Ghana’s capacity to repay $1 billion RCF borrowed, SDR adequate – IMF
The International Monetary Fund (IMF), has said Ghana’s capacity to repay loans taken from the Fund is adequate despite increased risks from rising debt vulnerabilities such as a possible default on debt payments.
“While noting that risks to Ghana’s capacity to repay have increased, Directors concurred that they are still manageable and that Ghana’s capacity to repay the Fund remains adequate,” said the IMF in its July 2021 Article IV Consultation Paper report on Ghana’s economy.
Loans taken from the Bretton Wood institution include the $1 billion Rapid Credit Facility (RCF) taken by the government as well as a $1.2 million loan taken by the Bank of Ghana in Special Drawing Rights (SDR).
BoG depletes SDR holdings worth $42m; borrows $1.2m in SDR
The Central Bank at the end of April this year had depleted its Special Drawing Rights holdings with the International Monetary Fund (IMF).
According to the Bank’s Statistical Bulletin for April, Ghana’s SDR holdings with the IMF at the end of the first quarter of 2021 stood at Ghs 60.13 million ($10.3 million).
But as of April, the Bank’s SDR holdings with the IMF had been diminished with the Bank now indebted to the IMF.
The BoG had used up its SDR holdings of Ghs 60.13 million ($10 million) and is now indebted to the IMF by some Ghs 7.18 million ($1.2 million).
Prior to being indebted to the IMF, the BoG held SDR to the tune of Ghs 242.39 million ($42.2 million) in November 2020.
Special Drawing Rights (SDR) are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund.
SDRs are units of account for the IMF, and not a currency per se. They represent a claim to currency held by IMF member countries for which they may be exchanged.
Read This: Bank of Ghana depletes SDR holdings with IMF
$1 billion RCF
The International Monetary Fund (IMF) approved the disbursement of $1 billion to Ghana to be drawn under the Rapid Credit Facility (RCF).
The money was to help Ghana address the “fiscal and balance of payments needs” and also help the country to improve confidence in its economy especially in the wake of the COVID-19 pandemic.
“The COVID-19 pandemic is already impacting Ghana severely. Growth is slowing down, financial conditions have tightened, and the exchange rate is under pressure.”
“This has resulted in large government and external financing needs. The authorities have timely and proactively responded to contain the spread of the COVID-19 pandemic in Ghana and support affected households and firms,” the IMF remarked.
The Rapid Credit Facility (RCF) provides rapid concessional financial assistance with limited conditionality to low-income countries (LICs) facing an urgent balance of payments need.
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Debt-to-GDP
Presently, Ghana’s debt to GDP according to the IMF in its Article IV Consultation Paper stands at 79 percent of GDP including exceptional costs – financial sector and bailout costs.
But the government has, however, pegged the nation’s debt stock at 70 percent of GDP. Ghana’s debt stock is mainly driven by increasing expenditure with stagnated revenues.
The country’s total revenue to GDP ratio is currently in the region of 14.3 percent with the government seeking to increase it by some 2 percentage points to 16.7 percent of GDP for this year.
The country’s fiscal deficit as of the end of last year stood at 11.4 percent of GDP, the government for this year is targeting a fiscal deficit of 9.3 percent.
