IMF approval of US597 is vote of confidence in economy

Accra, July 16, GNA - Finance Minister, Dr Kwabena Duffuor, says the IMF Board's approval of US$597 million as balance of payment support to the country is a sign of renewed confidence in the economy. "So far, this is the largest financing package in Africa and it shows a strong expression of the IMF's support to Ghana's programmes and policies," the Minister told a press briefing in Accra.

The government inherited a difficult economic situation shown in high fiscal and current account deficits, high inflation and depreciation of the cedi against major international currencies. In response to the challenges, government announced an austere budget and pledged to reduce the fiscal deficit of about 14 per cent to 9.5 per cent this year.

He said in addition to the loan, US$425 million would also be made available to shore up foreign reserves as a result of the G-20 decision to increase the IMF's special drawing rights by US$250 billion. The Minister explained that the release of the amount was not dependent on having a programme with the Fund and was not based on any conditionality.

"In all, the loan based programme with the IMF (US$597 million) and the additional allocation based on Ghana's quota (US$425 million) is therefore US$1,022 million," Dr Duffuor said.

Of the total amount, Ghana will receive US$625 million before the year's end while the remaining amount will be disbursed between 2010 and June 2012.

The World Bank two weeks ago approved US$535 million. Of the amount US$300 million is for general budgetary support, US$225 million transport sector support and US$10 million for Natural Resource and Environmental Governance support.

Dr Duffuor said the inflows would significantly increase the level of the country's reserves, strengthen the cedi and increase confidence in the economy.

Besides the inflows would also lead to higher financing of the budget from external sources, thereby reduce domestic borrowing by government and dampen inflationary expectations. "The result will be lower domestic interest rates," Dr Duffuor added.