IMF to make available to Ghana an additional $1 billion Rapid Credit Facility

The International Monetary Fund (IMF), will be be making available to Ghana, an additional $1 billion Rapid Credit Facility (RCF) funds to continue its fight against the Covid-19 pandemic when a formal request made by its Managing Director, Kristalina Georgieva, is granted by the institution’s Board of Governors.

Ms Kristalina Georgieva, last week appealed to the Executive Directors of the IMF, to allow for the additional allocation of Special Drawing Rights (SDR) equivalent to $650 billion to further support member countries’ fight against the Covid pandemic.

According to her, the new SDR allocation will provide additional liquidity to the global economic system by supplementing the reserve assets of the Fund’s 190 member countries.

Additionally, it will help support global recovery from the COVID-19 crisis.

“If approved, a new allocation of SDRs would add a substantial, direct liquidity boost to countries, without adding to debt burdens. It would also free up badly needed resources for member countries to help fight the pandemic, including supporting vaccination programs and other urgent measures. And it would complement the range of tools deployed by the IMF to support our membership in this time of crisis,” stated Ms Georgieva.

“It would also be a powerful signal of the IMF membership’s determination to do everything possible to overcome the worst recession since the Great Depression,” she emphasised.

Under the IMF’s Articles of Agreement, the Managing Director may make a proposal of an SDR allocation if the Managing Director is satisfied that the allocation would help meet a long-term global need to supplement existing reserve assets in a manner that will avoid stagnation and deflation as well as excess demand and inflation, and there is broad support among IMF members for the allocation.

Once the Managing Director’s proposal is concurred in by the Executive Board, it would be submitted to the Board of Governors whose decision approving an SDR allocation would require support by members representing 85 percent majority of the total voting power. 

If approved, the additional SDR allocation will imply more fiscal resources at the disposal of Ghana to fight the Covid-19 pandemic. Ghana last year alone, increased its SDR holdings with the IMF by 318 percent.

At end-November 2020, Ghana’s SDR holdings stood at Ghs 242.39 million ($42.2 million) from a previous amount of Ghs 76.18 million ($13.3 million) at end-November 2019.

It is not clear if government will be accessing the additional $1 billion RCF when finally approved by the IMF’s Board of Governors given the fact that Ghana during the height of the pandemic last year, accessed a similar credit facility offered by the IMF.

Ghana also successfully issued a $3 billion Eurobond on the international capital market just last week.

However, if government decides to access the additional credit facility, this will mean that it will be adding onto the country’s already unsustainable debt level for which it has been heavily criticized.