Professor Godfred Bokpin, an Economist, has asserted that the average Ghanaian politicians is scared of a powerful domestic private sector because of the role money plays in politics.
He said the fear had made politicians to be more open to facilitating foreign capital because the foreigners were likely not to play a role in the country’s politics.
Prof. Bokpin was speaking at the 11th Edition of the Ghana Economic Forum on the theme:” Building a robust and resilient economy through technology, finance, investment, trade and entrepreneurship,” in Accra.
“If we have done this level of injustice to ourselves, how do we turn around and cry for going to IMF 17 times,” he added.
He said, “as a country, we have not been able to put in place the right measures and institutions that will ensure the necessary fiscal restraint and drive efficiencies.”
Prof Bokpin, who is also a Professor of Finance at the University of Ghana, said, therefore, anytime there were challenges, the country needed an external anchor, such as the IMF.
He said evidence showed that anytime the country visited the Fund, “we intent to get some level of macroeconomic stability but we are not able to sustain that.”
According to him, macroeconomic stability was not an end in itself but a means to an end and that was why nobody should expect the Fund to transform the economy.
Prof. Bokpin said the best helping hand the country could find lies in its own hands.
The Economist said economies were transformed by adding value through manufacturing.
He said until “we are conscious in growing some of the SMEs to be regional and international businesses, we are not going anywhere.
The Lecturer argued that Ghana was visibly absent in some of the lucrative sectors of the economy.
Dr. John K. Kwakye, Director of Research, Institute of Economic Affairs, said the Ghanaian economy had been vulnerable for some time now, because “we have not built economic buffers to allow us withstand these shocks.”
He said the country needed both resources and policies to advance its developmental agenda but unfortunately Ghana lacked adequate resources, while its policies had been ineffective in so many areas.
The Director of Research at IEA said the country has potential to be able to raise big revenue to fund development.
“We do not collect enough taxes not because our tax rates are low but it is because of the many loopholes and administrative inefficiencies,” he said.
He said studies had shown that of those loopholes and the administrative inefficiencies were blocked tax collection would improve drastically.
Dr Kwakye said because the country failed to raise enough revenue to fund developmental project, it turns to borrowing.
The Member of Parliament (MP) for Suame, Osei Kyei-Mensah-Bonsu, has cautioned his colleague parliamentarians over their push for the sack of Finance Minister Ken Ofori-Atta.
Speaking on the floor of Parliament on Tuesday, October 26, Kyei-Mensah-Bonsu said that sacking the Offori-Atta now might have a devastating impact on the economy.
He intimated that sacking the finance minister while he is leading Ghana’s bailout negotiation with the International Monetary Fund might have disastrous consequences.
“My own personal thinking is whether or not could be done midstream into the negotiations with the IMF and again midstream in the crafting of a budget.
“What will be the effects of this (the sack) in the negotiation and even its impact on the performance of the currency as we see now? And so Mr. Speaker these are matters that we should interrogate,” Kyei-Mensah-Bonsu, who is also the leader of the majority caucus, said.
The Minority and Majority Members of Parliament seem to be on the same page following the call to remove the finance minister from office.
While the Minority in Parliament has filed a motion to have Ken Ofori-Atta sacked, the Majority also threatened to boycott the 2023 budget presentation if the finance minister is not relieved of his post.
The MPs explained that their position follows several concerns over the poor management of the economy, which has forced the government to seek IMF assistance.
President Akufo-Addosays the government is close to having a programme with the International Monetary Fund (IMF).
The President said negotiations are nearing completion.
According to him, this will have a major impact on the Ghanaian economy.
President Akufo-Addo at a stakeholder engagement on moves to revive the economy on Tuesday, called for the support of all.
“We are talking and, hopefully, concluding soon. These important negotiations that we are going to have will have a positive impact on the Ghanaian economy in the months immediately ahead”, he said.
In a related development, the President will on Wednesday, October 26, meet the leadership of the Trade Union Congress (TUC) and the Association of Market Women at the Jubilee House.
The Akufo-Addo led government is seeking a US$ 3 billion bailout from the Bretton Woods Institution after months of struggle with the economy and a cost of living crisis.
The Ministry of Finance has said, government and the IMF have reached a clear path towards the final details of a programme with the goal of reaching a Staff-Level Agreement by the end of 2022.
This follows meetings between the Government and the IMF advancing negotiations towards a Fund-supported Programme in Washington (D.C) on the sidelines of the annual meetings of the World Bank and the International Monetary Fund.
President Akufo-Addo will meet the New Patriotic Party (NPP) Members of Parliament who want the Finance Minister, Ken Ofori-Atta be relieved of his duties.
The meeting will take place this evening, Tuesday, October 25, 2022 at 6:30 pm.
The NPP MPs argued that their attempts to get the administration take steps to assist their constituents in light of the failing economy had been ineffective.
Thus, on Tuesday, October 2022, the NPP organized a news conference to express their unhappiness and demand the resignation of Charles Adu Boahen the Minister of State for Finance, and Ken Ofori-Atta.
Andy Kwame Appiah-Kubi, the Member of Parliament for the Asante-Akim North Constituency and spokesperson for the disgruntled Majority group, told the media on Tuesday that sacking Ofori-Atta and Adu Boahen will help restore confidence in Ghana’s economy.
“The recent development within the economy is of major concern to our caucus and our constituents. We have made our grave concern known to our president through the parliamentary leadership and the leadership of the party without any positive response.”
“We are by this medium communicating our strong desire that the president changes the Minister of Finance and the Minister of State at the Finance Ministry without further delay in order to restore hope to the financial sector and reverse the downward trend in the growth of the economy,” he added.
Several Ghanaians had mounted pressure on President Akufo-Addo to remove Mr. Ofori-Atta from office in light of the country’s current economic predicament, which has compelled government to seek support from the International Monetary Fund (IMF).
President Akufo-Addo says he is hopeful the outcome of the International Monetary Fund ( IMF) negotiations would tackle the high cost of living in the country.
He admitted the cost of living was high but was optimistic that the package of measures which would accompany the IMF programme would address the economic issues successfully and reduce the hardship on Ghanaians.
“Yes we are going through difficulties but at the same time we trying to do well in other areas, the fundamentals of government policy is working. We have about 120 One District, One Factory completed and 300 of them in the pipeline,” he said.
President, Akufo- Addo made these statements at Nkawkaw in the Eastern Region on Friday when he spoke to the media as part of his three-day tour of the Eastern Region.
Speaking on concerns made by some persons to review the free Senior High School (SHS) policy, the President said he was a bit skeptical about it.
He argued “I have to confess my attitude when I hear the word review I hesitate because, first people who spoke about the review are people who opposed the policy in the first place and so if someone who did not want the policy comes to tell us that we should review it then my understanding is that he is to review the policy to reverse it.”
According to the President, the two fundamental thrust of the policy which was to expand access that has been dramatically achieved.
“The other was to include quality outcomes of education and I must say The outcomes of the free SHS graduates are a major improvement on the free SHS data that we have whether it is mathematics or integrated science, english across the board.”
President Akufo-Addo added that each of these areas of study has seen a significant increase in the results of the students.
President Akufo-Addo said reviewing these two thrusst of the policy and the improvement made will somehow be compromised, adding the country cannot tamper with the two fundamentals.
He said “as a country, we have ensured that nobody in the country, no matter their social origin and financial background should be denied access to good quality secondary education and added that for the past five years, the implementation of the policy has been established.”
He indicated that so far, his government have been able to financially sustain the free SHS policy and would continue to sustain it.
The President later attended an official opening of the NPP National Executives and directors Training and Orientation Conference at Rock City in the Abetifi Constituency.
He then proceeded to Nkawkaw to inspect the construction of the Nkawkaw-Abirem- Ofoase -Akim Oda road Project.
President Akufo Addo later paid a courtesy call on the Chief of Ofoase, inspected the construction of the Ofoase-Ayirebi Agenda 111 hospital project and departed to Akyem Asuboa in the Asene Manso Akroso constituency to inspect a similar project.
Discussions between the International Monetary Fund (IMF) and the government of Ghana for a Post-Covid Programme for the country are still ongoing.
In its most recent update on the engagement, the Ministry of Finance revealed that both parties have agreed on a clear path toward the final details of the programme.
According to a statement issued by the Ministry on October 21, 2022, this is with the “goal of reaching a Staff-Level Agreement by the end of the year.”
Both parties managed to reach an agreement following a trip by a government delegation to Washington, D.C. on the sidelines of the Annual Meetings of the World Bank and International Monetary Fund.
A path to financial sustainability was also extensively discussed during engagements.
The delegation also had a number of fruitful and energising interactions with the World Bank, bilateral partners, US government representatives, and external investors.
“The Annual Meetings concluded successfully with a renewed sense of urgency for countries to rally together to bolster the global economy, in light of the dim outlook for advanced and frontier markets alike,” the Ministry wrote in its release.
An IMF mission teamis anticipated to arrive in Accra in the coming weeks, with a Staff-Level Agreement still in the works.
A delegation from the Fund would be visiting for the third time to assess the nation’s economic situation and help resolve any problems.
The government first engaged the IMF this year in July and then subsequently in September.
The United Kingdom, Germany, and France, which are bilateral partners of Ghana, have pledged to support the country as it engages the International Monetary Fund.
The government has thanked Ghanaians “for their forbearance in what is undoubtedly a troubling and challenging time for our economy and economies globally.”
Government has pledged to continue working, with “a fierce sense of urgency, to stabilize the economy and place it back on a firm trajectory of growth.”
According to him the majority of the problem is caused by the increased demand for dollars to import goods for the holiday season.
Speaking to the media about Ghana’s currency at the time, Mr. Ken Ofori-Attaacknowledged that he was surprised by how much the cedi had fallen in value in comparison to other major trading currencies, particularly the US dollar.
