[ 2016-07-21 ]

IMF and Finance minister Seth Terkper

Gov't risks losing $116m IMF cash for violating borrowing agreement
Ghana could lose out on the third tranche of $116
million from the International Monetary Fund (IMF)
if government goes ahead to pass an amendment bill
on borrowing from the Central Bank.

The amendment to the Bank of Ghana Act will allow
government to borrow from the Central Bank not
more than 5% of the previous year's revenues. This
will be a departure from an agreement with
government not to borrow a dime from the Bank of
Ghana in the three-year period of the credit
agreement.

The Fund has become a supervisor of Ghana's
economy after government entered into a 3-year
extended credit facility agreement with the IMF in
2014.

Ghana is expected to receive $918 million from the
IMF, released in three separate tranches. If
government behaves well according to the IMF,
government gets approval for a tranche.

After a first tranche of $116 million was
transferred in January 2015 and another $114.6
million and a second tranche approved in September
2015, the IMF expressed satisfaction with
government saying “the program is on track".

But signs of a clash were already on the wall when
in the second approval, the IMF expressed disquiet
about government's inability to meet the mark set
for borrowing from the Central Bank.

"...all performance criteria [were] met except for
the ceiling on central bank financing to the
government which was technically missed by a small
margin".

Thus after receiving two tranches totaling more
than $230 million, it is the third tranche that
could pose a tricky piece of negotiation.

Member of Parliament’s Finance Committee, Dr.
Mark Assibey Yeboah, suspects the Fund may not
release the third tranche because government is
"not sticking to the rules of the game".

He said government entered into a bad agreement
with the IMF when it promised to pass the
amendments to scrap borrowing from the BoG.

The current law allows up to 10% borrowing of the
previous year's revenue. But government over the
years has exceeded this limit prompting the IMF to
move to scrap off borrowing entirely.

"How can you go and agree that there should be
zero percent financing?" he expressed contempt for
the decision.

He said the "bad negotiations" is also an affront
to parliament because it suggests that the
Executive has Parliament in its pocket.

"The ministry can only submit these bills to
parliament. Can you pre-empt what parliament is
going to do? You can’t force parliament’s hand
in the deal", he told Joy Business.

The Board of the IMF is expected to meet next
month to decide on the next tranche to Ghana but
to Dr. Assibey Yeboah, the deal may be off.

"From where I sit and how I see things, the IMF
has technically suspended the program with the
country", he maintained.

Source - Myjoyonline.com

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