IMF lends Ghana $91.5m, endorses $3b China loan

The Executive Board of the International Monetary Fund (IMF) December 14, 2011 completed the fifth review of Ghana’s economic performance under its programme supported by the Extended Credit Facility (ECF).

“The completion of the review will enable the disbursement of an amount equivalent to SDR 59.58 million (about US$91.55 million), bringing total disbursements under the arrangement to SDR 268.31 million (about US$412.28 million),” the IMF said in a statement issued by its Deputy Managing Director and Acting Chair, Mr. Naoyuki Shinohara. It has also given Ghana the green light to contract the $3 billion China loan to be used for infrastructure development.

According to the IMF, its Board also approved a “modification of a performance criterion related to Ghana’s non-concessional borrowing limit to provide additional room for scaled-up infrastructure investment.”

Per an agreement signed with the IMF in July 2009, Ghana’s limit of commercial borrowings is up to $800 million a year.

The lender, even though did not give details of the modifications, it is believed that it has given a go ahead for Ghana to secure the $3 billion loan from the China Development Bank.

The IMF and the World Bank economists have been studying the terms of the $3 billion loan after officials from Ghana’s Ministry of Finance asked them to assess the implications of the credit.

According to the Africa-Asia Confidential (AAC) news publication on December 14, 2011, an internal Bank document it has seen reported that ‘the joint IMF-World Bank Debt Sustainability Analysis, based on critically conservative assumptions, concludes that Ghana’s economy could accommodate the CDB loan without aggravating risks of external debt distress but requires prudent fiscal policy.’

Although the loan would be partly repaid with oil exports, these would be at the prevailing market prices and therefore would not be an extra cost on the loan, according to the publication citing the Bank assessment.

The document, according to AAC, says the gas infrastructure project deserves the ‘highest and most urgent attention’ adding that the gas, ‘which comes as a by-product to the extraction of oil, is currently mostly being re-injected to avoid flaring in large quantities.

Financial returns, the Bank argues, would be much greater if the project included a plant for liquefied petroleum gas (LPG) production. This would generate income that would alone ‘cover 80%, in net present value terms, of the financial costs (interest and principal) to be incurred on the entire $3 billion amount of the China loan agreement.’

The AAC says an independent consultant’s report it has seen sent to the Ghana government reckoned the value of LPG produced at Jubilee was about $200 million a year.

By Ekow Quandzie