ACCRA - The World Bank will decide on June 30 whether to give Ghana a $300 million loan to help stabilise the economy, knocked by heavy spending under a former government as well as global woes, the bank said.
The interest-free loan is the first slice of a total $1.2 billion the bank has agreed over the next three years to help the West African country, seen by donors as an example of successful economic reform as well as democracy.
A statement from the bank said its governors would decide on approving the first payment on June 30. It would still be subject to approval by Ghana's parliament.
The government of President John Atta Mills has been struggling with a cash crunch since taking office in January after defeating the former ruling party in an election.
The new government inherited a difficult macro-economic situation, the result of a series of shocks in 2008 which exacerbated a structural trend of widening fiscal imbalances, the statement said.
Although the economy grew 7.3 percent in 2008 after an average 6 percent for the previous five years, spending before an election late last year sent the budget deficit to nearly 15 percent of gross domestic product.
The Bank said the government's plan to reduce the deficit to 9.4 percent this year and 6.0 percent next year would not be enough to stabilise the world's second biggest cocoa producer, due to start pumping crude oil next year.
Without important external support, the financing of the deficit internally will crowd out private investors, generate further currency depreciation and inflation and lead to an unsustainable accumulation of high interest debt, the bank said.
Ghana is also in talks with the International Monetary Fund to secure at least $1 billion of support to prop up its foreign exchange reserves.