Ghana says in talks for at least $1 billion IMF support
Written by Kwasi Kpodo
Thursday, May 07, 2009 3:23:53 PM
ACCRA (Reuters) - Ghana is in talks with the International Monetary Fund to secure a total of at least $1 billion of support to prop up its foreign exchange reserves, the Finance Ministry said on Thursday.
The West African country, the world's second biggest cocoa grower, is grappling with a swelling budget deficit and trade imbalances after the cost of food and fuel imports surged to record highs last year. Its woes have unsettled some investors holding its debut Eurobond.
"We discussed program options, which are essentially the standby arrangement or Poverty Reduction and Growth Facility (PRGF)," the Finance Ministry said in a written statement provided to Reuters, adding that a further round of talks were due next week.
It said the PRGF had an advantage of concessional funding, at a fixed 0.5 percent interest rate payable over 10 years, as opposed to a market-based interest rate on the stand-by which also has a shorter repayment period of less than 5 years.
Ghana expects to receive $420 million in the third quarter of this year as part of an IMF commitment at the Group of 20 summit in London to increase its allocations of special drawing rights (SDRs) to member countries, the ministry said.
The SDR is an international reserves asset, created by the IMF to supplement the existing official reserves of its members.
The fund also agreed to support for Ghana's balance of payments gap, the ministry added.
"Preliminary indications are that the Fund's support could be in the order of around $600 million over a two-three-year period, which together with the additional special drawing rights allocation, would boost Ghana's gross foreign exchange reserves by around $1 billion," it predicted.
Ghana is grappling with a weakening national currency and inflation, currently at a five-year high and quickening.
It is also suffering from the impact of lower remittances sent home by workers abroad as the global economic crisis bites.
"Ghana desperately needs such assistance programs to be able to achieve any meaningful turnaround of the economy. ... Of course, it should be backed by prudent management," Ishac Diwan, the World Bank representative in Ghana, told Reuters separately.
Ghana's budget deficit stands at a provisional 14.9 percent of gross domestic product in 2008 -- a gap the new government of President John Atta Mills plans to narrow to 9.4 percent of GDP by the end of 2009.
Labels: ACCRA, GHANA, IMF, PRGF
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IMF team coming next month
By NKOLE CHITALA
A MISSION from the International Monetary Fund (IMF) is expected to visit Zambia next month to conduct a final review of the Poverty Reduction and Growth Facility (PRGF) arrangement. The IMF team conducted the first review of PRGF from September 17 to 26 this year.
Bank of Zambia (BoZ) Governor Caleb Fundanga said a similar review would be carried out to conclude discussions with the Zambian authorities in December.
“A follow up mission would be undertaken to conclude discussions with the Zambian authorities in December 2008,” he said at quarterly media briefing in Lusaka on Wednesday.
The PRGF is the IMF's concessional facility for low-income countries. Its loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5 and half-year grace period on principal payments.
In June this year, the IMF approved a three-year, PRGF arrangement for Zambia amounting to US$79.2 million) in support of the country's economic policies aimed at alleviating poverty and sustaining growth.
The decision enables Zambia to request the first disbursement equivalent to US$11.3 million.
The first IMF PRGF review had preliminary indications saying all the benchmarks for June 2008 had been met. There was also a broad agreement on the macro economic outlook for 2008.
Dr Fundanga said the IMF mission expressed satisfaction with the performance of the country’ economy despite adverse shocks related to increases in world food and fuel prices.
The economic growth is however envisaged to slow down this year due to relatively poor harvest and the electricity crisis.
The mission also observed that fiscal policy was weaker than planned mainly on account of the huge supplementary expenditures undertaken and the fuel subsidies which might lead to revenue losses.
The new PRGF arrangement succeeds a previous arrangement that was successfully completed in September 2007.
And the second FinScope Demand Surveys is expected to be conducted during the fourth quarter of this year.
This follows the signing of a contract between the BOZ and the Ministry of Commerce, Trade and Industry to facilitate the release of K1.4 billion by the Private Sector Development Programme (PSD).
BoZ said the survey would be undertaken by FinMark Trust Zambia Limited, who had been contracted on condition that they work with local consultant to build capacity in the area of financial sector research.
Labels: CALEB FUNDANGA, IMF, PRGF
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Archbishop Mpundu sees no progress on poverty reduction
By Masuzyo Chakwe
Thursday June 12, 2008 [04:00]
LUSAKA Archbishop Telesphore Mpundu has said he will only believe Zambia is making progress in reducing poverty when there is a difference in the lives of ordinary people. In an interview, Archbishop Mpundu said he had not started seeing the reduction in poverty and an improvement on the economy to better the lives of the ordinary people. Archbishop Mpundu challenged the media to monitor what was obtaining at the grassroot level and see if people's lives were improving.
