Ghana to agree to IMF terms for $1b loan

Ghana may agree terms with the International Monetary Fund on a $1 billion loan within the next two days, Finance Minister Kwabena Duffuor said.

An agreement is likely to be reached “today or tomorrow,” he said in an interview to in the capital, Accra. The Washington, D.C.-based lender will then review the agreement before setting a date for a final decision, he said. As part of the agreement, the IMF wants Ghana to take better control of the government-employee wage bill and reduce oil subsidies, Duffuor said.

Ghana said on May 7 it was in talks with the IMF about borrowing “not less than” $1 billion over the next three years. The world’s second-largest cocoa producer needs the funds to deal with a budget deficit that reached 14.9 percent of the nation’s annual output in 2008, and a domestic currency, the cedi, which has dropped 37 percent against the dollar in the past 12 months.

The West African nation’s budget deficit stood at 2.8 percent during the first five months of the year, Duffuor said last week. Most ministries have had their budgets cut to between 50 percent and 60 percent of the funds they requested because the “fiscal imbalance was so big so we had no other option.”

Stable Currency

The budgetary measures have also helped stabilize the cedi, said Duffuor, a former governor of the Bank of Ghana. The cedi weakened 1.4 percent against the dollar during the last four weeks, having weakened by 17 percent since the start of the year. The Ghanaian currency was 0.2 percent stronger at $1.4913 as of 5 p.m. in Johannesburg.

While Ghana is unlikely to match last year’s growth rate of 7.3 percent, the country is likely to achieve growth rate of 5.9 percent this year, Duffuor said. The World Bank said last week that its board will probably approve a $300 million loan to Ghana on June 30, part of an interest-free, three-year, $1.2 billion package.

Ghana neighbors the Ivory Coast, the world’s largest cocoa grower, and is Africa’s second-biggest gold producer, after South Africa.