“It’s quite perplexing to see where it’s going. Of course, typically in October, people are importing for Christmas and maybe there’s a rush for that [the dollar],” he mentioned.
However, he urged the public to avoid becoming overly alarmed by the current state of the economy because their panic response could further aggravate the cedi’s depreciation rate.
“We really would want people to know not to panic or be rushing in order to put pressure on the currency,” the finance minister added.
According to him, the country, despite the economic challenges it is facing, is “in good shape.” At the beginning of October 2022, a dollar was trading for about GH₵11.
Three weeks later, and a dollar is trading at almost GH₵15 on the forex market as of October 21, 2022.
Many groups and individuals have expressed worry over the rate at which the local currency is losing its value.
The Ghana Union of Traders Association recently closed their shops to register their displeasure against the cedi’s depreciation and high taxes.
Economist, Professor Lord Mensah has said there is a cause to worry as Ghana continues to import heavily as against exporting.
“Once everything on the shelf is imported with the dollar, the Minister cannot say we cannot worry about the dollar. We need to get worried about the dollar because we know that getting to Christmas, the demand for the dollar is high, adding to the depreciation of the dollar, and the rate for this year alone is unbearable,” Professor Mensah told the media.
However, Mr Ofori-Atta wants Ghanaians to remain calm as the government puts in the right measures to regain the value of the cedi.
The Finance Minister explained that the cedi would begin to appreciate “once we conclude with the International Monetary Fund (IMF), which will lead to the fund’s disbursement early next year.”
“The support we are getting from countries like Germany and France, we are confident that we will get the resources needed,” he added.
The government of Ghana is hoping to receive as much as $3 billion under an IMF extended credit facility program to bolster its finances and regain access to global capital markets.
The Ministry of Finance has disclosed that Ghana and the IMF have reached a clear path towards the final details of a programme, with the goal of reaching a Staff-Level Agreement by the end of the year.
Calls for the dismissal of the Minister for Finance and Economic Planning, Ken Ofori-Atta, have heightened in the last couple of weeks following the wobblign state of the economy.
In spite of the fact that netizens have taken to social media to whine and call for the dismissal of the Finance Minister, President Akufo-Addo has disregarded their solicitations.
In some way or another, this got a few well-known individuals to pound on the Minister’s renunciation since the economic slump has forced government to seek a financial rescue programme from the International Monetary Fund (IMF).
President Akufo-Addo on August 8, while talking in an exclusive interview on Tamale-based North Star radio, during an official tour to the region shielded his ministers.
He noted that they have been working hard while expressing their outputs have been extensive.
GhanaWeb in this article puts together a list of some public figures pushing for the resignation of the Finance Minister.
Nana Oye Bampoh Addo
Former Gender Minister, Nana Oye Bampoh Addo, joined calls for Finance Minister, Ken Ofori-Atta, to resign.
She believes as the main gatekeeper of the national economy, the Minister must take responsibility for the economic downturn the country is experiencing.
Nana Oye pointed out that the approach that the National Democratic Congress government in 2015 used to secure a programme from the International Monetary Fund was different from that of this government.
Kwabena Agyei Agyapong
Former General Secretary of the governing New Patriotic Party, Kwabena Agyei Agyapong, has also hammered on the resignation of Ken Ofori-Atta.
According to Mr Agyapong, the main reason for his call was the decision of the government to seek an economic rescue programme with the International Monetary Fund (IMF) – a position that the Minister had vehemently opposed publicly and vowed will not be taken.
Mr Agyapong added that the Minister must on his own volition tender his resignation because of his anti-IMF statements and having “got it wrong.”
Lydia Forson
Entertainment personality, Lydia Forson, following the resignation of the UK’s Prime Minster, Liz Truss, questioned the rationale behind Ken Ofori-Atta’s decision to stay in office as the Minister of Finance.
According to her, Ghanaians have lost confidence in Ken Ofori-Atta as the Minister of Finance due to the economic downturn currently being faced by Ghanaians.
In a tweet sighted by GhanaWeb, she said, “It makes absolutely no sense that Ken Ofori-Atta is still the finance minister, how? He’s lost the confidence of the people!”
Nana Aba Anamoah
Lydia’s views were not different from media personality, Nana Aba Anamoah, who has also pushed for the Minister of Finance, Ken Ofori-Atta, to save himself the disgrace and step down.
According to her, Ken Ofori-Atta has failed in the management of the local economy.
Nana Aba Anamoah attributed the frequent fall of the local currency, high inflation rate, and increase in petroleum prices, among other factors leading to the country’s economic crisis to the incompetence of the Finance Minister.
She asserted that the current harsh economic condition was due to government’s “imprudent borrowing taste and wasteful use of those flammable funds.”
Kweku Sintim Misa (KSM)
Known for not shelving his thoughts on governmental issues, Ghanaian playwright and actor, Kweku Sintim Misa (KSM), in a recent post advised Minister for Finance and Economic Planning, Ken Ofori Atta, to resign from his position.
He didn’t mince words when he shared a post on Twitter on October 22, 2022, stating that since President Akufo-Addo has resolved not to sack him, Ken Ofori-Atta, he should take the initiative and step down from the position.
Dr Theo Acheampong
Political risk analyst and economist, Dr Theo Acheampong reiterated calls for the Finance Minister to resign from his post.
Speaking on Newsfile on JoyNews, he said that the calls for the minister’s resignation are not because he is not liked but because he has made serious policy mistakes which have impacted the livelihoods of many.
Dr Acheampong, listing some of the minister’s faults, said that “one is the E-Levy, number two on the fact that philosophically he doesn’t support us going to the IMF.”
Television show host, Kwaku Sintim-Misa, popularly known as KSM has urged Finance Minister, Ken Ofori-Atta to as a matter of urgency resign for another financial manager to take over the affairs of the economy.
He averred that President Akufo-Addo has refused to sack Ofori-Atta despite calls by a section of Ghanaians for him to be fired.
KSM in a tweet sighted by GhanaWeb opined that it’s about time a competent financial manager takes charge to stabilize the wobbling economy.
“Advice to Ken Ofori-Atta. Bra Ken, it is obvious the President cannot and will not fire you. Please do him and GH a favour and respectfully resign for a competent financial manager to take charge. I am sure that the financial markets will react positively to the news,” his tweet read.
It would be recalled that Bloomberg on Thursday, October 20, 2022, reported that Ghana’s local currency – the cedi – depreciated in value by 9.6%.
This, the news portal said, makes the total loss of the cedi in 2022 almost 52%, the highest recorded in 22 years.
The free fall of the cedi now places the currency at the 148 position of worst-performing currencies in the world.
Meanwhile, Ghana is targeting an amount of $3 billion over a three-year period from the International Monetary Fund (IMF) once an agreement on a programme is reached.
The new amount requested as a loan is double the government’s initial target of $1.5 billion.
The IMF programme is aimed at restoring macroeconomic stability and safeguarding debt sustainability among many others.
Bra Ken, it is OBVIOUS the President CANNOT and WILL NOT fire you. PLEASE do him and GH a favor and respectfully resign for a COMPETENT FINANCIAL MANGER to take charge. I am sure that the financial markets will react POSITIVELY to the news. ????????
An economist and political risk analyst says it is important that PresidentAkufo-Addo addresses Ghanaians on the current economic hardships.
According to Dr. Theophilus Acheampong, the President must tell Ghanaians what measures his government is working on to get the nation out of the crisis.
In his view, an address from the President on the issue will calm down the citizenry.
“I think we are at the time where the president must address the nation.
“The President needs to speak to all of us forthrightly about the challenges that we face and what they are doing to get us out of it because amidst all of these crisis there is some information vacuum or you may even call it policy which must be dealt with,” he said.
President Akufo-Addo
Meanwhile also speaking on the same show, a political scientist at the University of Ghana lambasted the government for solely relying on the International Monetary Fund (IMF) to address the current economic crisis.
Professor Ransford Gyampo says the Bretton Woods Institution cannot be the panacea for the country’s problems.
According to him, the ‘one size fit’ approach will not work for the nation in these times.
Prof Gyampo thus asked government to start working on other solutions.
“The IMF is not and can certainly not be a panacea to our woes and it appears that in our country, we have a certain one way propagandist stomach direction approach to solving every problem. They must be up and doing,” he said.
Meanwhile Ministry of Finance on Friday said the Government and IMF have reached a clear path towards the final details of a programme with the goal of reaching a Staff-Level Agreement by the end of the year.
This follows meetings between the Government and the IMF advancing negotiations towards a Fund-supported Programme in Washington (D.C).
Political scientist at the University of Ghana, Professor Ransford Gyampo, has chastised the government for relying solely on the International Monetary Fund (IMF) to resolve its economic woes.
He asserted that the Bretton Woods Institution cannot be the panacea for the country’s challenges.
“The IMF is not and can certainly not be a panacea to our woes and it appears that in our country, we have a certain one way propagandist stomach direction approach to solving every problem. They must be up and doing,” Prof Gyampo said while contributing to a panel discussion on Newsfile on Saturday, October 22, monitored by The Independent Ghana.
He argued that the ‘one size fit’ approach will not work for the nation in these times, thus asked government to take a look at other alternatives.
Due to the downgrade of Ghana’s credit worthiness, the country has not been able to access funds from international bodies. The government has therefore run to the Fund for assistance.
Meanwhile, the Ministry of Finance has revealed that the government and IMF have reached a clear path towards the final details of a programme with the goal of reaching a Staff-Level Agreement by the end of the year.
This follows meetings between the Government and the IMF advancing negotiations towards a Fund-supported Programme in Washington (D.C).
In an update to citizens, the Ministry stated that “a pathway towards fiscal sustainability has also been extensively discussed, and the Government of Ghana and the IMF remain fully committed to the goal of reaching a Staff-Level Agreement on a Programme within the shortest possible time.”
