Misleading: Government’s Stimulus Package for Businesses NOT from IMF Loan

A Facebook post shared on a National Democratic Congress (NDC) page, NDC Eye, has made a claim that even though the government of Ghana has borrowed $1 billion from the International Monetary Fund (IMF) at zero per cent to support the Ghanaian economy due to the effect of the COVID-19 pandemic, the same government is providing soft loans to micro, small and medium-scale enterprises (MSMEs) at an interest.

The post has attracted about 48 comments and shared over 20 times.

Fact-checkghana.com looked into the claim and found it to be misleading.

Explanation: since Ghana was hit by the COVID-19 in March, the government has received support from both the World Bank and International Monetary Fund (IMF). The subsequent establishment of the COVID-19 National Trust Fund has also attracted a lot of donations from corporate organisations, individuals and institutions.

The IMF, for instance, disbursed an amount of $1 billion to the government to help address the impact, while the World Bank gave $100 million for the same purpose. Meanwhile, as of May 2020, the COVID-19 National Trust Fund had mobilized GH₵ 44.9 million.

President Nana Addo Dankwa Akufo-Addo, on Tuesday, May 19, 2020, launched the GH₵1 billion Coronavirus Alleviation Programme (CAP) Business Support Scheme, which is being provided by the government and selected participating banks to micro, small and medium-scale businesses around the country.

At the launch of the programme, he acknowledged that the Coronavirus (COVID-19) had ravaged a lot of economies around the world, and affected businesses including MSMEs which had led to job losses and decline in government revenues.

In his fourth address to update Ghanaians on the country’s responses to the Coronavirus pandemic, President Akufo-Addo directed the Minister of Finance to prepare for approval by Parliament a CAP.

Out of the GH₵1.2 billion earmarked for the programme, GH₵600 million of it which is from government was to be disbursed as soft loans to MSMEs, with up to a one-year moratorium and a two-year repayment period.

The rate of interest on the government’s GH₵600 million facility is three per cent (3%).

Additionally, selected rural and commercial banks will provide negotiated counterpart funding to the tune of GH₵400 million, making in all, GH₵1 billion for disbursement.

The CAP fund is aimed at benefiting about 180,000 businesses that fall within this category, including agro businesses, manufacturing, healthcare and pharmaceuticals, and textiles and garments.

“The government is investing a lot in it, and I am confident that the proper application of these funds will help our nation bounce back stronger and better than before,” the President said.

We further spoke to the Executive Director of the National Board for Small Scale Industries (NBSSI), managers of the CAP fund, Mrs Kosi Yankey-Ayeh, who refuted the claim.

She confirmed that the GH₵600 million was government of Ghana (GoG) fund while the GH₵400 million was raised from some selected banks.

“As far as I know, the GH₵1 billion Coronavirus Alleviation Programme (CAP) is not from the IMF fund,” she said, and added that the interest was pegged such that it will not overburden the beneficiaries.

For the NDC Eye to create the impression that the stimulus package for businesses was from the $1 billion received from the IMF is completely misleading, since the managers of the fund have refuted the claim.

As a result, the impression was also created that since the money came from the Bretton Wood Institution at no interest, the government ought to give out soft loans also without interest. That is also not right.

Ghana’s current interest reference rate (benchmark that all banks must consider when setting their interest rate) is 14.80 per cent. Therefore, the MSMSE are getting it at 3 per cent because it is a soft loan which usually comes with very little interest rate especially during difficult times. In this case, the CAP scheme is being given to the businesses to alleviate their plight due to the devastating impact of the pandemic.

We, therefore, conclude that the claim is not entirely true and completely misleading.

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Supported by STAR Ghana with funding from UKAID and the European Union