IFC Loan: MEMORANDUM TO PARLIAMENT

MEMORANDUM TO PARLIAMENT
BY:
THE HON. MINISTER OF FINANCE
SUBJECT:

INTERNATIONAL FINANCE CONSORTIUM (IFC) LOAN

Members of Parliament are respectfully invited to consider and approve a loan of $350m which forms part of a series of three loans totalling $1,000,000,000 (One billion United States Dollars) being offered by the International Finance Consortium (IFC) on highly concessional terms to the Government of Ghana (GOG), under the infrastructure lending programme.

BACKGROUND
Members will recall that, in his State of the Nation Address on January 31, 2002, H.E. the President indicated to Ghanaians specific areas of priority actions that will be pursued within the medium term framework. Ranking first on his development priorities was a programme for vigorous infrastructural development. His Excellency further stated that we cannot talk of growing the economy unless and until we develop our infrastructure. A programme was, thus, to be initiated for improvement and development of roads, mass transportation, ports, air travel, telecommunication and energy.

The President is also convinced that the provision of basic amenities in the rural areas will have the added value of staunching and controlling the rural urban population drift.

In pursuance of this commitment, and upon the request of GOG, the IFC has agreed to offer a series of three loans totaling $1,000,000,000 to be disbursed in three tranches of $350, $350, $300 million respectively over a period of three years for infrastructural and development projects.

TERMS OF LOANS
The loans are to be covered by three separate loan agreements secured by unconditional Sovereign guarantees and approved by Parliament.

The proposed loans have a concessionality element of 41.65% as against the normal benchmark of 35 % agreed between Ghana and the IMF. Members will agree that IDA loans to Ghana usually have a concessionality element of 70 percent with many conditions attached. Specific details of the loans are:

 Loan Amount			-	$350 Million
 Interest rate			-	2.5% (to be paid half—yearly)
 Fees (including facilitation,	-	3.5%
 legal & feasibility studies, etc)
 Amortisation period		-	25years
 Grace Period			-	3years
 

Each project will be managed jointly by GOG and IFC representatives. A Trust made up of 7 people 4 from the GOG and 3 from the I.F.C will manage the resources. The Chairman of the Trust will be appointed by the GOG amongst the 4 people. GOG may also avail itself of other optional management services on unutilized disbursements included in the loan agreement to its advantage. ‘

RECOMMENDATION
The IFC offer represents an exceptional opportunity in our efforts to mobilize resources for national development. Given the reputation of the Consortium, and the highly concessionary terms of the loans, I hereby invite members of Parliament to kindly consider and approve of the first tranch of $350 million to enable government carry out some important developmental projects. Please find attached a copy of the Terms of the loan and the guarantee agreed between IFC, Bank of Ghana and Ministry of Finance.