The Ministry indicated in pursuance of the Staff-Level Agreement, negotiations with the IMF will continue in Accra, as the IMF team is expected within the next few weeks.
Senior Vice President of IMANI Africa, Kofi Bentil, has urged managers of Ghana’s economy to as a matter of urgency begin talks with the World Bank and friendly nations for economic support even as it looks to get a bailout from the International Monetary Fund (IMF) in the shortest possible time.
Mr Bentil contends that the balance of payment support expected from the IMF will not be enough to deal with Ghana’s current economic crisis.
“We need more than the IMF. We need to be speaking to the world bank and friendly nations for concessionary loans to shore up the economy and then get IMF to tide us over to health. We should be speaking to them by now, IMF alone can’t help us,” he argued.
Government has had to seek an IMF bailout after months of dithering and seeking desperate to tax its way out of its inability to meet debt repayment obligations.
The Finance Minister, Ken Ofori-Atta who had ruled out seeking an IMF bailout is currently leading negotiations to secure some three billion dollars for the country to heal resolve balance of payment challenges.
But Mr Bentil is of the opinion that the expected there billion dollars will be insufficient given the dire straits of the country.
Ghanaians are reeling under a harsh economy that has left vulnerable households unable to meet basic daily expenditure as inflation skyrockets and the currency continues a free fall against the dollar.
The International Monetary Fund (IMF) team, led by Stéphane Roudet, have indicated that there has been good progress regarding Ghana’s request for a financial bailout from the fund.
After meeting with Ghana’s Finance Minister, Ken Ofori-Atta and Bank of Ghana Governor, Dr. Ernest Addison in Washington DC, the IMF team leader said both teams had a fruitful discussion in identifying specific policies that would restore macroeconomic stability.
“The Ghanaian delegation and IMF staff had very fruitful discussions on the authorities’ post-COVID program for economic growth and associated policies and reforms that could be supported by a new IMF arrangement.
“We made good progress in identifying specific policies that would restore macroeconomic stability and lay the foundation for stronger and more inclusive growth. The IMF team and the Ghanaian authorities remain fully committed to reaching an agreement on a framework and policies for an IMF-supported program as soon as feasible. Discussions will continue in the weeks ahead, with a follow-up mission to take place expeditiously,” Stéphane Roudet said in a statement after the meeting.
The Finance Minister had earlier assured Ghanaians that the economy is in good shape despite the continuous depreciation of the Cedi.
Speaking to a journalist of Accra-based Asaase Radio from Washington DC, Ken Ofori-Atta said, “It is a bit perplexing because as you know, typically we go to markets at the beginning of the year and get our two billion.
“But that we were not able to do, we were able to then get US$750 from AfriExim in the summer, August or so, to stabilize it. Then we moved on traditionally as we do, the ASL, the annual syndicated loan of COCOBOD, and that came in very strongly. So, it is quite perplexing to see where it is going.”
“The support we are getting from countries like Germany, France etc. we are confident that we will get the resources needed. So, we really would want people to know not to panic or be rushing to put pressure on the currency. I think it is unnecessary and we are in good shape.
“Of course, typically in October, people are importing for Christmas and maybe there is a rush for that. But my expectation is that once we also conclude the fund, that would lead to the Fund’s disbursement early next year.”
The Cedi has recently been classified by Bloomberg as the worst-performing currency against the US Dollar.
Currently, the Cedi is trading at around GH₵13 – GH₵14 to a dollar at some forex bureaus.
Ghana’s ability to obtain an economic programme from the International Monetary Fund (IMF) now depends on evidence of the nation’s capacity to meet all of its present and future financial obligations without the need for extraordinary financial assistance or defaulting.
Director of the IMF’s African Department, Abebe Aemro Selassie, made this known during the 2022 IMF/World Bank annual meetings in Washington, D.C., that ended on October 16, 2022.
During a press conference, Mr Aemro Selassie said, “so much will depend on how quickly this reform plan can be fleshed out for implementation. There are also important initiatives that have to be taken in terms of how the programme will be financed so that we can move forward.”
Ghana’s debt stock peaked at GH¢402.4 billion in September, equivalent to 68 per cent of its GDP.
Ghana is a member of the IMF, and when a member country requests financing from the Fund, it assesses whether the country’s policies are consistent with debt sustainability.
This assessment is based on a Debt Sustainability Assessment (DSA), conducted jointly by the IMF and World Bank, to determine whether the government is able to meet all its current and future payment obligations.
In cases where a country’s debt is assessed as unsustainable, the IMF is precluded from providing financing unless the member takes steps to restore debt sustainability, including by seeking a debt restructuring from its creditors.
Per reports, Ghana has furnished the Fund with proof that it has a debt sustainability plan.
After the government of Ghana provided a debt situation plan, it was presented to the IMF’s Executive Board for consideration by the authorities’ programme request.
According to Mr Abebe Aemro Selassie, the IMF is awaiting the results of the debt sustainability analysis (DSA) exercise.
“So, part of the work ongoing now is to assess where the debt sustainability situation is right now and how the government would like to address that. We are waiting for the results of that assessment,” Mr Selassie said.
Ghana formally commenced negotiations with the Fund in September 2022, after reaching out in July this year.
An economic programme from the Fund is expected to help Ghana address the depreciation of the local currency, its high inflation, and undertake several developmental projects to resolve the current economic crisis.
There have been assurances from the IMF that a deal could be reached with Ghana by December, should all conditions be met.
President Nana Addo Dankwa Akufo-Addo has said he takes the blame for his government’s u-turn on Ghana seeking an International Monetary Fund (IMF) bailout.
President Akufo-Addo indicated that the move was necessary because it was what the country needed.
Speaking during his tour of the Ashanti Region on Otech FM, on October 18, Akufo-Addo added that he hopes the IMF bailout will help get Ghana out of the current economic hardships.
“I take full responsibility for it. But I’m hoping very strongly that by the middle of November, a month from now, these negotiations will be over. We are going to come to a budget for the country in the middle of November.
“I’m hoping that the IMF negotiations will be over at least substantially so we will have a clear idea of the elements of the agreement with the Fund, which hopefully will be able to feed into the budget and have that drive our budgetary projection for next year and the year ahead.
“For me, my hope is that we will have a programme of fiscal adjustment. It will take us through most of the immediate budget but then will put us in a position in 2024 to begin the recovery and the growth,” he said.
Meanwhile, the Finance Minister, Ken Ofori-Atta, is reported to be pushing for the speedy completion of negotiations with the International Monetary Fund for an economic support programme.
Ghana is targeting an amount of $3 billion from the Fund once an agreement can be reached with funds likely to be accessed in 2023.
According to Joy News, a team of government officials have been in the United States of America and met with the Director for the Africa Department of the IMF, Abebe Aemro Selassie, at the ongoing Annual IMF/World Bank Spring Meetings.
It is expected that the second round of negotiations will continue after the annual meetings between the Government of Ghana team led by Minister for Finance, Ofori-Atta, and the IMF team, led by the IMF Mission Chief, Stéphane Roudet.
The negotiations will focus on the implementation of policies that create conditions for a stable macroeconomic environment, sustainable growth and debt sustainability.
President Akufo-Addo has acceded to the assertion that Ghanaians are currently facing severe economic hardship that has compromised their wellbeing.
The President told the media that he has been furnished with the general outlook of the country’s economy, which indicates that the cost of living is high.
Speaking on Kumasi-based OTEC FM on Monday, he said “I know times are hard for Ghanaians. The data comes to me. So I’m very much aware. I know things are hard for Ghanaians.”
President Akufo-Addo, who is on a four-day tour of the Ashanti Region, however, assured that “we (experts in his government) have a plan and programme to help us resolve this.”
He cited the ongoing discussions between the International Monetary Fund (IMF) and the government delegation led by Finance Minister Ken Ofori-Atta as one of the measures put in place to restore the crippled economy.
“It’s part and parcel of a larger programme of development we want to embark upon to solve the current hardship in the country. So it is not like the government is not doing anything about it,” he reiterated.
It would be recalled that in December 2021, President Akufo-Addo made a similar comment, admitting that Ghana is facing some economic challenges.
He, however, made it clear that he was not responsible for the deteriorating state of the wellbeing of Ghanaians.
“I admit that Ghanaians are going through difficult times. Some people are trying to say that it is my fault, but you know that is not the case.”
Ghana is working to come out of an economy that is recording a consistent rise in inflation and further depreciation of the local currency.
According to recent international reports, the Ghana Cedi has fallen in value against the US dollar by 40.05% since January.
At forex bureaus in the Greater Accra Region, a dollar is trading at GHS12.
Again, as of September 2022, Ghana’s inflation stood at 37.2%. Eastern region, with 47.1% maintained its lead as the region with the highest inflation.
It was followed by the Greater Accra (45.3%) and Central regions (41.9%).
The rise in general prices has been attributed to a price surge in housing, water, electricity, gas, and other energy sources (68.8%).
In September this year, electricity and water tariffs were increased by 27.15% and 21.55%, respectively.
A litre of petrol, that cost about GHS7 in January 2022, now costs GHS13.10.
A rise in the price of fuel products has, in some cases, have led to the adjustment of transport fares. Transport fares increased by 15% in February and 20% in May.
As most economic activities engage in transportation as part of the production process, any surge in the price of fuel products and transport fares will translate to an increase in the price of a commodity.
According to the government, it is aware of these trends and is “working hard to try and find a solution to these problems.”
Amid high inflation and a fast-depreciating local currency which have caused turmoil in the economy this year, Second Deputy-Governor of the Bank of Ghana (BoG) Mrs. Elsie Addo Awadzi has assured that the situation is temporary, as her outfit together with the finance ministry are working hard to keep it under control with the proposed programme with the International Monetary Fund (IMF).
