News Brief No. 01/50

News Brief: IMF Completes Ghana Review Under PRGF and Approves US$66 Million Disbursement

June 28, 2001

The Executive Board of the International Monetary Fund (IMF) today completed the third review of Ghana's arrangement under the Poverty Reduction and Growth Facility (PRGF)¹. The Board also approved an increase of SDR 36.9 million (about US$46 million) in the amount available to Ghana under the arrangement. As a result, Ghana will be able to draw up to SDR 52.58 million (about US$66 million) from the arrangement immediately.

Ghana's three-year program was originally supported under the Enhanced Structural Adjustment Facility (ESAF) approved on May 3, 1999 (See Press Release 99/16), for SDR 155 million (about US$193 million), increased to SDR 191.9 million (about US$239 million) on August 21, 2000. So far, Ghana has drawn SDR 71.05 million (about US$89 million) under the arrangement.

The Executive Board also decided to ask Ghana to repay an earlier PRGF disbursement that had been deemed noncomplying (see Press Release 01/32)

After the Executive Board's discussion on Ghana, Eduardo Aninat, Deputy Managing Director and Acting Chairman, made the following statement:

"Ghana's economic program for 2001 represents a strong and appropriate response to the problems that have resulted from a severe terms of trade shock and a shortfall in donors' assistance, compounded by inappropriate macroeconomic policies and poor management of public enterprises in the latter part of 2000. In light of the corrective policies being implemented by the authorities, the Fund has waived the nonobservance of a number of performance criteria under Ghana's PRGF arrangement. It completed the third review, and agreed that Ghana may request the disbursement of the fourth loan under the arrangement. The Board also approved an increase of SDR 36.9 million in the amount available to Ghana under the arrangement.

"The newly-elected government is to be commended for taking action to raise the prices of petroleum products as well as the tariffs for electricity and water in order to stem the current losses suffered by the public oil refinery and utility companies. Restoring financial viability in the parastatal sector is essential for future fiscal stability, and the Fund encourages the government to move to full economic pricing for the oil refinery and public utilities as quickly as possible.

"New fiscal measures in 2001 are aimed to achieve a domestic primary surplus of 4 percent of GDP as against 2.4 percent in 2000. Minimizing the government's domestic borrowing requirement is important as it will help reduce interest rates and lower budgetary outlays on interest payments, thereby creating room for social and other priority spending.

"The measures to strengthen the fiscal expenditure management system that are included in the program will need to be vigorously implemented to ensure that budgetary allocations are respected and new accumulation of external or domestic payment arrears are prevented. Improved public expenditure monitoring in Ghana is also important to allow effective tracking of poverty-related expenditure programs.

"The Fund commends the authorities' progress in revamping the development and poverty reduction strategy with the broad participation of civil society, and looks forward to seeing a full Poverty Reduction Strategy Paper later in 2001.

"Based on a preliminary assessment of Ghana's eligibility for relief under the enhanced HIPC Initiative, the Board agrees that Ghana is eligible for assistance under the Initiative," Mr. Aninat said.

¹ On November 1999, the IMF's facility for low income countries, the Enhanced Structural Adjustment Facility (ESAF), was renamed Poverty Reduction and Growth Facility (PRGF), and its purposes were redefined. It is intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. The Ghanaian government's 2002/04 agenda for poverty alleviation will be articulated in the Ghana Poverty Reduction Strategy (GPRS). The document is scheduled to be finalized by September-October 2001. PRGF loans carry an annual interest rate of 0.5% and are repayable over 10 years with a 5 ½ year grace period on principal payments.