"It is up to you the media to go the grassroots to see what is obtaining on the ground. You know, if we are told that Zambia has achieved the HIPC point or achieved a one-digit inflation or that there has been more investment, so more money is coming. How does that translate to the common person in Kanyama? How does that translate to the common person in Mtendere or in Chainda and Mandevu?" he asked.
Archbishop Mpundu said he recently visited the compounds in Kabwe and that poverty was visible there.
"People in Ngungu for example, and you go to Railway compound and you will see the poverty there; you see it. For me, I am not criticising anybody, I am simply saying I will believe we are making progress when there is a difference in the lives of the people there, on the ground not those in Kabulonga, Woodlands or the high areas; that's the litmus test, that's the criteria number one. I have not started seeing it and that is why I do not believe until I start seeing. I am told 'well, it takes a few years', I am prepared to wait but until then I see effects, I am not prepared to swallow anything that is said to me," said Archbishop Mpundu.
Labels: NEOLIBERALISM, POVERTY, PRGF, TELESPHORE MPUNDU
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Zambia’s economy delights IMF
By Fridah Zinyama
Monday June 09, 2008 [04:00]
FINANCE minister N’gandu Magande has said
the next programme that the International Monetary Fund (IMF) will embark on with Zambia will have little conditionality due to the country’s good performance in the last programmes. The IMF last week approved a US$79 million (about K291.9 billion) three-year-plan to support Zambia’s poverty alleviation and sustained economic growth. In an interview on Friday, Magande said the IMF had reduced the funds that they will be allocating to Zambia due to its good performance in past projects.
“We will have low access to the Poverty Reduction and Growth Facility (PRGF) and the funds we have been allocated (US$ 5 million) will be meant for consultation purposes,” he said.
Magande however said the US$ 5 million was little and that Zambia would have to work very hard to source for funds for other projects.
And Magande added that the government would also embark on completing most of the roads across the country which were economically strategic to the country.
He said government was in the process of developing a feasibility study of starting a dual carriage on particular roads which were very busy.
The government this year allocated about K1.3 trillion for road rehabilitation and construction. According to the IMF, the new PRGF succeeds a previous arrangement successfully completed last year.
The IMF commended the Zambian authorities for implementing prudent macroeconomic policies, which, in the context of high copper prices and debt relief, contributed to robust economic growth, markedly lower inflation, a reduction of poverty, and a build up of international reserves.
Labels: HYPOCRISY, IMF, MAGANDE, NEOLIBERALISM, PRGF
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IMF approves K261bn plan for economic growth
By Chiwoyu Sinyangwe
Friday June 06, 2008 [04:00]
THE International Monetary Fund (IMF) has approved a US $79 million (about K261.9 billion) three-year plan to support Zambia’s efforts in poverty alleviation and sustained economic growth. According to a press statement released on Wednesday, the new Poverty Reduction and Growth Facility (PRGF) plan succeeds a previous arrangement successfully completed last year.
Following the IMF executive board's discussion, Takatoshi Kato, deputy managing director and acting chairman, commended the Zambian authorities “implementing prudent macroeconomic policies, which, in the context of high copper prices and debt relief, contributed to robust economic growth, markedly lower inflation, a reduction of poverty, and a build-up of international reserves.”
“The authorities remain committed to maintaining prudent macroeconomic policies and pursuing structural reforms to sustain high economic growth, further reduce poverty, diversify the economy and preserve macroeconomic stability and debt sustainability,” Kato said.
The statement further noted that the new PRGF arrangement would support the government's objectives of boosting economic growth and enhancing employment and income opportunities, especially for the poor, while maintaining macroeconomic stability.
The PRGF is the IMF's concessional facility for low-income countries. PRGF loans carry an annual interest rate of 0.5 per cent and are repayable over 10 years with a five-and-a-half-year grace period on principal payments.
Recently, a group of IMF executive directors that visited Zambia early this year indicated that the new financing package to replace PRGF would come with a smaller amount of money saying: “We can't give as much money as previously because we feel your economy is in a better shape than previously.”
Zambia’s previous PRGF expired at the end of September last year and the IMF indicated that the country had performed well under the financing facility that had been in place since June 2004.
The PRGF arrangement was approved on June 16, 2004 in the amount equivalent to SDR 220.1 million (approximately US$333.6 million or K1.3 trillion). The PRGF-supported programmes are based on country-owned poverty reduction strategies adopted in a process involving civil society and development partners and articulated in the Poverty Reduction Strategy Paper (PRSP).
Labels: IMF, PRGF
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IMF backs govt's new mining tax
By Chiwoyu Sinyangwe
Wednesday February 27, 2008 [03:00]
THE International Monetary Fund (IMF) has backed the government’s decision to raise mining tax which it described as extraordinarily low. And the IMF has disclosed that the new financing package to replace the three-year Poverty Reduction Gross Facility (PRGF) would come with a smaller amount of money.