Data from Ghana Statistical Services (GSS) show that inflation for September hit 37.2 percent, the highest recorded in more than 21 years (since June 2021); and the cedi is currently trading around GH¢12 to US$1 – indicating a 50 percent depreciation since beginning of the year.
Scary as these figures are, though, the Second Deputy-Governor says she is confident about the economy’s outlook, given the plans both BoG and the Ministry of Finance have tabled before the IMF for a programme to transform the economy – adding that all must avoid speculative behaviour which tends to aggravate the situation.
“Recent global developments have heightened economic and business uncertainties for businesses and individuals. Our domestic economy is not spared from these developments. The Bank of Ghana is working closely with the Ministry of Finance and other key stakeholders to negotiate a sound economic reform programme supported by the IMF, to stabilise and transform our economy.
“We at the Bank of Ghana are confident about the outlook for our economy. The current high inflation and cedi depreciation are temporary, and we must avoid speculative behaviour that only works against attaining stability sooner,” she said at the 21st annual RCB CEOs Conference held in the Volta Region.
RCBs must brace up for digitalisation
Speaking on the theme ‘Positioning Rural Banking at the Centre of Financial Services Delivery in Ghana – The Role of Stakeholders’, Mrs. Awadzi urged the Rural and Community Banking (RCB) sector to embrace digitalisation, as that is the direction the financial sector is going; hence, failure to follow suit will lead to disastrous consequences for industry players.
“It is also important to situate the RCB sector’s strengths within the rapid changes taking place in the financial services industry all around the world and here in Ghana. For a start, technology is fast disrupting traditional business models for delivering finance all around the world, and is redefining financial services as we knew them.
“Digital financial services are now the future, and are creating opportunities to reach existing customers and the previously unbanked in cost-effective ways. This also means that universal banks are now able to reach communities and people with their services much easier and cheaper than they previously could, thereby competing with the RCB sector on your own turf.
“At this rate, any financial institution that has not already adopted and implemented a digital transformation strategy is already behind the curve. The RCB sector therefore cannot afford to wait much longer before it begins to leverage emerging technologies to modernise their business models to meet the fast-changing needs of their customers and remain relevant to the segment of the economy that was traditionally served by the sector,” she said.
She further cautioned them on the heightened concerns about cybersecurity – one of the disadvantages of going digital; saying RCBs must invest in good infrastructure to take care of this associated risk.
“Digitalisation comes with its own complexities and risks – including cyber security risks, third and fourth party/outsourcing risk, data privacy breaches, technology failure risk, increased AML/CFT risks, and consumer protection risk among others. Needless to say, a lot is required by way of strong governance and risk management systems to help mitigate these risks as financial institutions seek to exploit the benefits of digitalisation.
“RCBs will therefore need to augment their capital base as needed in order to deploy more sophisticated systems and structures in line with the Bank of Ghana’s 2018 Cyber and Information Security Directive. The Directive provides for the adoption of minimum technical, governance, data protection protocols; and transaction monitoring and fraud detection and mitigation tools to help mitigate key risks from digitisation,” Mrs. Awadzi said.
The International Monetary Fund (IMF) has asserted that the incessant increase in prices of commodities is mainly due to domestic factors in the country.
According to the Director of the IMF’s African Department, Abebe Aemro Selassie, it would be misleading to pin the whole blame on external factors such as the Russia-Ukraine invasion.
At a press conference on the sideline of the IMF/World Bank Spring Meetings from 10-16 October 2022 in Washington, D.C., US, he explained that “on inflation, I mean, again, there are always trade-offs when you’re doing policy calibration, and so in our regional economic outlook, we are very careful to flag that there are some countries where inflation has clearly been driven more by domestic factors than exogenous factors. I think Ghana would fall in that camp.”
His comment, however, suggests that both domestic and external factors have a role to play in the country’s extremely high inflation rate.
Since January this year, inflation has been on the rise. From 13.9%, Ghana’s inflation rate now stands at 37.2% as of September 2022, according to the Ghana Statistical Service (GSS).
As inflation rose this year, the price of petroleum products also saw an increase. During the period when fuel prices were hiked, transport fares were adjusted twice.
Consequently, the cost of goods and services has also surged.
The Bank of Ghana has adjusted the Monetary Policy Rate (MPR) to check rising inflation. Increasing the rate from 17%, then to 19% and 22% seems to have not aided the reduction of the inflation rate.
Despite failed efforts, the central bank has recently increased the policy rate to 24.5% in a bid to control the high inflation rate.
The Bank of Ghana is optimistic that its many measures will address the worrying rate.
As the adjustment in policy rate has failed to check inflation, some experts have asserted that imported inflation could be driving Ghana’s inflation.
Such views have not been discarded, as Ghana remains a heavily imported dependent country.
Mr Abebe Selassie also hinted at such an assertion, however, did not categorically state that Ghana falls under such a category.
“But there are also quite a lot of other countries where the inflation we are seeing is more imported inflation, so the scope and the space and the ability of monetary policy to address that is limited. So again, it depends on country-specific circumstances, and on time”.
Mr. Abebe also said a volatile exchange rate affects a country’s inflation rate. Currently, a dollar is trading at over GH¢12 at the forex bureaus.
According to him, he receives briefing on the situation routinely.
The President said he is ruling the country from within and not outside. So, whatever happens in the country, he is aware.
Speaking on Kumasi-based OTEC FM as part of his Ashanti Regional tour on Monday, President Akufo-Addo said his government is working assiduously to ameliorate the plight of Ghanaians.
He cited the government’s negotiations with the International Monetary Fund (IMF) as part of the plans to resolve the crisis.
“I know times are hard for Ghanaians. The data comes to me. So I’m very much aware. I know things are hard for Ghanaians. But two things I can say is that we have a plan and programme to help us resolve this.
“That is why we are in negotiations with the IMF. It’s part and parcel of a larger programme of development we want to embark upon to solve the current hardship in the country.
“So it is not like the government is not doing anything about it,” the President said.
Meanwhile, he has assured Ghanaians that his government is committed to ensuring they are cushioned.
“We are working hard to try and find a solution to these problems because we know Ghanaians are suffering.”
Earlier, the President said he is not threatened by calls for the New Patriotic Party (NPP) to be voted out of office in the 2024 election.
He said such threats do not frighten him.
“No problem. I am saying people make those kinds of threats; me they don’t frighten me.”
According to him, although he understands the masses may support a party with an expectation, he, however, does not see the need to threaten the government if it fails to deliver.
“If you decide to vote for the NDC in the general election, it is your choice and that is not my problem. No one will force you to vote for someone,” he stated.
Nineteen of the Sub-Saharan Africa region’s 35 low-income countries are in debt distress or at high risk of distress, the International Monetary Fund (IMF) has stated in its October 2022 Regional Outlook Report.
Out of the other 10 countries in the region, the Fund said three have faced spreads of more than 1,000 basis points at some point over the past six months. The three are Angola, Nigeria and Gabon.
The Fund however did not mention the names of the 16 countries. But, those with a ratio of high debt-to-Gross Domestic Product (GDP) are expected to be part of the countries that are in debt distress or at high risk of distress.
On public debt, the Fund said the regional indebtedness is now approaching levels last seen in the early 2000s before the impact of the Heavily Indebted Poor Countries Initiative, though with a different composition.
“About half of the countries are expected to undertake some consolidation this year—regionwide deficits are projected to narrow by about ½ percent of Gross Domestic Product (GDP) after a larger consolidation of about 1¼ percent in 2021, bringing average debt at end-2022 down to around 55% of GDP. Approximately one-third of the region’s economies now have debt levels above 70% of GDP”.
Global financial conditions becoming less forgiving
The Fund also said the global financial conditions are set to become less forgiving, saying, much of the current debt has been contracted during a period of historically low-interest rates.
“Looking ahead, as global policy rates normalize, financial conditions will continue to tighten, adding to external borrowing costs and weighing on sub-Sahara Africa’s debt dynamics. Over the next few years, already-high interest payments are projected to increase as a proportion of revenue, exceeding 50% in some cases and far surpassing the burdens seen in other regions”.
Furthermore, the Fund said as global conditions tighten, borrowing costs may also become more volatile, explaining “as with other emerging markets, sub-Saharan African borrowers are subject to sudden changes in market sentiment, particularly those perceived at greater risk.
During the most recent turmoil, for example, the Fund stressed that sovereign spreads fluctuated widely, disrupting the plans of some countries that had aimed to issue during the year.
The IMF at its annual meetings in Washington this week indicated increased support for economic recovery in Africa.
The IMF wants to speed up long-delayed debt restructurings for Zambia and Chad to institute by year-end. In Zambia, a combination of tighter monetary and fiscal policies and the elimination of custom duties have tamed inflation to 9.9% from 21% in the past year.
The Kwacha has been Africa’s best performing currency, rallying around 18% year to date, after Zambia secured a $1.3bn bailout package from the IMF.
Prospects remain positive given the debt restructuring plans to be concluded this year in addition to improved global consumption for the copper producing country.
Debt restructuring should also help spur recovery for Chad amid a pick-up in oil and agricultural output. In other news from the IMF meetings, the Fund is seeking to include clauses in future debt contracts that will allow borrowers to suspend debt servicing commitments in the event of a climate shock.
Meanwhile, Rwanda is set to become the first African country to benefit from a $40bn Resilience and Sustainability trust fund set up by the IMF to help countries deal with the impact of climate change. A $310m staff-level agreement reached with the IMF will enable the Rwandan government to integrate climate-related considerations into its overall fiscal reforms. The Rwandan franc has contracted by about 5% in the past year to RWF 1065 per dollar, against a backdrop of inflation soaring to 23.9% this year amid continued dependence on Russian wheat and fertilizer. A combination of the country’s economic reforms and an agreed IMF climate change related support programme could be a long-term boost for the currency.
