World Bank approves $535 mln package for Ghana

By Kwasi Kpodo

ACCRA (Reuters) - The World Bank approved a $535 million package for Ghana on Tuesday aimed at helping stabilise the economy knocked by the global financial crisis, the bank said.

The amount includes $300 million in budget support for the West African country, which is widely seen as one of the best examples of economic reform and democracy in the region. A further $225 million would go toward improving the transport sector.

The prices of both Ghana's main exports, gold and cocoa, have held up relatively well amid the global crisis.

But 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, which spent heavily before the election.

"The government is currently faced with a difficult macroeconomic situation, the consequence of combination of domestic and external shocks," the bank said.

The bank said the $300 million in budget support would be disbursed in two tranches of $150 million, the first after the government approves the agreement early next month and the second in the third quarter of 2009.

The money is part of $1.2 billion that the bank plans in support for Ghana over the next three years.

Although the economy grew 7.3 percent in 2008 after an average 6 percent for the previous five years, spending before the election late last year sent the budget deficit to nearly 15 percent of gross domestic product.

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.