<<Print>>

Ghana began talks with the International Monetary Fund (IMF) yesterday to reaffirm its commitment to a three-year aid programme after parliament passed a law breaching a key requirement of the $918 million deal, sources told Reuters.

Finance Minister Seth Terkper is leading a delegation in Washington for the first in a series of meetings aimed at restoring investor confidence after an unsuccessful attempt to issue a $500 million Eurobond last week, the sources said.

Ghana's parliament last week passed a bill allowing the central bank to finance the government's budget deficit up to a ceiling of 5 per cent of the previous year's total revenue.

The initial bill had specifically ruled out central bank financing, but parliament rejected the IMF restriction saying it could put a further strain on the government's finances.

The new law, therefore, breaches the IMF financing restriction, which is a key tenet for the conclusion of the third programme review which began in May.

Terkper will tell the IMF that despite the change to the bill, the government has no plans to finance its deficit with central bank funds, the sources said.

"We must remain on track in order to win investor confidence, and we must make our case that Ghana will keep to spending limits this election year," a government official told Reuters on Monday.

An IMF spokesperson said last week that the fund intended to discuss with the government the possible implications of the law's passage.

The government expects the IMF Executive Board to meet at the end of August to conclude the third staff review, which began in May, and authorise the next disbursement.

The major commodities exporter last week pulled a five-year amortising Eurobond sale because investors were demanding higher than the single-digit yield the government had expected.

Analysts blamed the high yield demand for the bond in part on parliament's decision to pass the financing bill. The West African country is also grappling with a high public debt levels amid slumping commodity prices.