Naira weakens as Nigeria considers debt restructuring
The Naira continued its slide against the dollar this week, trading at 734 from 722 at last week’s close, as Nigeria’s government said it was considering options to restructure its debt. Finance Minister Zainab Ahmed said the country has appointed a consultant to look at ways to ease its debt burden, such as extending repayment periods, according to Bloomberg.
Nigeria’s oil output continues to decline amid rising oil theft and vandalism, with the country now Africa’s fourth biggest crude producer behind Angola, Libya and Algeria, having started the year as the continent’s largest. That is piling further pressure on the Naira given that oil revenues are by far the biggest source of FX for the central bank. We expect further depreciation in the unofficial market in the short term as demand pressures continue to weigh heavily on the local currency.
Cedi touches new low amid record 37% inflation
The Cedi depreciated against the dollar again this week, trading at 10.58 from 10.45 at last week’s close, having briefly touched a record low of 10.63 on Tuesday. Annual inflation hit a record high 37.2% in September, up from 33.9% in August.
Ghana’s interest rate is currently at 24.5%, its highest level since 2017 following last week’s 250 basis point hike. Given that inflation is being driven mainly by the supply side, the bank’s rate hikes are not proving as effective in curbing rising prices.
Fitch Ratings has warned that a sovereign debt default is a real possibility, with any kind of domestic restructuring likely to severely impact the local banking sector. Against that backdrop, we expect the Cedi to continue weakening towards the 11 level in the near term.
Risk-off drives Rand lower as planned power cuts ease
The Rand weakened against the dollar, trading at 18.18 from 18.04 at Friday’s close as risk-on sentiment of last week was snuffed out amid concerns about global growth and an escalation of Russia’s war in Ukraine. On the domestic front, planned power cuts are expected to ease this week.
A workers’ strike at freight company Transnet has seen South African coal exports slow to the lowest level in a year, causing coal prices to jump higher.
Europe’s increased dependence on South African coal amid the ongoing energy crisis is likely to provide some support to the Rand in the months ahead. For the near term, we expect the Rand to continue trading in line with global risk sentiment.
Egypt Pound at record low as banks limit FX withdrawals
The Pound edged to a fresh low against the dollar, trading at 19.69 from 19.66 at last week’s close.
Egyptian banks have been taking steps in recent days to limit the withdrawal of foreign currency to protect against a scarcity of dollars in the country. The central bank is also considering allowing non-deliverable forwards so companies and investors can hedge exposure to large swings in the Pound.
Meantime, annual inflation climbed to 15% in September from 14.6% a month earlier, pushed higher by rising food and transportation costs.
We expect the Pound to weaken further in the coming days, although Egypt’s hosting of next month’s UN climate change conference COP 27 could help drive FX inflows with increased visitors.
Shilling slides as Kenya reserves hit 7-year low
The Shilling depreciated against the dollar, trading at 120.80/121.00 from 120.70/120.90 at last week’s close—just shy of a record low—due to increased dollar demand by importers in the oil, energy and manufacturing sectors.
Economic growth slowed for a fourth consecutive quarter, hitting 5.2% in Q2 of the financial year from 6.8% in the previous three-month period as election-related uncertainty and the worst drought in 40 years weighed on activity. To support the Shilling, the central bank sold an unspecified amount of dollars.
Kenya’s FX reserves fell to $7.3bn last week from $7.4bn a week earlier—the lowest level in seven years—amid lower foreign funding, faster import growth and a slowdown in remittances. We expect the Shilling to stabilise in the coming week as the central bank continues to dip into reserves to cushion against volatility.
Ugandan Shilling weakens amid rate hikes
The Shilling weakened against the dollar, slipping to 3831 from 3817 at last week’s close. Uganda said it was working with China, the US and Russia to find potential investors to help develop East Africa’s first nuclear power plant, which the government hopes to have operational by 2031.
Meantime, Uganda’s purchasing manager’s index climbed to 51.6 in September from 50.5 in August, the strongest level in five months. The central bank said more rate rises could be on the cards following last week’s 100 basis point hike.
Uganda’s benchmark interest rate has increased by 350 basis points since June, now at a three-year high of 10%. We expect the Shilling to weaken further in the near term due amid higher import costs.
Tanzania outlook raised at Moody’s as exports soar
The Shilling appreciated marginally against the dollar, trading at 2331 from 2332 at last week’s close.
Moody’s upgraded Tanzania’s credit outlook to positive from stable, affirming its B2 rating, five levels below investment grade, based on lower political risk given the government’s new approach to promoting economic development and engagement with the international community.
Tanzanian exports hit $1.4bn during the 12-months to August, a 75% increase on the previous 12-month period. We expect the Shilling to continue strengthening modestly against the dollar in the week ahead.
The International Monetary Fund (IMF) will provide support to African countries hit by food price rises, the institution’s Africa head Abebe Aemro Selassie has said.
“The surge in food prices has meant that there are a lot of people that have become food insecure.
“Global economic issues have also become difficult. Access to financing has dried up,” he told Focus on Africa, the BBC’s flagship radio programme for the continent.
“Countries have been hit much worse than we expected.”
Responding to criticism from listeners that the IMF imposes programmes seeking its help, Mr Abebe defended the IMF’s record.
“This is not your grandfather’s IMF,” he said adding that solutions are not brought in from outside and African ministers know they now have agency when dealing with the IMF.
The UK High Commissioner to Ghana, Harriet Thompson has said Ghana is not alone in facing economic challenges.
She said in a tweet that there was the need to take the difficult decisions and come together internationally to get through.
Her tweet comes after the UK’s Minister for Development, Vicky Ford said “Ghana is a great friend of the UK.
“In my meeting with Hon. Minister Ofori-Atta @MoF_Ghana we discussed the global economic challenges and the support we as the international community can offer Ghana, including a possible new @IMFNews programme.”
Harriet Thompson tweeted “Ghana is not alone in facing economic challenges. We must be ready to take the difficult decisions & come together internationally to get through. We look forward to welcoming you back to Ghana in your new role@vickyford(& we’re glad to see you love your made-in-Ghana jacket!”
Ghana is not alone in facing economic challenges. We must be ready to take the difficult decisions & come together internationally to get through 🇬🇭🇬🇧
We look forward to welcoming you back to 🇬🇭 in your new role @vickyford (& we’re glad to see you ❤️ your made-in-Ghana jacket!). https://t.co/qh9CwLB58p
— Harriet Thompson (@HCThompson001) October 14, 2022
Meanwhile, the G7 has asked the World Bank to provide financial support to Ghana and other African countries to enable them deal with the impact of the economic crisis caused by force majeures.
The decision was taken during a meeting with African Finance Minsters with the G7 as part of the ongoing World Bank/International Monetary Fund (IMF) Meetings in Washington D.C.
The G7, an informal grouping of seven of the world’s advanced economies: Canada, France, Germany, Italy, Japan, the United Kingdom, the United States and the European Union.
Representatives from Ghana, Tunisia, Morocco, Senegal were all at the meeting.
Speaking in an exclusive interview with TV3, Ghana’s Finance Minister Ken Ofori-Atta described the meeting as historic because this is the first time African Finance Ministers have been invited to for such discussions.
Mr Ofori-Atta said “It was actually quite a historic meeting because for the first time the G7 has called African Finance Ministers to deliberate on the crisis that they see.
“The trues that these are exogenous factors that have really, even their own economies put it under serious stress and are therefore, looking for ways in which they can add to the capital needs to make sure that things do not deteriorate. So countries such as Ghana, Senegal, Tunisia, Morocco were there.”
He added “The empathy is clear, the need to [introduce] something new and therefore, their interest in encouraging the world Bank to find more resource, tapping into the private sector so that they will stabilize where things are going.
“They have reduced growth rate to 2.7 per cent expecting a grim and difficult period, they don’t want to make sure that things deteriorate from liquidly to insolvency to chaos.”
The meeting brings together central bankers, ministers of finance and development, parliamentarians, private sector executives, representatives from civil society organizations and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness.
Also featured are seminars, regional briefings, press conferences, and many other events focused on the global economy, international development, and the world’s financial system.
Former President John Dramani Mahama has said that any government that comes to office must ensure the country never seeks a bailout from the International Monetary Fund (IMF) again.
That, he said, was because constantly seeking bailouts from the organisation creates instabilities thereby threatening the country’s democracy.
“This should be the last time because going and coming to the IMF creates a certain instability in the whole system and reduces the faith that people have in our democracy,” he said.
He made the statement in a television interview on the Voice of America (VOA) Straight Talk Africa programme in Washington DC.
Home-grown policies
Mr Mahama said engaging in an IMF programmewould bring the country’s debts back to sustainable levels and help to achieve policy credibility which would motivate investors to do business in the country.
However, he urged the government to also develop home-grown policies aimed at transforming the economy to ensure investor confidence.
Mr Mahama also said the government must make reducing the budget of the Office of the President a key aspect in the negotiations with the IMF which, according to the former president, was necessary to show the government’s commitment to reduce expenditure.
“They have to cut the budget to the Office of the President to show the way because if the president himself is cutting the budget of government machinery, then it means everybody must be prepared to make a sacrifice,” he explained.
The former president therefore stated that the next National Democratic Congress (NDC) government would strengthen stated-owned institutions and undertake a constitutional review as part of their strategy to sustain the economy.
“We have been operating it for more 26 years and I think the time has come to look at it again and do some tweaking so that we can have a proper constitutional environment in which to grow the economy,” he added.
Opportunity for Africa
Mr Mahama also stated that the current global economic crisis had presented Africa with a unique opportunity to trade internally.
“It is an opportunity for us to look within and see why we can go better in terms of trading with ourselves.”
Mr Mahama was hopeful that the initiative would increase Africa’s internal trade which would create opportunities for its citizens particularly the youth to realise their full potentials.