Meanwhile, the IMF cautioned the government to manage its debt contraction process to avoid fall into debt. IMF alternate executive director and delegation leader of the IMF executive directors Miranda Xafa said her institution supported the decision by the government to increase the mining tax although it could not interfere in the implementation of the new mining fiscal regime.
The government has proposed windfall profit tax at a minimum of 25 per cent, raising the mineral royalty to 3.0 per cent from 0.6 per cent, a variable profit tax at 15 per cent a taxable income above eight per cent and plan to lift corporate tax to 30 per cent from 25 per cent, a move which the mining companies in the country have protested.
“We are certain that there’s room to raise taxes because Zambia had the lowest taxes on mining not just in Africa but the whole world,” Xafa said. “But we also think it is very important to do so by negotiating with the foreign direct investors to make sure that mining remains profitable and that Zambia is able to attract new investments into mining.”
And the IMF said the PRGF which was a US $320 million has since expired and that the Fund’s mission team was currently negotiating with government for a new finance facility.
“We can’t give as much money as previous because we feel your economy is in a better shape than previously… your reserves have hit US $1billion so you have more money.”
Meanwhile, Xafa has cautioned the government to manage its future loans so that the country does not slip back into debt.
And Xafa said Zambia still had a challenge of managing the inflows from the price boom in metal prices to prepare for possible slump in high prices of commodities and ensure that the economic boom translates in improving the lives of ordinary Zambians.
Labels: IMF, PRGF, WINDFALL TAX
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IMF gives Zambia $33.4m
By Joe Kaunda
Monday June 11, 2007 [04:00]
THE executive board of the International Monetary Fund (IMF) has approved a US $33.4 million disbursement to Zambia following the completion of reviews of the country's Poverty Reduction and Growth Facility (PRGF).
And IMF's deputy managing director Takatoshi Kato has hailed the Zambian government for pursuing sound macroeconomic policies that have resulted in a sustained robust economic growth and a marked reduction in inflation. During the Board's meeting on Zambia's fifth and sixth (final) PRGF reviews that took place in Washington DC
on Friday, the Board also approved the request for waivers for the non-observance of performance criteria in view of the corrective actions taken by the Zambian government.
“These include the end-June 2006 and end-December 2006 quantitative performance criteria on net domestic financing of the central government; the end-June 2006 quantitative performance criterion on gross international reserves of the Bank of Zambia; and the end-September 2006 and end-March 2007 structural performance criteria on the initiation of the piloting of the Integrated Financial Management and Information System (IFMIS),” the IMF announced on its website yesterday.
The PRGF arrangement was approved on June 16, 2004 amounting to SDR 220.1 million (about US$333.6 million) with a request by the Zambian government to extend the original three-year arrangement to September 30, 2007 which was approved by the Board on May 25, 2007.
And commenting on Zambia’s performance, Kato said besides the prudent economic management he cited high copper prices and extensive debt relief as having helped strengthen Zambia’s external position and the build-up of international reserves.
“Going forward, the challenge for the authorities is to consolidate macroeconomic stability and implement structural reforms to raise productivity and diversify the economy. Continued prudent fiscal policy is needed to restrain the growth of government domestic debt, while monetary policy will need to remain firm in the months ahead to keep inflation on a downward path. Better coordination between fiscal and monetary policy will help improve liquidity management,” said Kato.
“It will be important to press ahead with tax reform to broaden the tax base while making the tax system simpler, more efficient, and equitable. Higher levels of tax revenue will be required over the medium term to accommodate spending on infrastructure, agriculture and the social sectors as envisaged in the Fifth National Development Plan.”
Kato also noted that the public expenditure management and accountability reforms being implemented by the Zambian government were essential for the successful implementation of the government’s poverty-reduction programmes and the effective use of public resources more generally.
He further observed that budget execution and reporting, which were key elements of the reform, would be greatly enhanced by the planned establishment of a treasury single account and implementation of the integrated financial management and information system.
Kato also advised that a strengthened debt management would help ensure that new borrowing did not undermine debt sustainability.
“To foster diversification of the economy and boost economic growth and employment, it will be important to implement vigorously the economic reform agenda set out in the Fifth National Development Plan, particularly the measures to stimulate the private sector development,” said Kato.
The PRGF is the IMF’s concessional facility for low-income countries with an annual interest rate of 0.5 per cent and are repayable over 10 years with a 51¼2-year grace period on principal payments.
The PRGF-supported programmes are based on country-owned poverty reduction strategies adopted in a process involving civil society and development partners and articulated in the Poverty Reduction Strategy Paper (PRSP).
Labels: IMF, PRGF
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