BoG urges IMF to maintain zero-interest PRGT support

THE Governor of the Bank of Ghana (BoG), Dr Ernest Addison, has said the timing for the resumption of charging interest rates on the Poverty Reduction and Growth Trust (PRGT) is inappropriate as most PRGT-eligible countries are still facing significant challenges. 

He said the IMF’s charges and the surcharges policy should avoid adding financial burdens on countries facing fiscal challenges. 

The PRGT is the IMF’s main vehicle for providing concessional financing (currently at zero interest rates) to low-income countries (LICs).

The IMF has, however, indicated that effective May 1, 2025, a new interest rate mechanism will apply to new PRGT lending. Outstanding credit under financing approved before that date, as well as new disbursements under existing arrangements, including potential augmentation of access, will remain subject to the current zero interest rate. 

The new mechanism will however set interest rates at zero for the poorest PRGT-eligible members (around half of all LICs), and a modest, but still concessional, interest rates for the others.

At the 2024 Africa Caucus Meeting with the Managing Director of the International Monetary, Dr Addison said the IMF’s support should remain flexible, adapting to global conditions and country-specific needs, while ensuring sufficient resources. 

“In this context, maintaining the high concessionality of the Poverty Reduction and Growth Trust is critical while ensuring adequate financing through all possible options, such as gold sales.” 

“In this regard, it is crucial to highlight that the timing for the resumption of charging interest rates on PRGT funds (tiered interest rate structure) is inappropriate as most PRGT-eligible countries are still facing significant challenges,” he stated.

CCTR resources 

He said with the expiry of the Food Shock Window and rising food insecurity, especially in Africa, timely emergency financing through the Catastrophe Containment and Relief Trust (CCRT) was essential. 

Dr Addison said intensified fund-raising efforts under the second phase of resource mobilisation was paramount.

He also called for a collaborative approach to address Africa’s fiscal challenges. 

“We urge the IMF and World Bank to coordinate their support to develop resilient fiscal policies, considering Africa’s diverse needs.” 

“Programmes should account for regional specificities to ensure sustainable and impactful reforms that do not disproportionately affect vulnerable populations,” he stated.

He further urged the IMF to leverage its catalytic role and convening power to deepen dialogue with regional Multilateral Development Banks for additional concessional finance and grants, aiding debt restructuring for members at high risk of debt distress.

Technical support 

The BoG Governor also called for tailored and enhanced technical support from the Fund and other international partners to strengthen institutional capacity in Africa. 

He said this was a key prerequisite to address the underlying causes of fiscal challenges and other bottlenecks to achieve durable and inclusive economic growth in member countries. 

To this end, he said a stronger partnership between the IMF and the Africa Peer Review Mechanism would help boost institutional capacities for country-specific fiscal governance and economic reforms across Africa, and enhance the framework for identifying, managing, assessing and integrating fiscal risks and debt sustainability.

Dr Addison also urged the IMF to continue to lead in debt restructuring and relief efforts for heavily indebted countries. 

“In this respect, the Global Sovereign Debt Round-table (GSDR) should ensure swift, fair and effective debt resolution under or outside the G20 Common Framework, focusing on providing timely debt relief for the most vulnerable countries.” 

“At the same time, we call for greater private sector involvement in the Common Framework to ensure Comparability of Treatment and faster progress on debt resolution initiatives,” he said.

He said the IMF, through the GSDR, should also explore innovative financing solutions such as blended finance, and debt-for-climate swaps to address both the continent’s debt vulnerabilities and climate change risks.