Govt allocates $1bn fund for COVID support, housing and employment
The Government has disclosed that it would allocate its $1 billion in Special Drawing Rights (SDRs) from the International Monetary Fund (IMF) primarily to the health sector to support its COVID-19 fight.
Additionally, some funds would go to the housing sector to aid the reduction of the over two million housing unit deficit, as well as the creation of jobs to lessen the country’s unemployment canker.
Part of the SDRs fund, which comes without any conditionality, as in the case of loans, because the IMF describes it as an asset to the country, would be used to power the digitalisation agenda.
The approved fund for Ghana would be made available on August 23, through the IMF’s automatic disbursement mechanism to member countries.
The amount forms part of the sum of $650 billion SDRs general allocation, of which $275 billion is to be given to Ghana and other Emerging Markets and Developing Countries (EMDCs).
Commenting on the use of the funds, the Finance Minister, Ken Ofori-Atta said, “we would work on parameters such as immediate COVID-19 related needs, and look at our medium-term programme to see areas that are important where the nexus between finance and health meet.”
Adding that, “it could be housing, employment (which is key to us), and digitalisation, and make sure that it is used well and leverage to support the COVID-19 Alleviation and Revitalisation of Enterprises Support (Ghana CARES) ‘Obaatanpa’ programme.”
Mr Ofori-Atta was speaking on the sidelines of an economic forum on the mid-year budget review held in Accra on Tuesday, August 10.
The IMF has noted that the allocation of the SDRs is to ensure that its members, including Ghana, have a strong external position to voluntarily channel part of the fund to scale up lending for low-income countries through its Poverty Reduction and Growth Trust (PRGT).
The fund, which Ghana would have the right to decide which areas to spend on, is to shore up the country’s international reserves.
READ ALSO: COVID Fight: IMF Approves $275 Billion For Ghana, Other Countries
The Board of Governors of IMF on August 2 approved $275 billion out of a $650 billion support for Emerging Markets and Developing Countries (EMDCs) including Ghana to fight COVID-19.
The funds, which was part of $650 billion SDRs, an international reserve asset created by the IMF to supplement the official reserves of its member countries was to boost global liquidity and reduce the impact of COVID-19 on global economies.
In addition to this is a new Resilience and Sustainability Trust, which could be considered to facilitate more resilient and sustainable growth in the medium term.
The $650 billion fund is the largest SDRs that IMF allocated in the history of the international financial institution.
Before this, the IMF said, “so far SDRs 204.2 billion (equivalent to about US$293 billion) have been allocated to members, including SDRs 182.6 billion allocated in 2009 in the wake of the global financial crisis.”
Proposal for a general allocation of $650 billion special drawing rights
On June 25, the Executive Board discussed a proposal for a historic US$650 billion general allocation of SDRs to address the long-term global need to supplement existing reserve assets.
Following concurrence by the Executive Board on July 8, the Managing Director submitted the proposal to the Board of Governors on July 9 for its approval by August 2.
The proposal makes a case for an allocation of US$650 billion (about SDR 456 billion), based on an assessment of IMF member countries’ long-term global reserve needs. It also includes measures to enhance the transparency and accountability in the reporting and use of SDRs while preserving the reserve asset characteristic of the SDR.
The general allocation would help many EMDCs with liquidity constrained smooth needed adjustment and avoid distortionary policies while providing scope for spending on crisis response and vaccines.