Press Release No. 03/222

Press Release: IMF Completes First Review Under Ghana's PRGF Arrangement and Approves US$38.5 Million Disbursement

December 17, 2003

Ghana's three-year PRGF arrangement was approved on May 9, 2003 (See Press Release No. 03/66) for SDR 184.5 million (about US$270 million). So far, Ghana has drawn SDR 26.35 million (about US$38.5 million).

The PRGF is the IMF's concessional facility for low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5 ½-year grace period on principal payments.

Following the Executive Board's discussion on Ghana's request, Shigemitsu Sugisaki, Deputy Managing Director and Acting Chair, stated:

"The authorities are to be commended for their successful conduct of macroeconomic policy in 2003. The economy is on a steady growth path, fiscal discipline has been restored, and official reserves have exceeded targets. The fiscal framework for 2004 and the medium term will support the objective of reducing the domestic debt-GDP ratio by at least half over the three-year program period. Steadfast implementation of the authorities' monetary targets should bring about single-digit inflation in early 2004. As a result, prospects for achieving the medium-term macroeconomic and economic reform objectives set out in their poverty reduction strategy are good.

"The authorities are committed to steadfast implementation of well-prepared structural reforms, which will be further developed early next year. An immediate priority will be to continue to adjust prices to achieve full cost recovery for petroleum, electricity, and water. Although the planned divestiture of the Ghana Commercial Bank (GCB) was suspended, the authorities are taking welcome steps to strengthen its financial management and operational efficiency.

"Successful implementation of Ghana's poverty reduction strategy over the coming year will depend on avoiding further losses in the energy and utility companies, and liberalizing petroleum prices as intended in mid-2004. It will also be vital that the authorities remain resolute in their commitment to counter pressures to raise government spending in 2004, an election year. Achievement of these objectives will help to consolidate the progress already made under the 2003-2006 PRGF-supported program. This, together with action on the remaining policy triggers under the enhanced Initiative for Heavily Indebted Poor Countries and continued strong program implementation, will help pave the way for Ghana to reach the HIPC completion point around mid-2004," Mr. Sugisaki stated.