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Apr 5, 2015

IMF approves $918m Ghana credit facility to pay debt and boost growth

Ghana's president John Mahama (L) with Finance minister Seth Terkpe. (Photo AFP). Ghana's president John Mahama (L) with Finance minister Seth Terkpe. (Photo AFP).

THE International Monetary Fund approved a three-year, $918 million extended credit facility for Ghana to help it repay debt and stabilize the nation’s economy.

The IMF Executive Board has allowed immediate disbursement of $114.8 million, the fund said in a statement Friday

“The programme aims to restore debt sustainability and macroeconomic stability to foster a return to high growth and job creation, while protecting social spending,” the Washington-based IMF said in the statement.

Ghana turned to the IMF last year as its currency plunged and economic growth slowed because of a drop in commodity prices, including oil and gold. The government missed its budget deficit target, borrowing costs surged to a five-year high and credit-rating companies cut the nation’s creditworthiness.

The money will be used to increase foreign reserves to support the currency and curb the budget gap before a $1 billion Eurobond sale scheduled for June. The government is in talks with Bank of America Corp. to borrow as much as $1 billion to refinance domestic and international debt before the Eurobond sale.

Minister of Finance Seth Terkper raised the fiscal gap target to 7.5% of gross domestic product for 2015 because of the more than 50% decline in the price of oil. The previous estimate was 6.5%.

Inflation soared to 17% last year, curbing consumer demand and limiting economic growth already hampered by chronic power outages.

The economy will probably expand 3.9% this year from 4.5% last year. That’s the slowest pace in 20 years.

Ghana is the world’s second-largest producer of cocoa and Africa’s second-largest gold miner. Ivory Coast is the largest maker of the chocolate ingredient. South Africa is the continent’s biggest producer of bullion.

The cedi plunged to a record 3.88 last year against the dollar. The currency fell 0.2% to 3.835 per dollar Friday in Accra, the capital. – BLOOMBERG