Interest Rates Down Again

The government has further reduced the interest rate from 42.6% to 41.3% which is close to the June figures. It is cutting down domestic borrowing after it received assurances from the World Bank that it will receive more donor inflows for the second half of the year.

Last month, the IMF approved $30 million to support the Ghana Poverty Reduction and Growth Facility (PRGF). Government business for the second half almost came to a standstill and it became worried when the programmed donor inflows from international donors were not delivered. The World Bank, EU, ADB, U.K., Japan and The Netherlands promised Ghana about $320 million.

With the approval of PRGF last month, the government is now hopeful that this would open the door for the remaining funds to be released.

The Finance Minister, Mr. Kwame Peprah, revealed at a press conference that Ghana is expecting about $600 million in foreign exchange. The amount represents the total commitment of international donors, plus $270 million receipt from cocoa.

The government is under intense pressure from its critics, particularly the opposition parties for failing to direct the economy on the path of growth.

The foreign exchange crunch and inflation led many to believe that the economy is getting out of control. Many businesses that depend on imported raw materials lost their fortunes because of the deteriorating value of the cedi.

The government blamed the donor community for deliberately delaying the inflows to discredit the system because of the election year.