The 750 million united states dollars financial facility secured by the Government of Ghana from the African Export-Import Bank (Afreximbank), is expected to hit the Ministry of Finance’s account at the Bank of Ghana this week.
Parliament on 20th July 2022, approved the US$750 million loan agreement between Government and Afreximbank.
The loan is expected to finance capital and growth-related expenditures in the 2022 Budget. It will also give a big boost to the local currency, by helping to stabilize the cedi, which has been under serious depreciation pressure this month, especially.
Asaase News sources familiar with the agreement, confirm that the board of Afreximbank has approved the loan and that the “facility agreement has reached the final stage.”
A senior Government official indicated that the “Afrieximbank has received board approval, a critical condition precedent (CP),” before the disbursement.
“The fees letter has been agreed and final draft issued. The signing of the facility will take place once the final draft is submitted by Afrieximbank and agreed by the Ministry of Finance (MOF)” the source said.
With growing concerns over the fate of the cedi, Asaase news followed the progress of the U$750m injection of foreign exchange into the economy.
The signing of the credit facility is scheduled to take place by Wednesday 17th August, “if the Finance Ministry does not raise any objections,” an Asaase News source in Cairo added.
According to another source at the Finance Ministry, “Escrow account forms have been completed and they would be signed off on Monday 15 August 2022.”
From all indications, disbursement, which is tied to completion of the conditions precedent, should be activated this week with drawdown taking place “as early as 18 August,” the source further indicated.
Government has cut down budgeted expenditure down by 30% and has put a hold on starting any new projects. What has not helped is the low levels of receipts from revenues and the high rise in inflation.
The economic difficulties have been biting, affecting businesses and families.
Government has, however, been praised in some quarters for being able to keep our lights on and avoided essential commodity shortages such as petroleum products.
Loan syndication approach
Given the hikes in global interest rates and our macro situation, the decision was made by Government not to issue any Eurobond in 2022 until market conditions improve.
Government, therefore, provisioned in the 2022 Budget to use the loan syndication approach to raise the necessary financial resources.
This approach serves two purposes: (1) to enable the country to finance some priority projects in the 2022 Budget; and (2) to provide the needed foreign exchange to the Bank of Ghana to shore up the reserve position of the bank and for foreign exchange management.
Use of proceeds
The proceeds from the loan would largely be used to finance projects in the roads, energy, railways, and health sectors. These projects are those outlined in the 2022 Budget Statement and Economic Policy of Government.