Chairman of Parliament’s Finance Committee, Dr Mark Assibey-Yeboah, has disclosed part of a US$ 1 billion loan government has secured from the Internal Monetary Fund (IMF) will be used to pay for the Covid-19 electricity subsidy for Ghanaians announced by President Nana Akufo-Addo.
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Parliament on Friday night approved the US$1 billion (5.5 billion Ghana cedis) IMF Rapid Credit Facility to mitigate the impact of the Covid – 19 pandemic.
Dr Assibey-Yeboah, who delivered to the house a report of the Finance Committee of Parliament recommending approval of the loan, said 1 billion Ghana Cedis of the amount will be used to pay for the electricity subsidy.
President Akufo-Addo on 9th April 2020 announced the free electricity and subsidy for some electricity consumers. Energy Minister Peter Amewu told a media briefing on Friday the support will cost 1 billion Ghana cedis.
“Out of the total facility, approximately 1 billion Ghana Cedis will be used to finance electricity subsidy announced by the president whilst the remained is employed towards expenditure outlined in the 2020 budget,” Dr Assibey-Yeboah said.
In a memo to parliament, the Minister for Finance, Ken Ofori-Atta said the loan is part of an amount of US$50 billion the IMF is offering to help address Coronavirus impact on low income countries.
Ghana had originally sought to apply for an amount of US$500 to US$600 million, but successfully engaged the fund to increase the request to US$1 billion.
The IMF executive board approved the amount on 13th April and “the disbursement of the RCF proceeds to Ghana is expected to take place in a single tranche on Friday, 17th April, 2020,” the report of the Finance Committee said.
The Rapid Credit Facility provides low access, rapid and concessional financial assistance to Low Income Countries facing urgent balance payments need. In the case of Ghana, given the enormous fiscal challenge posed by the Covid-19 pandemic, the RCF has been negotiated to be used for budget support. The assistance will help preserve critical expenditures, including social protection programmes outlined in the 2020 budget.
The proceeds from the facility will also be used to help close the financing gap that has been created by the Covid-19 pandemic through shortfalls in revenue and additional expenditures in the fight against the pandemic.
The loan carries a zero interest rate, has a grace period of five and half years, and a final maturity of 10 years.
The Finance Committee’s report said Ghana becomes the first country to receive a 100% quota under the Covid-19 RCF from the IMF.
The report also said the loan is a facility and does not mean Ghana is entering another IMF programme.