IMF Executive Board Grants Waiver on Noncomplying Disbursement to Ghana

The Executive Board of the International Monetary Fund (IMF) reviewed a noncomplying disbursement to Ghana under the three-year Poverty Reduction and Growth Facility (PRGF) arrangement, along with corrective actions taken by the Ghanaian authorities. As a result of that review and in light of Ghana's corrective steps, the Executive Board granted a waiver that was necessary to retroactively bring the SDR 22.1 (about US$16 million) disbursement into compliance with IMF rules.

Following the Executive Board's discussion on Ghana, Eduardo Aninat, Deputy Managing Director and acting Chairman, summarized the discussions. Mr. Aninat stated:

"Executive Directors expressed concerns over a noncomplying disbursement made to Ghana.
On November 29, 1999 Ghana received the second disbursement under the three-year PRGF arrangement, which had been approved in May 1999¹. On November 11, 1999, prior to the disbursement, the Bank of Ghana introduced special swap transactions with local commercial banks, without informing IMF staff. According to the Ghanaian authorities, these swaps were used in an attempt to smooth exchange rate volatility at time when large movements in the exchange rate were deemed temporary. This practice constituted a multiple currency practice (MCP) under IMF articles and the authorities should have requested a waiver for nonobservance of a performance criterion prohibiting the introduction of an MCP under the arrangement before the November disbursement took place. As this waiver was not requested or granted, the November disbursement was a noncomplying disbursement.

"Executive Directors noted the authorities' indication that they did not realize that these swaps resulted in a multiple currency practice. However, failure to consult the staff of the IMF in advance of the introduction of the special swaps and subsequent delay to disclose this practice to the staff are serious matters. They noted that prior consultation with the staff on key policy measures taken in the context of programs supported by the use of IMF resources is critical to meeting program objectives. They therefore welcomed the authorities' decision to discontinue the issuance of special swaps and their renewed commitment to the comprehensive provision of information to the staff of the IMF. They also noted the actions taken by the authorities to make the operation of the foreign exchange market and treasury bill market free and flexible.

"In light of corrective actions taken by the authorities, the Executive Board of the IMF granted a waiver of the nonobservance of the performance criterion prohibiting the introduction of a multiple currency practice," Mr. Aninat stated.