World Bank Extends $550 Million Support To Ghana

The World Bank Group’s Board of Executive Directors has approved US$150 million budget support for Ghana.

The credit from the International Development Association (IDA) supports the First Macroeconomic Stability for Competitiveness and Growth Development Policy Financing (DPF), the first of three development policy financing operations aimed at helping the Government of Ghana stabilise its economy and shore up fiscal control by implementing financial policies and processes that are transparent and predictable.

A statement by the World Bank said the Board at its meeting last Wednesday also approved IDA’s very first landmark Policy-Based Guarantee (PBG) of up to US$400 million for Ghana, which might be used to support Ghana’s future external debt financing.

IMF endorses Ghana’s 2015 budget
“The proposed credit is the first in a programmatic series that will make policy more predictable and enhance the productivity of public spending,” says Santiago Herrera, World Bank Task Team Leader for this Project.

“As Ghana transitions from concessional financing towards market-based financing, the cost of public funds will increase, and so will the productivity of public capital to ensure that future obligations can be met. It is our hope that PBG will minimise costs and risks,” it said.

Interest rates
The statement said in the context of rising interest rates and a depreciating currency, extending the maturity of public domestic debt became a daunting task.

As a result, it said, debt managers were forced to issue short-term debt to avoid committing future budgets at unsustainable high interest rates.

It said while the financial objective was achieved, it was done at the expense of rising rollover and liquidity risks.

“We are delighted to have made history today by pioneering this innovative policy-based guarantee facility, the first ever by the IDA, to a long-standing client who needs it most urgently,” noted Yusupha B. Crookes, World Bank Country Director for Ghana.

“We hope this will provide additional space to Ghana to sort out some of its short-term economic challenges and continue to provide for its poorest and most vulnerable citizens through its social safety nets programmes,” Crookes is quoted to have said.

The statement said to ensure that the most vulnerable in society were not inequitably affected by the government’s strong fiscal adjustment, the Bank Group had over the past several years supported the expansion of the Livelihood Empowerment Against Poverty (LEAP) programme, a social safety net that provides cash transfers to the poorest families in Ghana.

It said the current facility included a component by which about 350,000 poor households would be provided with cash transfers by 2017.
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  • Origin: Peacefmonline: GhAgent