most likely to receive a positive result after the third review of its three-year programme with the International Monetary Fund, IMF.

The staff led by IMF Mission Chief for Ghana, Joël Toujas-Bernaté, were in Accra from Monday, August 29 to Friday September 2, 2016.

The team met with President John Dramani Mahama, Finance Minister Seth Terkper, Governor of the Bank of Ghana, Dr. Abdul-Nashiri Issahaku and other senior government officials and also conducted its own independent checks of some key policies being implemented.

A release on IMF’s website described the discussions as very constructive and said it set the tone for further discussions ahead of conclusions to be reached.

The release signed by the IMF Mission Chief for Ghana, Joël Toujas-Bernaté among other things said:

“Following recent progress in implementing the IMF-supported program, including the passing by Parliament of several important legislations, we had constructive discussions with the authorities during this week on a few outstanding issues.

“The discussions focused mainly on updating the macroeconomic projections, firming up the fiscal outlook for 2016, and ascertaining that financial pressures faced by the main State Owned Enterprises (SOEs) in the energy sector will not pose additional risks to the central government budget.

“Understandings were reached on many of these issues. Outstanding questions remain with regards to certain elements of the legislations recently passed by Parliament and discussions will continue.”

The statement noted that its Executive Board, is expected to meet on the review on Ghana’s performance before a final announcement.

It’s unclear if the recent bill passed by Parliament on borrowing from the Central Bank will impact on the proposed mid of September meeting of the Executive Board of the IMF.

The exercise could impact positively on the proposed IMF board meeting date and start the release of some $500 million from Ghana’ donors.

The IMF’s Extended Credit Facility (ECF) is a lending arrangement that provides sustained program engagement over the medium to long term in case of protracted balance of payments problems.

The arrangement for Ghana approved on April 3, 2015 is about US$918 million.
Finance experts are optimistic a quick completion of the third review could impact positively on government’s plans to know how to issue its fifth Eurobond if market conditions improve.
The bold home grown policies being implemented which have so far cushioned the economy. The cedi has been relatively stable over the past few months, government deficit is reducing, the zero financing policy has freed reserves for commercial banks and the improvement in power crisis has also given a boost to businesses which hitherto were holding on investments.

Good news for the power sector

Meanwhile, government has made the first tranche of payment to clear debts owed by Volta River Authority (VRA) to the commercial banks. According to Finance Minister Seth Terkper, GH¢250 million have been paid onto a separate account at the Bank of Ghana (BoG). The payment is part of a GH¢4.4 billion of VRA’s debt which will be paid over a five-year period.
The savings were made from the recently introduced energy levy on fuel prices.

Government has entered into an agreement with the banks to reduce interest payments from 30 percent to 22 percent while interest on the dollar component has also been reduced to 11 percent to 8.50 percent.

Payments are also being funded from a debt service account which will receive a cash flow from an energy debt recovery levy and a debt service reserve and a proportion of VRA’s receivables.

Source: Dan Acheampong/Freelance Journalist

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