The Parliament of Ghana has approved a One Billion Dollar loan facility sourced from the International Monetary Fund (IMF) to mitigate the impact of the COVID-19 pandemic on the country’s economy.
Following the IMF’s announcement on March 4, 2020, of US$50 Billion support to help address the Coronavirus impact with an allocation of US$10 Billion for low income countries through the Rapid Credit Facility (RCF) window, the Government of Ghana put in a request for the facility on March 16, 2020.
The US$1Billion interest free loan approved for Ghana has a maturity period of 10 years made up of a grace period of 5 and half years and a repayment period of 4 and half years.
The purpose of the Rapid Credit Facility Agreement between the Government of the Republic of Ghana and the International Monetary Fund is to provide low access, rapid, and concessional financial assistance to Low Income Countries (LICs) facing an urgent balance of payments need, without ex post conditionality.
According to the Chairman of the Finance Committee of Parliament, Dr. Mark Assibey-Yeboah in his presentation of the Committee report to the House, indicated that in the case of Ghana, the Rapid Credit Facility has been negotiated to be used for budget support given the enormous fiscal challenge posed by the COVID-19 pandemic.
He said the proceeds from the RCF will be used to help close the financing gap that has been created by the pandemic as a result of shortfalls in revenues and additional expenditures to fight the COVID-19 pandemic.
The Committee report indicated that “out of the total facility, approximately GHc 1 Billion will be used to finance the electricity subsidy announced by H.E. the President whilst the remainder is employed towards expenditure outlined in the 2020 Budget.”
The economy of Ghana is expected to have a significant negative impact from COVID-19. As at April 17, 2020, Ghana had recorded 641 confirmed COVID-19 positive cases, 8 deaths and about 83 recoveries.
The impact of the COVID-19 has been profound as it has caused significant disruptions to social and economic activities across the world. With more than 65% of the global economy under some form of a lockdown, most economies are predicted to experience some degree of depression for a foreseeable future.
The Unites Nations Econimic Commission for Africa (UNECA) estimates that this pandemic will cause the projected 2020 GDP growth for Africa to drop from 3.2% to 1.8%.
In the case of Ghana, there are expected negative impacts on the transport, hotel and tourism sectors. Petroleum revenue shortfall of US$993 Million, equivalent of GHC5,660.35 Million is expected.
A further slowing down of domestic economic activity is also expected to hit tax revenue to the tune of GHC2,254.3 Million.