Parliament approves $597 million credit

Page 13, July 18, 2009
Story: Emmanuel Adu-Gyamerah

PARLIAMENT has approved a $597 million credit agreement between the Government of the Republic of Ghana and the International Monetary Fund to provide Balance of Payments (BoP) support for the period between July 2009 and July 2012.
The facility among others is being procured from the IMF to support the government’s efforts to address the economic imbalances, increase import cover and also stabilise the economy.
The facility known as the Poverty Reduction and Growth Facility has a 0.5 per cent interest rate and a 10-year term with a grace period of five years.
A report of the Finance Committee of Parliament noted that the global financial crisis had contributed to put pressure on the country’s balance of payments as private remittances had slowed down.
It added that foreign direct investment had assumed non-encouraging outlook whilst official access to global market financing had become extremely limited.
The committee chaired by Mr James Klutse Avedzi, observed in its report that reforms under the Poverty Reduction and Growth Facility (PRGF) would centre on measures to substantially raise revenue to make room for increased spending and develop needs.
The report said the assessment of the progress of the implementation of the facility would be done through the use of quantitative performance criteria with reviews of the product to be conducted twice each year.
According to the report, the Minister of Finance and Economic Planning informed the committee that although the facility covered a period of three years, the ministry was arranging with the IMF to frontload the facility so that more funds could be received this year relative to the two remaining years.
But the Minority raised some concerns with some conditions attached to the facility stressing that they would impose hardships on Ghanaians.
According to the report, as part of the measures to achieve additional fiscal savings, the government was to introduce legislation to establish a National Stabilisation Levy (NSL) comprising an additional five per cent profit tax, effective through end 2010 and applicable to companies in the banking, insurance and other financial services, communications, mining and brewing sectors. “Expected yield of this tax is GHC11 million for the remainder of 2009 and GHC22 million or more for the full year of 2010,” the report said.
The report added that under the energy sector reform, the committee observed that “government intends to retain the bi-weekly price adjustments for petroleum products which are designed to ensure cost recovery for the Tema Oil Refinery (TOR) and bulk importers and to adjust electricity pricing by end-2009 to bring the average tariff to cost recovery levels”.
The report noted that some members of the committee suggested that the populace be educated by the government on the fact that although credit facilities from the IMF and other multi-laterals helped the country to stabilise the economy, they also came with costs such as full cost recovery of the energy sector.
The House also approved a $12 million loan agreement between the SG-SSB Limited and the Government of Ghana, (acting through the parliamentary service) to be used to purchase vehicles for Members of Parliament.
According to the agreement, the interest rate applicable shall be the Bank’s base rate currently at 25.75 per cent per annum.
The facility, which is being procured for the MPs has the government of Ghana as the guarantor,