Announcement of IDA Credit to Ghana for Essential Imports to Speed Economic Recovery on June 30, 1983

FOR IMMEDIATE RELEASE •World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.• Telephone: (202) 477-1234 IDA NEWS RELEASE NO. 83/108 Contact: Pamela Brennan June 30, 1983 ( 202) 477-3294 IDA CREDIT TO GHANA FOR ESSENTIAL IMPORTS TO SPEED ECONOMIC RECOVERY Ghana will undertake measures to rehabilitate its economy with the assistance of a credit of SOR 37 million ($40 million) from the International Development Association (IDA), the World Bank announced today. IDA is the World Bank's affiliate for concessionary lending. The country's economic efficiency has steadily declined over the past few years. In April 1983, the government announced the introduction of a short-term economic recovery program designed to remove distortions in the exchange rate, restore production and income levels, reduce budget deficits and inflation, and facilitate the flow of imports to ease the severe foreign exchange constraint. Due to a lack of foreign exchange, there has been a decline in imports. Serious shortages of raw materials, spare parts, and • consumer goods have taken place. To provide these urgently needed resources, the government will use the IDA credit to finance essential imports for two key productive sectors -- agriculture and transport. Agriculture contributes about 51% of gross domestic product and accounts for roughly 65% of employment. Cocoa is the most important crop accounting for more than 70% of the country's export earnings. Despite numerous efforts to increase agricultural production, the lack of agricultural supplies and equipment together with a deterioration in transport services has caused the sector's poor performance. About $19 million of the credit will be allocated to finance agricultural supplies and equipment, such as fertilizers, insecticides, sprayers, tools, and spare parts for machinery. These will be distributed mainly in the areas growing rice and maize, the country's two main crops. The Ministry of Agriculture, through its regional and district offices, will be responsible for distribution, and commercial organizations and cooperatives will serve as additional channels. It is estimated that there will be a 25% increase in rice and maize output, and cocoa production will be increased to bring in an additional $34 :1nillion in foreign exchange in 1984. NOTE: IDA credits are denominated in SDRs (Special Drawing Rights), • which are valued on the basis of a "basket" of currencies. The U.S. dollar equivalent of the SOR amount of the IDA credit reflects the exchangae rates existing at the time of the negotiation of the credit.  - :2 - The s'hort,age of for-eign excha~ge :has se·r:l:ously ,affected the transport sector which requires a continuous su.pply of :&.pare parts and .s·upplies crucial for its maintenance and operation. This dete.rio.ration has had an • adverse .impact on agr.icultural production and marketing. To keep the transport system functioning, about $18 .• 7 million of the credit will finance .the inq>ort of tires, batteries, spare parts, and ret.reading materials for the trucking industry and public corporations involved in agricultural goods and passenger .transport. A stand-by arrangement and a compensatory financing facility to be provided by the International Monetary Fund are currently being negotiated. Both the Banlc and Fund staff have collaborated .closely in the development of the economic recovery program and the forDlllation of the credit. Since 1962, the Bank has made 10 loans totaling $190.5 million and 18 credits totaling $219 million to Ghana. Agriculture has rece·ived 25.2% of total lending, and transport has received 23%. The IDA credit is for 50 years, including 10 years of grace; it carries no interest but has a small annual service charge (0.5% on the undisbursed balances of the credit and 0.75% on the disbursed balances). • •