The British diplomatic service copes well with fast-changing plans… and for the staff of the British Embassy in Washington, from the ambassador to the chefs, Thursday evening was one to remember.
The (now ex) chancellor was in town for the IMF annual gathering. He’d already missed key meetings throughout the day.
I’d watched an aide, red government folder in hand, dash across the IMF atrium to tell organisers that Kwasi Kwarteng’s deputy would take his seat. Something was afoot.
By early evening the intrigue shifted to the British Embassy.
I joined a couple of hundred guests for a drinks reception hosted by theambassador and the Institute of International Finance. The chancellor was the guest speaker.
He came, he spoke, he was confident, he was relaxed. But the dinner organised for later at the ambassador’s residence was off. The staff had been told to prepare drinks and canapés instead.
We journalists were encouraged to leave the reception and head to the residence. The chancellor had something to tell us.
And so, after a scuttle through the Washington rain from embassy to residence, I found myself listening to a chancellor – white wine in hand – reveal that he would be leaving the IMF on the red-eye flight to London.
Important talks on the fiscal plan, we were told.
Within 10 hours he’d been fired.
DISCLAIMER: Independentghana.com will not be liable for any inaccuracies contained in this article. The views expressed in the article are solely those of the author’s, and do not reflect those of The Independent Ghana
Source: SkynewsBy Mark Stone, US correspondent in Washington DC
The International Monetary Fund (IMF) has projected that Ghana will end the year with a Debt-to-GDP of 90.7 per cent.
This according to myjoyonline.com was captured in its Fiscal Outlook Report released on the sidelines of the on-going IMF/World Bank Annual meetings in Washington DC, USA.
The report, also forecasts that the Debt–to-GDP could reduce to 87.8 per cent in 2023.
According to the IMF, revenue expressed as a ratio of GDP could also hit 14.1 per cent at the end of 2022.
It will subsequently increase to 14.7 per cent in 2023 and 15.4 per cent in 2024”, the report said, classifying Ghana as a Low Income Developing Country.
Ghana is currently undergoing Debt Sustainability Analysis with the IMF and the World Bank. This is expected to help the country ascertain the true levels of the debt stock.
The country was recently classified as a High Risk of Debt Distress by the World Bank and IMF in its Debt Sustainability Analysis.
The two Bretton Wood institutions are currently conducting a new Sustainability Debt Analysis on Ghana – a situation that could influence the outcome of an economic programme with Ghana by the end of 2022.
The Finance Minister, Ken Ofori-Atta, has already indicated that government is working hard to reach a programme with the IMF by November 2022.
The government is hoping to secure a programme with the IMF before the 2023 Budget presentation in parliament within the same period.
In October 2022, data from the Bank of Ghana pegged the country’s debt stock at ₵402 billion as of July 2022, representing 68 per cent of GDP.
Some financial observers have stated that with an expected expansion of the economy and an IMF programme, the country’s debt stock may not reach “unsustainable levels”.
The World Bank in its Africa Pulse Report released in October 2022 projected that Ghana will end 2022 with a Debt –to –GDP ratio of 104 per cent.
Nothing is inevitable in politics, but if the markets are expecting a U-turnand there isn’t one, then the situation could get worse both politically and economically for the prime minister.
I don’t think we’re going to see a complete unpicking of the mini-budget from last month but, as we’ve been hearing, one of the possible U-turns would be over corporation tax.
Rishi Sunak wanted to put corporation tax up from 19% to 25% from next year, and it was a central plank of Liz Truss’s campaign during the summer to become Conservative leader to ditch that tax rise.
There is speculation she will put it up a little bit – perhaps not the full amount that Sunak was suggesting. If there is a U-turn at all, certainly that may help steady nerves in the market but politically it could be very damaging.
There are now questions about who will be in charge of economic policy. Is it Chancellor Kwasi Kwarteng, who is returning early from the IMF meeting in Washington, or is it No 10?
The decisions to be taken on the economy – and the reaction to them – could determine whether Truss’s policies and her premiership, can survive until the next election.
DISCLAIMER: Independentghana.com will not be liable for any inaccuracies contained in this article. The views expressed in the article are solely those of the author and do not reflect those of The Independent Ghana
The International Monetary Fund (IMF) has predicted a tough 2023 as it cut growth predictions and forecast economic contraction in a third of the world.
“The worst is yet to come,” the global financial institution’s World Economic Outlook report said.
“For many people 2023 will feel like a recession,” it added.
A downward revision of the global growth rate for 2023, from the amount the IMF said it expected in July, has been made in the report.
Now, 2.7% growth is expected next year. It’s down from the 6% growth experienced last year and the 3.2% growth forecast for this year.
This is the “weakest growth profile” since 2001, excluding the acute phase of COVID-19 pandemic and the global financial crisis, the IMF said.
It reflects “significant slowdowns” for the largest economies as America’s gross domestic product (GDP) contracted in the first half of 2022, followed by the Euro area’s contraction in the second half of 2022, and prolonged COVID-19 outbreaks and lockdowns in China with a growing property sector crisis.
“The world is in a volatile period: economic, geopolitical, and ecological changes all impact the global outlook,” the report says.
While the IMF issued a warning to the UK, following the mini-budget market turmoil, this World Economic Outlook report was completed prior to the chancellor’s mini-budget announcement, so does not reflect the ensuing market activity.
Nevertheless, IMF chief economist Pierre-Olivier Gourinchas told reporters that the government should ensure its tax and spending plans are in line with the Bank of England’s inflation-fighting remit.
“Fiscal policy should be aligned with monetary policy,” he said when asked about Britain’s economic situation and the turmoil in its government bond market.
“Central banks are trying to tighten monetary policy, and if you have at the same time fiscal authorities that try to stimulate aggregate demand, it’s like having a car with two people in the front… each trying to steer the car in a different direction. That’s not going to work very well.”
The future health of the global economy relies on the “successful calibration” of monetary policy, the course of the war in Ukraine, and the possibility of further pandemic-related supply-side disruptions, for example, in China.
Inflation could also continue to worsen as more energy and food price shocks cause it to persist for longer.
About a third of the world economy faces two consecutive quarters of negative growth, the IMF also forecast.
A 5-member Consultative Committee has been set up by the government to lead extensive stakeholder engagement as the country negotiates with the International Monetary Fund (IMF).
Before a deal with the IMF for an economic programme is finalised, the committee, which is made up of eminent members of the financial services industry, will review opinions from financial sector players on how to address issues in the financial sector.
They will also provide guidance and, among other things, lead conversations with the financial services industry and other stakeholders in order to provide industry-wide input and relay industry concerns about debt management strategy to the Ministry of Finance and the Bank of Ghana.
The Committee, according to the Finance Ministry, is chaired by Albert Essien, with Simon Dornoo as vice chair.
Mr Essien is the Board Chairman of Ghana Amalgamated Trust. He holds a Bachelor of Arts degree in Economics from the University of Ghana, Legon, and is a fellow of the Chartered Institute of Bankers, Ghana.
The committee also includes Peter Enti, Mabel Nyarkoa Porbley, and Alex Asiedu.
According to the Ministry of Finance, the 5-member team will “will immediately get to work to engage key stakeholders in the financial services sector, in addition to ongoing engagements with Civil Society Organizations (CSOs), social partners (labour unions, employers, and FBOs), academia, industry professionals, and the leadership of Parliament.” The government, as part of efforts to restructure the country’s economic debt, is still in talks with the IMF on the country’s medium- term macro-fiscal framework.
The IMF team, which has reaffirmed its commitment to assisting Ghana in its current economic difficulties, has conducted a debt sustainability analysis (DSA) to help inform the economic programmes required to put the country’s debt levels on a sustainable path in the medium term.
So far, the IMF programme is hinged on seven (7) pillars, namely: Debt Sustainability, Fiscal Consolidation, Strengthening Monetary and Exchange Rate Policies, Building Strong Financial Institutions, Macro-Critical Structural Reforms, Maintaining Peace and Security, and Economic Growth and Transformation.
Kow Essuman, lawyer for President Nana Addo Dankwa Akufo-Addo has expressed belief in the ability of Finance Minister, Ken Ofori-Atta, to steer Ghana out of the current economic downturn.
Essuman’s belief is anchored in the fact that the Minister has steered Ghana out of a crisis and that “he will do it again.”
“I am confident that Finance Minister, Ken Ofori-Atta, will get a good deal for Ghana and steer us out of these times very soon. He has done it before, and he will do it again,” tweeted on October 11, 2022.
His views accompanied a GhanaWeb curated publication from the Business and Financial Times portal, in which Ofori-Atta expressed satisfaction with progress made so far with regards to negotiation with the International Monetary Fund for an economic programme.
“This has been a very productive mission and I thank the IMF Team and all stakeholders for their commitment over what has been a marathon fortnight. The Government of Ghana is deeply encouraged by the progress made so far,” he said.
“We look forward to continuing our engagement and remain committed to working tirelessly to create a stable and resilient macroeconomic environment, ensure debt sustainability, and maintain social cohesion.
“Ghana is at a pivotal moment in her history and we are grateful for the IMF’s support, and indeed the support of all Ghanaians, as we work together to bolster Ghana’s build back effort,” he is quoted to have said.
His views come after the IMF mission team led by Stéphane Roudet completed its work in assessing the state of the Ghanaian economy.
I am confident that Finance Minister, Ken Ofori-Atta, will get a good deal for Ghana and steer us out of these times very soon. He has done it before, and he will do it again.
The International Monetary Fund (IMF)and the World Bank have warned of a possible global recession at the start of the annual meeting of the two bodies in Washington on Monday.
Growth was slowing in the industrialized countries of Europe, World Bank President David Malpass said.
Referring to the dollar’s recent rise, he said currency devaluation posed a problem for low-income countries, where the debt burden was growing.
