The country faces losing a staggering US$3.8billion in World Bank funding over five to six years after passing a controversial ‘Anti-LGBTQ’ bill last month, warns a leaked government document.
The draft Proper Human Sexual Rights and Ghanaian Family Values Bill triggered international backlash upon parliamentary approval on February 28.
According to a leaked memo addressed to the President, the 2024 loss could reach US$850million, including US$600million in budget support and US$250million for a Financial Stability Fund.
The leaked document emphasises that this substantial reduction in financial support will have profound consequences on Ghana’s foreign exchange reserves and exchange rate stability, as the inflows from the World Bank were expected to bolster the country’s reserve position and mitigate the impact of recent macroeconomic vulnerabilities.
In response to the international backlash triggered by the passage of the controversial bill, the document suggests that the loss of World Bank financing will necessitate alternative strategies for Ghana. Enhanced revenue mobilisation, expenditure rationalisation, and strategic resource mobilisation are proposed as potential solutions to bridge the financing gap.
However, the document acknowledges the challenges of implementing these measures, given the significance of the amounts at stake and the impending disbursements crucial for immediate budget support.
“The success of this path will depend greatly on stronger revenue mobilisation and expenditure cuts; hand-in-hand policy directions which have evoked very strong reactions from Ghanaians in recent times,” the leaked document read in part.
Emphasising the long-term view, the document highlights the need for Ghana to fortify domestic and African financing sources, aligning with the Ghana Beyond Aid Agenda. The goal is to navigate the complexities of international relations and emerge with a resilient economy characterised by greater Ghanaian autonomy in financing.
The leaked document also sheds light on the potential impact on the International Monetary Fund (IMF) programme. While no direct conditionality related to the bill has been identified, the non-disbursement of World Bank budget support threatens to derail the IMF programme. This poses a risk of losing out on a substantial US$720million scheduled for disbursement after the second and third reviews, triggering market reactions and affecting the stability of the exchange rate.
Additionally, the document highlights the repercussions on Ghana’s debt restructuring programme. The success of negotiations with the Official Creditor Committee (OCC) and Eurobond holders is intricately linked to the IMF programme. A derailed IMF programme could jeopardise Ghana’s long-term debt sustainability.
Moreover, Ghana’s bilateral partners, including the USA, have expressed concern over the passage of the bill, indicating potential negative impacts on trade and financing cooperation. This underlines the need for careful management of bilateral relationships, especially concerning support for debt restructuring and development financing.
The leaked document also outlines potential adverse effects on ongoing and future World Bank-funded programmes, including the suspension of budget support, negotiations for financial stability, and disbursement for ongoing and pipeline projects.
