Parliament has approved an amount of $750m loan to finance Capital and Growth-Related Expenditures as stipulated in the 2022 Budget.
This is in accordance with Article 181 of the Constitution and Section 56 of the Public Financial Management.
The government intends to use the credit facility to finance critical flagship projects because the government has decided not to use the capital market to raise financing until market conditions improve.
Presenting the report on the loan, the chairman of the Finance Committee, Kwaku Kwarteng explained that the execution of the agreement would provide the needed resources to support the implementation of some critical government projects and provide the needed foreign exchange to shore up the reserve position of the Bank of Ghana and support foreign exchange management.
Mr Kwarteng indicated that the loan is in two tranches; tranche A is made up of EUR200m and $101m whereas tranche B is made up of $350m.
“As part of the terms and conditions of the loan, each tranche has a grace period of 3 years and a repayment period of 4 years except tranche B which is 7 years,” he added.
On the importance of the facility, the report stated that the approval of the facility is urgently needed to avoid the country going bankrupt and help the country to meet its obligations.
The report further said Ghana has over the recent past accessed financing from the International Capital Market and the domestic bond market to support the implementation of its budget.
However, the International Capital Market is not available to Ghana this year as a result of the downgrade of the country’s credit rating by international rating agencies.
The government’s intention to raise funds from the domestic bond markets did not also yield the desired result.
Consequently, the economy is presently challenged with rising inflation, rising interest rates, exchange rate depreciation and increasing energy cost.
These challenges are further exacerbated by the rapidly dwindling reserves of the Bank of Ghana which have declined from US$9bn to about US$3bn.
The Finance Committee recommends that the Minister as a matter of urgency should set up a sinking fund to retire maturing debts and create buffers to enable the country to withstand the shock of the projected increase in amortization to about US$25bn in 2025.
Adwoa Ocran, ISD
