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Banks To Lend Govt US$1bn To Shore Up Reserves

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SOME INTERNATIONAL banks have pledged to lend US$1 billion to the government to shore up Ghana’s budget and boost the central bank’s reserves.

This is aimed at helping Ghana to cut her fiscal deficit and stabilise the local currency.

The loan arrangement, led by the Standard Bank Group Limited, Standard Chartered Plc and Rand Merchant Bank Limited, may be presented to Parliament this week.

According to a report by Bloomberg, the transaction is the first part of US$2 billion in syndicated loans that Ghana is targeting to raise this year to stabilise its finances and the financial market.

“Ghana lost access to Eurobond markets this year due to higher debt and budget deficit levels, caused by the impact of the coronavirus pandemic,” the report indicated and continued that the nation raised US$750 million through syndicated loans with the participation of about eight African and European banks.

It said US$250 million of the amount was from multilateral lenders, intimating that the country “aims to cut its budget shortfall to 7.4% of gross domestic product this year from an estimated 12.1% of GDP.”

The report said it would dedicate US$750 million of the syndicated loans to the budget for expenses and liability management, while the rest will go to the Bank of Ghana to beef up its resources for swap deals.

“Ghana’s debt ratio rose to 78% of GDP at the end of March, from 66.3% of GDP a year before. The cedi lost 22% against the dollar this year compared with 1% appreciation for the same period a year ago.”

The report quoted an unnamed official of the Finance Ministry as saying that the country would consider the second tranche of $1 billion in the latter part of the year, after the mid-year review of the budget, taking into account the impact of the electronic transactions levy, oil and food prices, as well as geopolitics.

“Finance Ministry spokeswoman Cecilia Akwetey was unable to immediately comment when contacted by phone and text message. A spokesman for the Bank of Ghana, who asked not to be identified, said he couldn’t immediately comment when contacted by phone,” Bloomberg said.

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