According to a Bloomberg report, the IMF is pressuring Ghana’s government to stop borrowing from its central bank.
The persons who requested anonymity because they were not permitted to speak publicly on the subject claimed that the IMF wants the two organizations to sign a pledge to zero financing. According to one of the persons, Ghana must reach an agreement in order to receive final clearance for a $3 billion IMF bailout.
According to the report, the choice would stop central bank loans to the government totaling roughly 40 billion cedis ($3.2 billion). As investor apprehension regarding the status of the country’s public finances decreased demand for its domestic bonds, central bank lending to Ghana’s government exploded last year. The budget was funded by the central bank, which also extended loans that were nearing maturity.
A deal would also prevent state-owned companies from obtaining more central bank financing, such as the Ghana Cocoa Board, which owes roughly 7 billion cedis, according to the source. The funding is used by the cocoa regulator, the single purchaser of cocoa from growers in the second-largest producer of the chocolate ingredient in the world.
The central bank announced last week that an auction of cocoa bills worth 940 million cedis was “severely” undersubscribed after it decided not to purchase the board-issued securities.
Steve Opata, the head of financial markets at the central bank, told Accra-based Joy FM earlier this week that the central bank used to intervene when there were under-subscriptions. Without providing any information, he stated that “the bank decided to conduct things differently, thus this gap was not paid by the central bank.”
An estimated 467 billion cedis worth of loans to Ghana are being repaid. Since borrowing costs increased last year due to investor worry over Ghana’s governmental finances, it has been shut out of the global capital markets.
The nation received a staff-level agreement from the IMF for a $3 billion bailout last year, but the IMF board must still approve the deal before it can be finalized. These so-called “prior actions” haven’t been made public. In an effort to demonstrate that it can make its loans more sustainable—another prerequisite to access IMF funding—it is also developing a restructuring plan for its domestic and external debt.
