GHANA: SEEKING HELP AT THE IFIS

C O N F I D E N T I A L SECTION 01 OF 02 ACCRA 000545

SIPDIS

NSC WASHDC FOR MICHELLE GAVIN
AF/EPS FOR ELLIOT REPKO

E.O. 12958: DECL: 05/05/2019
TAGS: ECON EFIN GH
SUBJECT: GHANA: SEEKING HELP AT THE IFIS

REF: ACCRA 00356

Classified By: Philip Cummings, Economic Chief, reasons
1.4 (b) and (d)


1. (C) SUMMARY: Finance Minister Duffuor asked the
Ambassador to support Ghana's proposals for emergency
economic support and a macroeconomic stabilization program
with the IMF and World Bank in order to cover its financing
gap due to the ongoing fiscal crisis and the effects of the
global financial crisis. The GOG is negotiating with the IMF
for USD 1 - 1.4 billion in Balance of Payments support and
USD 550 million in general budget support from the World
Bank. IMF tax administration consultants will be providing
the GOG with advice on reforms to the current tax regime.
END SUMMARY


2. (C) Minister of Finance and Economic Planning (MOFEP) Dr.
Kwabena Duffuor called in the Ambassador twice in May to
brief him on the state of play in Ghana's negotiations with
the International Monetary Fund (IMF) Article IV team in
Accra and the World Bank at the IFI spring meetings in
Washington. Noting Ghana's attempts to correct its ongoing
fiscal crisis and mitigate the effects of the global
financial crisis, Minister Duffuor also made a strong request
for USG support in both the IMF and World Bank so that Ghana
can secure emergency economic support, including a
macroeconomic stabilization program with the IMF and
concessional loans from the Bank. Duffuor specifically asked
for the Ambassador to reach out to the U.S. Executive
Director and Treasury on support for Ghana.

TIME IS MONEY
--------------

3. (C) In particular, Minister Duffuor is keen to have the
IMF Board consider its proposed program at an early July
Board meeting so that the government can quickly solidify its
plan for economic stabilization and receive its SDR
disbursements in order to inject capital into the debt-ridden
economy. (NOTE: An early July vote would also lock in IFI
support for the GOG's plan prior to President Obama's visit
to Ghana on July 10-11. END NOTE.) Duffuor emphasized that
he hoped for IMF approval in July and not August; furthermore
"we should not be grouped with the other LDCs (for
consideration later) because we have oil reserves." Duffuor
remarked that he had already engaged the UK government on the
issue, and that in his calculus, if the USG and HMG supported
Ghana in the IFIs, passage of the GOG package will be
assured. The Ambassador promised to speak to Washington.

WHAT'S IN THE BOX?
--------------

4. (C) According to MOFEP and IMF Resident Representative
Arnold McIntyre, the GOG is asking the IFIs for a
macroeconomic stabilization program along the following
lines. (NOTE: These are preliminary figures that are
currently under discussion between the GOG and the IMF and
World Bank, not final amounts. Please protect and handle
accordingly. END NOTE.)


A. 3-YEAR IMF PRGF: Total USD 1 - 1.4 billion
--------------
o USD 425 million in a December 2009 tranche from the IMF's
General Allocation of Special Drawing Rights (SDRs)
disbursement for Balance of Payments (BOP) support.

o USD 200 million each year for three years in BOP support
from the IMF's General Resources Account.

o Although not confirmed by McIntyre of the IMF, Minister
Duffuor hopes to additionally receive up to USD 420 million
in assistance promised at the London G20 meeting.


B. WORLD BANK ASSISTANCE: Total USD 550 million
-------------- --
o From the World Bank, USD 550 million in concessional loans
in 2009 from increased lending to low-income countries, with
300 million going to general government budget support, 225
million going to road rehabilitation, and 25 million for a
natural resource management project.

o Minister Duffuor related that he asked World Bank Country
Director Ishac Diwan for additional funds for projects in
water, sanitation, and other projects. However, the World
Bank has not agreed to these projects at this time.


SEND IN THE CONSULTANTS

ACCRA 00000545 002 OF 002


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5. (C) The IMF will send two teams of IMF tax experts to
visit Accra this year to assist the GOG in reforming current
Ghanaian tax revenue management. (COMMENT: President Mills
was a tax law professor prior to his political career and has
promised to improve Ghana's tax system while he is in office,
and the fiscal crisis and IMF program talks have provided a
means for the president to take action on this campaign
promise. END COMMENT.)

o Tax Administration: These experts, working with the
Ghanaian Internal Revenue Service (IRS) and Value-Added Tax
(VAT) Authorities, will present recommendations for tax
reform and greater integration of the IRS and VAT regimes.
McIntyre noted that large organizations in particular tend to
underreport their earnings, and there is weak compliance with
the VAT regime.

o Oil and Gas Taxation: In June experts will consult with
the GOG on revisions to their system of natural resources
taxation, especially for oil, gas, and gold. (COMMENT: Both
the GOG and the Ghanaian public feel they are getting a raw
deal from the country's current gold taxation policies. This
tendency drives Ghanaian interest in getting a "better"
system in place before oil and gas start pumping. The IMF
Res. Rep. also stated that "Ghana has the weakest gold tax
regime in Africa." McIntyre believes that the GOG's Petrol
Tax Unit, to be established in the IRS, lacks critical
expertise. The IMF hopes that improvements to the overall
tax system, especially natural resource taxes, will help
Ghana to use oil and gas revenues to administer both a
Stabilization Fund and a Heritage Fund (Sovereign Wealth
Fund). END COMMENT.)

KOSOVO
--------------

6. (C) The Ambassador also thanked Duffuor for GOG support of
Kosovo's application for membership in the IMF in May and
urged similar action on Kosovo's membership in the World
Bank.

TEITELBAUM