Ghana's commitment to disburse only US$250 each year from previous loans to affect stalled projects.
Many of the stalled projects in the country cannot be restarted this year. This is because Government has committed to limit the amount of money that can be disbursed from previously contracted loans to only US$250.
These are loans that were contracted before Ghana sort help from the International Monetary Fund (IMF) in 2022. The directive will be in place until 2025.
Ghana contracted substantial loans before the IMF bailout, with undisbursed bilateral loans alone estimated at US$3.8 billion. But with the new commitment, only about 6.5% of the funds can be disbursed in 2024. This measure aims to align disbursements with IMF programme targets while addressing the challenge posed by the volume of undisbursed funds from previous loans.
Government agreed to the limit on the loan disbursement, following an assessment from an IMF staff report, which emerged after the second review of Ghana's 36-month Extended Credit Facility Arrangement. The report highlighted that undisbursed amounts under external bilateral and commercial facilities signed before the debt restructuring were larger than initially anticipated. This according to the report, presents a considerable obstacle to achieving debt reduction targets set under the IMF programme.
"The authorities will carefully monitor disbursements associated with bilateral and commercial projects signed before December 2022," the IMF report stated. This oversight is crucial to ensuring that project disbursements align with programme parameters. The commitment therefore places significant limits on the number of stalled projects that can be restarted, since the government cannot exceed the US$250 million ceiling.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
President Akufo-Addo and Finance Minister Dr. Mohammed Amin Adam had said publicly that work on stalled projects will resume. This was after Ghana secured an agreement with the external bondholders. But this promise does not look feasible, as it will conflict with the new commitment to limit the loan disbursement to only US$250 million each year.
Instead, the Government, in collaboration with the Official Creditors Committee (OCC), will closely monitor disbursements, assessing project maturity, socio-economic impact, expected disbursement timelines, and debt service obligations, to ensure that they align with the IMF target.
Dr. Mohammed Amin Adam conceded to the importance of maintaining debt sustainability and achieving macroeconomic objectives through this new target. A monthly intra-government monitoring mechanism will be established to ensure adherence to the US$250 million annual limit.
Ghana has however requested an adjustment to allow an additional US$172 million in borrowing for security-related expenditures. A comprehensive assessment of potential future disbursements from bilateral and commercial partners is planned for completion by August 2024. This assessment will inform prioritisation strategies aimed at aligning future disbursements with IMF parameters and debt sustainability goals.