“The rise in interest rates was an additional burden for these countries, and inflation remained a major problem for all, but particularly for the poor,” Malpass said.
IMF Managing Director Kristalina Georgieva noted slowing economies in all three of the world’s major economic zones. She pointed to increased energy prices as a problem for the eurozone and to outbreaks of the coronavirus pandemic in China as a persistent cause of supply chain problems.
While the labour market in the United States remained strong, jobs growth was slowing in response to interest rate increases imposed by the Federal Reserve.
On Tuesday, the IMF is to present its latest forecasts for the global economy. Georgieva has announced that the growth prediction will be reduced again.
She pointed to factors such as the pandemic, the Russian invasion of Ukraine and climatic disasters on all continents as creating problematic situations.
For the first time since 2019, the meeting is taking place in a single location, with gatherings over recent years being in hybrid format.
The meeting brings together finance ministers and representatives of banking and development aid, as well as central bankers.
Yaw Osafo-Maafo, a senior presidential advisor, has disclosed that the government flagship Free Senior High School, Free SHS, programme will remain untouched amid talks with the International Monetary Fund, IMF, for a financial rescue programme.
He disclosed at an event in Accra on Monday, October 10, that the programme and social interventions in the education sector, in general, will not be impacted by ongoing negotiations.
He dismissed calls for the IMF to demand cuts to the Free SHS expenditure admitting, however, that calls for a relook at the programme’s implementation were in the right direction.
“If there is any sector that we should not touch the expenditure, that sector is education. Because we are protecting the potential use of our resources in a very efficient and effective manner.
“So, if you touch education, you are undermining your own development paradigm. So, that is not the area to go when you decide to cut expenditure,” he stressed.
On the Free SHS policy, he pointed out how political opponents “fan their support base by pointing out the amount of money the government will save if the Free SHS is abolished.
“People have written and I have read in the papers arguing that one of the first things IMF should look at as they admit us into the IMF programme is to cut the Free SHS. Let me tell you here and now, we are negotiating with the IMF and Free SHS will not be touched, we cannot touch it,” he stressed.
He pointed out further that the IMF as an institution was pro-poor adding that free High School education was a social intervention that is being enjoyed across the Western world.
“The IMF itself as an institution is pro-poor, the IMF itself believes in education so how can IMF ask you to cut Free SHS? Don’t you have Free SHS in America, don’t you have Free SHS in Germany, don’t you have it in Europe?
“Most of the developed world has Free High School, so we are taking the right path towards development and I can assure you that the IMF will not touch the Free SHS,” he stated.
On the issue of calls for a review of the programme, he said: “Let us meet to discuss the overall implementation with the view to improving efficiency and effectiveness and we may realign certain things, but cutting it is out of the question.”
He argued that the economy can support flagship programmes currently in place, “the challenges being faced are short-term and we cannot afford to sacrifice our common vision due to short-term economic pressures,” he added.
The Free SHS programme has become topical in recent times with the government seeking a programme with the International Monetary Fund, IMF, amid an economic downturn.
Calls for a review of the programme have heightened whiles fears of the IMF calling for a scrapping or massive review of the programme have also come up.
Government insists that Free SHS will remain untouched in its current form, allying with any fears and or critique.
The Free SHS policy is one of the main policies of the government of Ghana, which started in September 2017.
“Every child in Ghana who qualifies for, and is placed in a public Senior High School for his secondary education will have his/her fees absorbed by the government,” the Free SHS secretariat said on its website.
According to Dr. Patrick Assuming, an economist, there are two things that can affect the trajectory of macroeconomic data before the year is out.
According to The Economist, Ghana’s condition could change if it can obtain funds from the IMF before the year is up since it will boost investor confidence in the economy.
“There are two news items that we are expecting before the end of the year which could make a difference. One is if the IMF deal goes through and the other is what the finance minister will say during the reading of the 2023 budget. If there is the indication from the budget that the government is showing commitment by way of fiscal policy measures, we might see some improvement.
“If also there is the indication that the IMF deal has been agreed and we will make progress quickly, that might change investor sentiments and thereby improve what will happen after that,” he is quoted by citibusinessnews.com.
As of August 2022, the country’s inflation has stood at 33.9%.
The Ghana cedi has also depreciated by almost 40% against other major trading currencies, ranking as the second worst-performing currency in the world.
Ghana’s economic situation is expected to see marginal improvements in the coming days as the country continues to discuss financial assistance with the International Monetary Fund (IMF).
An economist, Dr. Patrick Asuming, has stated that before the end of the year, there are two things that can make a difference in the trajectory of macroeconomic indicators.
The Economist indicated that being able to secure funding from the IMF before the year ends could make a difference in Ghana’s situation because this will improve investor confidence in the economy.
Also, he added that the commitment that will be proven by the government in the 2023 budget will also go a long way to show that it is making efforts to ensure that the economy rebounds.
“There are two news items that we are expecting before the end of the year which could make a difference. One is if the IMF deal goes through and the other is what the finance minister will say during the reading of the 2023 budget. If there is the indication from the budget that the government is showing commitment by way of fiscal policy measures, we might see some improvement.
“If also there is the indication that the IMF deal has been agreed and we will make progress quickly, that might change investor sentiments and thereby improve what will happen after that,” he is quoted by citibusinessnews.com.
As of August 2022, the country’s inflation has stood at 33.9%.
The Ghana cedi has also depreciated by almost 40% against other major trading currencies, ranking as the second worst-performing currency in the world.
The International Monetary Fund (IMF) team has concluded its discussions with government on policies and reforms that could be supported by a fund lending arrangement.
The team, led by by Stéphane Roudet, Mission Chief for Ghana, arrived in Accra on September 26, 2022.
In an earlier press statement, the IMF team said the visit will include engagements with other stakeholders such as the Bank of Ghana, Parliament, business associations and civil society groups.
Stéphane Roudet, Mission Chief for Ghana
At the conclusion of the latest visit, Mr. Roudet in a statement said, “key areas of focus included ensuring public finance sustainability while protecting the vulnerable, bolstering the credibility of monetary and exchange rate policies to reduce inflation and rebuild external buffers, preserving financial sector stability, and steps to encourage private investment and growth, including by improving governance, transparency, and public sector efficiency.”
According to him, “The team will return to Washington, D.C. to advance its technical work. This includes making further progress on assessing Ghana’s debt sustainability. The discussions with the authorities will also continue in the weeks ahead, including during the upcoming Annual Meetings that will be convened at IMF headquarters.”
Ghana is looking at a sustainable debt path, which is one of the requirements for an IMF programme.
The IMF/World Bank and the government are undertaking a debt sustainability analysis (DSA) to inform the programme negotiations.
This means that a conclusion has not been drawn on the framework of any debt operations.
From January to July this year, Ghana’s overall fiscal deficit amounted to GH¢31.1 billion, which is 5.3% of the Gross Domestic Product (GDP).
As of August, the country’s inflation stood at an all-time high of 33.9%. The Ghana cedi has depreciated by 37.1% against the US dollar as of September 27th, 2022.
Also, the Fund and the government are now reviewing the country’s medium-term macro-fiscal framework. This is looking at a three-year expenditure plan which sets out the medium-term expenditure priorities and budget constraints, as well as focuses on sectors that need to be developed and refined.
According to the Finance Minister, both factions are discussing policy measures and structural reforms proposed in the economic programme aimed at “addressing the economic challenges facing the country towards restoring and sustaining macroeconomic stability, fiscal and debt sustainability, as well as promoting durable and inclusive growth and social protection.”
As government irons out issues with the Fund, the Finance Ministry has announced that it will set up a 5-member committee which will consist of prominent financial service professionals to engage key stakeholders in the financial services sector, in addition to ongoing engagements with Civil Society Organizations (CSOs), social partners (labour unions, employers, and FBOs), academia, industry professionals, and the leadership of Parliament.
The list of members of the committee will be released in the coming days, the Finance Minister has assured.
Government has made it known that it seeks to be transparent in its engagement with the IMF, therefore, the Finance Ministry is contemplating a weekly report.
Martin Amidu, a former special prosecutor, claims that the government is planning to use the IMF as a smokescreen to impose an austerity budget on the people of Ghana.
Since the government is currently negotiating with the IMF, Mr. Amidu has called nationalists and crusading civil society organizations to insist on and demand openness and accountability from them.
“This year, the IMF will be used as a pretext to compel Ghanaians to make sacrifices while the ruling elite relaxes and gorges itself on our sweat.
We shouldn’t wait for those responsible for our economic woes to use the IMF as leverage to threaten the country and impose an austerity budget without seeking our input or getting our consent. Now is the time to demand accountability and openness.
We have the authority to do this and put Ghana first thanks to the 1992 Constitution,” he said in a statement.
Mr. Ofori-Atta has also disclosed that a team of government officials will from this weekend travel to Washington, DC in the USA for two weeks to continue negotiations with the Fund to fast-track the deal.
But the former Special Prosecutor argued the People are entitled to know the content of the dialogue with the Bretton Woods Institution billed to form part of the Minister for Finance’s 2023 Budget Statement to Parliament.
“In the November 2021 Budget for the year 2022, this government rammed down our throats the E-Levy that went to Parliament without any prior consultation with the generality of the people and stakeholders. It is an understatement to say that a majority of Ghanaians were against the E-Levy but with arrogance and impunity, the government corruptly bought its way with the political elite to approve and enact the E-Levy into law. The consequent reaction from Ghanaians is there for all to see how successful a reception that policy received and is receiving.” Martin Amidu added.
Former Special Prosecutor, Martin Amidu, has berated the Akufo-Addo government for failing to consult Ghanaians before going into negotiations with the International Monetary Fund (IMF) for a bailout.
