Ghana heads to IMF for loan to address economic impact of COVID-19

The International Monetary Fund (IMF) says it has received a request from Ghana for a disbursement under the Rapid Credit Facility to help the country address the economic impact of the COVID-19 pandemic.

The IMF’s African Department Director, Abebe Aemro Selassie in a statement, said the international organisation was working hard to evaluate Ghana's request and present to the Executive Board consideration.

Ghana has recorded 53 confirmed cases of Coronavirus and two deaths from the disease.

President Nana Addo Dankwa Akufo-Addo had earlier directed the Minister of Finance, Ken Ofori-Atta, to make available the cedi equivalent of $100 million to enhance Ghana’s Coronavirus preparedness and response plan.

This amount, according to President Akufo-Addo, “is to fund the expansion of infrastructure, purchase of materials and equipment, and public education.”

Delivering an address to the nation on Wednesday, March 11, 2020, the President explained that, with the declaration by the World Health Organisation (WHO) of the Coronavirus disease as “a pandemic”, it is important that Ghana steps up her preparedness to ensure that, beyond the initial measures that have been put in place, a ‘whole of Ghana’ approach is adopted in preparation for a possible hit within the country’s borders.

Read the entire IMF statement below;

Ghana Requests Rapid Credit Facility Disbursement to Help Fight the Coronavirus March 24, 2020

IMF’s African Department director Abebe Aemro Selassie today made the following statement:

“Last week, the IMF received Ghana’s request for a disbursement under the Rapid Credit Facility to help the country address the economic impact of the COVID-19 pandemic. We are working hard to evaluate the authorities’ request and bring it forward for Executive Board consideration as soon as possible.”

About the IMF Rapid Credit Facility (RCF)

The Rapid Credit Facility (RCF) provides rapid concessional financial assistance with limited conditionality to low-income countries (LICs) facing an urgent balance of payments need. The RCF was created under the Poverty Reduction and Growth Trust (PRGT) as part of a broader reform to make the Fund’s financial support more flexible and better tailored to the diverse needs of LICs, including in times of crisis. The RCF places emphasis on the country’s poverty reduction and growth objectives.

Financial assistance tailored to country needs

Purpose: The RCF provides low-access, rapid, and concessional financial assistance to LICs facing an urgent balance of payments need, without ex post conditionality. It can provide support in a wide variety of circumstances, including shocks, natural disasters, and emergencies resulting from fragility. The RCF also provides policy support and may help catalyze foreign aid.

Eligibility: The RCF is available to PRGT-eligible members that face an urgent balance of payments need, where a full-fledged economic program is either not necessary (for instance because of the transitory and limited nature of the shock) or not feasible (for instance because of capacity constraints or domestic fragilities).

Duration and repeated use: Financial assistance under the RCF is provided as an outright loan disbursement. While RCF financing takes the form of a one-off disbursement., there is scope for repeat use. A repeat use of the RCF is possible within any three-year period if the balance of payments need is caused primarily by a sudden and exogenous shock or the country has established a track record of adequate macroeconomic policies. However, no more than two disbursements may be made in any twelve-month period. Repeat use of the RCF may facilitate eventual transition to an ECF arrangement.

Access: Access to RCF financing is determined on a case-by-case basis, taking into account the country’s balance of payments need, the strength of its macroeconomic policies, capacity to repay the Fund, the amount of outstanding Fund credit, and the member’s record of past use of Fund credit. In addition, it also takes into account the size and likely persistence of the shock. Under the RCF, access is limited to 50 percent of quota per year and 100 percent of quota on a cumulative basis, with an annual access norm and a per disbursement limit of 25 percent of quota under the “regular” (as opposed to exogenous shock) window and the possibility of up to two disbursements during a twelve-month period. The RCF also has a higher annual access limit of 80 percent of quota annually and 133.33 percent of quota cumulatively for cases where a member faces urgent balance of payments needs arising from a large natural disaster (that is, which causes damage of at least 20 percent of the member’s GDP).

Limited conditionality

Fund support under the RCF is provided without ex post program-based conditionality or reviews. Economic policies supported under the RCF should aim at addressing the underlying balance of payments difficulties and support the country's poverty reduction and growth objectives.

Concessional lending terms

Financing under the RCF carries a zero interest rate, has a grace period of 5½ years, and a final maturity of 10 years.