The European Commission is to resume budget support disbursements to Ghana.
The EU Ambassador to Ghana, Mr William Hanna, who announced this at a meeting with government officials in Accra on Friday, said the EU would release in total €161.38 million of budget support to the Government of Ghana in the coming weeks.
Support aimed at four areas
According to a statement issued in Accra by the EU Commission, the support would focus on four major areas.
- It said €105.63 million would be released to support the implementation of the Ghana Shared Growth and Development Agenda II, Ghana’s national development plan for 2014-2017.
- An amount of €31.25 million will also go to support the Ministry of Health in the implementation of the Millennium Development Goals (MDG) – Acceleration Framework and country action plan to reduce maternal mortality in Ghana and achieve MDG 5.
- The third area of support the release noted would be decentralisation reforms process where an amount of €7.5 million would be advanced to improve service delivery at the local level.
- It said €7 million would go to support the preparation and implementation of policy reforms in the environment and natural resources sector, promoting, among others, effective forest law enforcement and the development and implementation of the national climate change strategy.
“The EU welcomes the recent conclusion and implementation of a three-year extended credit facility programme with the IMF.”
The statement also noted that the EU welcomed the adoption and publication in March of the Government’s Payroll Action Plan to address payroll irregularities.
“In this regard the EU is also satisfied to note that the IMF programme includes a strong public financial management component and integrates important benchmarks of this action plan.”
Mr Hanna was further quoted to have emphasised EC’s readiness to support Ghana in pursuing its development agenda and particularly in the implementation of the challenging structural reforms ahead.
“The sound implementation of the IMF programme will be essential to restore macro-economic stability with a view to creating an enabling framework for the development, investment and job creation,” the release said.
It noted that a comprehensive public financial management reform, including all necessary actions to combat any irregularities and mismanagement of public payroll, would also be fundamental.
Meanwhile, he noted that the EU would continue to closely monitor progress in these two areas.
Relief for Ghana
The announcement by the EU is expected to be a major relief for the country which has been in dire financial distress as it has not been able to raise enough domestic revenue in recent years to match its growing expenditure and heavy appetite for loans.
It comes at a time when a report from the Monetary Policy Committee (MPC) of the Bank of Ghana indicates that preliminary fiscal data for the first quarter points to the fact that the fiscal consolidation efforts of the government are on track.
Although it did not readily provide figures, the report said revenue and grants were above target, on the back of strong growth in domestic revenue.
Expenditures were also below target, as the major items, including the wage bill, one of the major considerations of the EU in releasing the funds, were contained within target.
These were said to have resulted in a cash fiscal deficit equivalent to 0.6 per cent of GDP, against a target of 1.9 per cent.
This also means that monies meant for the four areas mentioned will be saved and channelled into other projects to benefit the people.
The release is also likely to positively shore up the cedi which is fast depreciating against the major international currencies.
Concerns hover still
The country’s large total deficit continues to be a bother for many donors because of fears that the levels are too high and may soon be unsustainable.
The total public sector debt stock, as per the MPC report of May this year, stood at GH ¢88.2 billion at the end of the March 2015, representing 65.3 per cent of GDP.
Of the total public debt, domestic debt constituted 41.4 per cent and external debt 58.6 per cent.
However, it is expected that as the EU leads the way among the other development partners to release frozen funds to the country, others will follow and that might force the government to reduce its strong appetite for borrowing at exorbitant interest rates.
Credit: Graphiconline (charles benoni okine)