No More Electricity Subsidy

GHANAIANS WILL no longer enjoy electricity, water and fuel subsidies, as the International Monetary Fund (IMF) has made it clear that the $1.1 billion credit facility given to Ghana to support its economy comes with conditionalities though it is zero percent interest rate.

Already, the National Petroleum Authority (NPA) has revealed that government is no longer going to subsidize fuel for the Ghanaian consumer.

Speaking to some financial journalists in Accra and South Africa from Washington DC through video conferencing last Thursday, Dominique Strauss-Khan, head of the IMF, said conditions must be attached to credit facilities to ensure the funds are judiciously used so repayments will be done on time.

According to him, the focus of the fund is to help bring Ghana�s budget deficit which recorded 14.9 percent in 2008 to about nine percent this year and ensure macroeconomic sustainability, he explained.

�Electricity tariffs are not adequate enough to generate resources to boost infrastructure in the sector. Government cannot continue to provide subsidies for fuel and we agreed that public sector wages must not go beyond a certain level,� Mr. Strauss-Khan said.

�If we allow governments to do whatever they want to do it would be difficult for them to redeem their debts,� he further noted, stating, �Our job is to provide economic stability and financial growth.�

Antoinette Sayeh, African Director of the IMF also emphasized that currently the electricity sector is dependent on government and thereby must be stopped for the people to bear the cost.

BUSINESS GUIDE gathered that the conditions will also trigger a freeze on public sector employment for two years and a full cost recovery at all tertiary level of education, starting this year.

Sixty (60) countries considered low-income earners are expected to benefit from the financial support from the IMF with more than half from Africa.

The lender plans to sell 403 tonnes of its gold reserves in an effort to soften the effect of the global recession. That will be done in collaboration with the Central Banks of Europe especially.

�We will do it judiciously so as not to unsettle developing countries that depend on gold exports,� the head of the IMF stated.

According to him, central banks have been told to reduce their gold reserves over the next five years.

�We will accede to that. There won�t be more gold than planned on the global market,� he said.

The yield from the gold sales will be used to ensure that the loans are granted on very favorable terms, for which up to $1.5 billion will be required From now till 2014, the IMF will make $17 billion available to low-income countries.

By means of �concessionary loans� the IMF will help developing countries survive the recession. Mr. Strauss-Kahn pointed out that poorer countries are worst affected by lack of liquidity.

Meanwhile, the IMF has predicted a growth rate of 1.2 percent in 2009 for Sub-Saharan Africa and then about 4 percent next year.

Source: Business Guide