US$1bn IMF facility will address economic shocks from Coronavirus - Ofori-Atta

Finance Minister, Ken Ofori-Atta says the US$1 billion rapid credit facility to Ghana from the International Monetary Fund will cushion the economy against shocks that arise from the COVID-19 pandemic.

According to him, the nation will be able to best manage the economy better than most countries that have been hit by the coronavirus outbreak.

The facility comes with 5 years moratorium and does not come with conditionalities as well.

The US$1bn IMF loan will help us the nation address shoot fall in revenue that could impact on the fiscal position of the economy as well as the current account position of the country

But Ken Ofori-Atta said “The beauty of this is that the rapid credit facility which we went for I think we are the first to have gotten a double quota of a billion dollars, and I think is a zero percent facility, is 30 years, is 5 and half years moratorium, and it doesn’t come with any conditionalities.

“We will do all of the paper work and possibly by the weekend we should have the Bank of Ghana receiving these funds”

Continuing, he said “One of the more crucial elements of this is that when you get these shocks on your economy there is usually a liquidity crisis and when if you don’t manage that quickly you then get into insolvent crisis which is then rarely put you into a tail spend.”

After getting parliamentary approval, the government applied to the IMF fund in March this year for an interest free loan facility in furtherance of President Akuffo Addo’s broad policy of cushioning the Ghanaian economy against the outbreak of the novel coornavirus

The Fund responded within two weeks of assessing the request.

After a little above a month, the Executive Board of the International Monetary Fund (IMF) on Monday April 13, 2020 approved the disbursement of SDR 738 million (about US$1 billion) to be drawn under the Rapid Credit Facility (RCF).

The disbursement according to the fund, will help address the urgent fiscal and balance of payments needs that Ghana is facing, improve confidence, and catalyze support from other development partners.

Mrs Zhang, Deputy Managing Director and Chair, said: “The COVID-19 pandemic is impacting Ghana severely. Growth is projected to slow down, financial conditions have tightened, and the exchange rate is under pressure. The budget deficit is projected to widen this year given expected lower government revenues and higher spending needs related to the pandemic. The Fund’s emergency financial assistance under the Rapid Credit Facility will help address the country’s urgent financing needs, improve confidence, and catalyse support from other international partners.

“The authorities’ response has been timely, targeted, and proactive, focused on increasing health and social spending to support affected households and firms. The central bank has recently taken steps to ensure adequate liquidity, preserve financial stability, and mitigate the economic impact of the pandemic, while allowing for exchange rate flexibility to preserve external buffers.”