Ghana: IMF SDR Support to Cushion Economy - Governor.

28 September 2021

About $300 million of the $1 billion the International Monetary Fund (IMF) recently received by Ghana as Balance of Payment (BoP) support will be used to support the execution of the budget, Governor of the Bank of Ghana, Dr Ernest Addison, has said.

Ghana received an equivalent of $1 billion from the IMF in August this year, being its share of the new Special Drawing Rights (SDRs) allocation to boost post-COVID-19 economic recovery of member states.

The package is part of the fund's 650-billion-dollar package to support IMF member countries in view of the coronavirus pandemic.

Of the $650 billion, $33.7 billion was allocated to African countries to boost liquidity and economic recovery following the devastating impact of the COVID-19 pandemic on lives and livelihoods.

The SDR is an interest-bearing international reserve asset created by the IMF in 1969 to supplement member countries' official reserves. The general allocations of SDRs are distributed across the IMF membership in proportion to their IMF quota.

The Governor of the BoG, Dr Addison who disclosed this during the Monetary Policy Committee (MPC) news conference in Accra yesterday to announce a new policy rate said, even though the money was for BoP support, the government had discussed with the IMF to use part of the money as budgetary support.

He said a third of the $1 billion IMF SDR support would be allocated to support the budget.

"IMF has agreed we can use part of the SDRs to support the budget and invest in areas where there are pressures," Dr Addison, said.

The Governor said the SDR is not BoG support to the budget because of the source of the funding.

'This is not BoG funding because of the source of the fund," Dr Addison, said.

Responding to the high lending rate in the country, the Governor said the BoG had done a lot to bring lending rate down.

"We have worked since 2016 to reduce lending rate by 600-700 basis points," he said, he said, adding that average lending rate which stood between 26-27 per cent about four years ago was now 21 per cent.

Dr Addison said the high lending rate was due to many factors including the macro economy, structure of the banking sector and fiscal consolidation.

For instance, he said, fiscal consolidation would help address the high lending rate, explaining if government had enough revenue without borrowing, there would be more money available tothe banks to lend to the private sector.

Per the recent BoG report, the banks in the country are holding about GHc80 billion of government bonds, which is crowding out the private sector.

The Governor indicated that the BoG would continue to push and initiate strategies to help bring interest rate down, including moral suasion.

On the move Afrieximbank to issue its payment system in line with the African Continental Free Trade Initiative, Dr Addison said the BoG supported the call by the Vice President Dr Mahamudu Bawumia for the various Central Banks across the region to issue their payment systems.

Quizzed about the latest on the person recently arrested for holding more than 600 ATM cards, the Governor said it was early for the BoG to comment on that since the report on the matter was not ready.

He said the BoG was establishing the Financial Industry Operation Security Center, which would be ready in a year's time.

Dr Addison said all the 23 universal banks would be on the platform and that would help in the monitoring to promote the cybersecurity of the universal banks.

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