In a statement copied to GhanaWeb, Martin Amidu said that the government has not learnt from the failure of its policies like the E-Levy which it forced on Ghanaians and it is now doing the same thing with the IMF bailout.
He added that the ongoing IMF negotiation is shrouded in secrecy and because the government is rushing to get a bailout before the presentation of the 2023 budget in November 2022, it will accept anything from the IMF even if it will hurt ordinary Ghanaians.
“We the people are entitled to know the content of the dialogue the President, a well-known comprador bourgeoisie who has run this country into its present economic mess, has had with the IMF Managing Director, Kristalina Georgieva, that they have both already sealed the fate of Ghanaians from being part of or privy to the on-going negotiations which she had agreed with the President will form part of the Minister for Finance’s November 2022 Budget Statement to Parliament.”
“Ghanaian patriots and civil society organizations should, therefore, heed the signal of impunity sent out by the Government to use the International Monetary Fund (IMF) as a smokescreen behind which to ram down the throat of Ghanaians an austerity budget in November 2022 without any extensive and in-depth transparent and accountable consultations with “We the People” as required under any democracy.”
Also, Amidu alleged that after mismanaging the resources of the country, Akufo-Addo wants to use the IMF negotiation to ensure that he has a safe retirement.
“President Akufo-Addo through his cousin, the Hon. Ken Ofori-Atta, the Minister for Finance who has given notice that the suffering of Ghanaians occasioned by the mismanagement of our economy by their Family and Friends’ government provides them the opportunity to use the IMF negotiations as means of carrying through all the diabolical policies that enables them to build annuities abroad with the resources of this country,” he said.
The Monetary Policy Committee of the Bank of Ghana is anticipated to make its decision following the postponement of its 108th scheduled meeting to discuss economic developments.
After the Committee delayed its statement to coincide with the conclusion of the IMF mission team’s visit to Ghana, this has happened.
The Bank earlier explained the postponement is “to allow the decision on the policy rate to benefit from the broader discussions to be held during the period.”
The MPC has held its regular meeting from September 20, 2022, to Friday, September 23, 2022, to review developments in the economy.
Meanwhile, inflation for the month of August hit 33.9% with food and transportation being the major contributors. With the rise in inflation, it is expected that the committee will further hike the policy rate.
Ghana’s long-term issuer and senior unsecured debt ratings have been downgraded by international rating agency Moody’s Investors Service to Caa2 from Caa1 and are currently being reviewed for a downgrade.
On September 30, 2022, Moody’s published a statement on its official website stating that “Without external support, the government’s policy levers to arrest a worsening macroeconomic backdrop and heavier debt burden are extremely limited; the government’s small revenue base, large and increasingly absorbed by interest payments, further intensifies the policy dilemma between competing objectives, including servicing debt while meeting essential social needs.”
It however explained that the initiation of the review for downgrade is prompted by the ongoing negotiations between the government of Ghana and the IMF over a funding programme that may include a condition for debt restructuring to ensure debt sustainability.
“Such a restructuring would likely be considered a distressed exchange and thereby a default under the rating agency’s definition. The review will evaluate the likelihood of a debt restructuring being a prerequisite to secure sufficient and durable financing from official sources to avert a fiscal and balance of payments crisis that is already unfolding,” Moody’s noted.
The Government of Ghana’s long-term issuer and senior unsecured debt ratings have been reduced by Moody’s Investors Service (“Moody’s”) to Caa2 from Caa1 and are currently being reviewed for a downgrade.
Additionally, Moody’s has lowered the senior unsecured MTN program ratings from (P)Caa1 to (P)Caa2 under review for a downgrade.
The recent macroeconomic deterioration, which has worsened the government’s liquidity and debt sustainability issues and raised the likelihood of default, is reflected in the rating downgrade to Caa2.
Despite Ghana’s tightening of monetary policy in response to the global price shock, inflation continues to rise from high levels and the currency has been under very significant pressure. Combined, a sharp rise in interest rates, high inflation and a rapidly weakening currency exacerbate the government’s debt challenges.
Without external support, the government’s policy levers to arrest a worsening macroeconomic backdrop and heavier debt burden are extremely limited; the government’s small revenue base, largely and increasingly absorbed by interest payments, further intensifies the policy dilemma between competing objectives, including servicing debt while meeting essential social needs. As a result, the risk of an eventual default has increased.
The initiation of the review for downgrade is prompted by the ongoing negotiations between the government and the IMF over a funding programme that may include a condition for debt restructuring to ensure debt sustainability. Such a restructuring would likely be considered a distressed exchange and thereby a default under the rating agency’s definition.
The review will evaluate the likelihood of a debt restructuring being a prerequisite to secure sufficient and durable financing from official sources to avert a fiscal and balance of payments crisis that is already unfolding.
Concurrent to the rating downgrade, Moody’s has also downgraded Ghana’s bond enhanced by a partial guarantee from the International Development Association (IDA, Aaa stable) to Caa1 from B3, reflecting a blended expected loss consistent with a one-notch uplift on the issuer rating. The rating has also been placed on review for downgrade given the review initiated on all unsecured debt ratings of the government.
Finally, Moody’s has lowered Ghana’s local currency (LC) and foreign currency (FC) country ceilings to respectively B2 and B3, from B1 and B2. Non-diversifiable risks are captured in a LC ceiling three notches above the sovereign rating, taking into account relatively predictable institutions and government actions, limited domestic political risk, and low geopolitical risk; balanced against a large government footprint in the economy and the financial system and external imbalances.
The FC country ceiling one notch below the LC country ceiling reflects constraints on capital account openness and fiscal policy effectiveness against robust foreign exchange reserves buffers and average monetary policy effectiveness.
Global and domestic rate hikes result in higher interest rates for the government while the loss in purchasing power induced by high inflation is a drag on economic activity. Higher government borrowing costs have rapidly increased its interest spending, which consumed almost half of the government’s revenue in 2021, a proportion Moody’s forecasts to rise to 58% in 2022, one of the highest globally.
Further monetary policy tightening is likely, with negative effects on already extremely weak debt affordability. The Bank of Ghana recently reported that the inflation rate climbed to 34% at end of August 2022 despite previous monetary tightening; the highest reading in Ghana since July 2001.
In the meantime, the local currency, the cedi, has depreciated by around 40% against the US dollar since the start of the year, exacerbating the challenges from an already high debt burden.
Because foreign currency-denominated debt accounted for 37% of GDP at end of 2021, Moody’s forecasts that the currency depreciation over 2022 will be the main contributor to the rise in the debt-to-GDP ratio this year to more than 100% of GDP (104%, 26 percentage points higher than in 2021).
Meanwhile, Ghana’s balance of payments position is deteriorating. Significant outflows in the first half of 2022 led to a fall in foreign exchange reserves to $5.9 billion as of the end of the second quarter of 2022 (covering 4.5 months of imports as of first quarter of 2022, which is the latest data available), down from $8.4 billion at the beginning of the year.
The deteriorating macroeconomic conditions, in particular the deep inflation shock, have further complicated the policy trade-off for Ghana’s authorities: limiting government primary spending to prioritise paying interest to creditors is difficult to reconcile with economic and social development objectives, fueling risks of further social discontent and damaging Ghana’s economic and social outcomes in the medium term.
LIMITED FISCAL POLICY LEVERS AVAILABLE TO ADDRESS INTENSIFYING DEBT SUSTAINABILITY CHALLENGES
Against the backdrop of higher inflation and larger interest payments, the government is left with very limited fiscal policy levers to reverse the deteriorating trend in debt burden and affordability and restore liquidity and external stability. Moody’s expects the government not to achieve the reductions in fiscal deficits targeted in its 2022 budget and instead to run stable deficits.
Notwithstanding the government’s intention at the start of the year to broaden its tax base, its capacity to raise its revenue intake (16% of GDP in 2021) is constrained by the weak macroeconomic environment. Meanwhile, Ghana’s room for manoeuvre on the spending side is also limited.
The interest bill, over which the government has little control in the short- to medium-term, constrains budget flexibility, especially amid large gross borrowing requirements (around 30% of GDP in 2022) and likely no access to international capital markets nor sizeable support from the donor community.
Moreover, there is a limit to the extent to which the government can lower primary spending: while the government had announced large cuts in its main primary spending items earlier this year implying a reduction of 4% year-on-year in total primary spending, budget execution over the first half of 2022 shows that spending rose by 26% instead, reflecting strong spending pressure amid severe economic and inflation shocks.
RATIONALE FOR THE REVIEW FOR DOWNGRADE
The review for downgrade reflects the risk that some form of debt restructuring may be required as part of an IMF funding programme currently under negotiation between the government and the IMF.
The review period will allow Moody’s to assess the risks of a restructuring involving private sector creditors both in the near and more medium term. The rating agency will focus on the government’s strategy to improve the macroeconomic backdrop and reverse the current negative feedback loop between high and rising inflation and interest and foreign exchange rates that are exacerbating the government debt burden and interest bill.
The debt sustainability analysis conducted as part of the IMF programme formulation and the government’s 2023 budget, among other policy decisions, will be important milestones.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
Ghana’s ESG Credit Impact Score is highly negative (CIS-4), reflecting its high exposure to social risks. Resilience to environmental and social risks is weak, constrained by low wealth and high debt levels.
Ghana’s credit profile is moderately exposed to environmental risks (E-3 issuer profile score). The cocoa sector is a large contributor to GDP, exports and employment and being demanding in water, it exposes the country to climate changes and especially droughts.
More generally, the size of the agricultural sector exposes the economy to weather-related disruptions and the effects of climate change. Ghana is also exposed to water management risks stemming from a lack of access to potable water in some areas.
The exposure to social risk is highly negative (S-4 issuer profile score), driven by limited access to quality housing and education, especially in rural areas. Risks related to health and safety and access to basic services are moderately negative.
While the government has put in place measures aimed at reducing poverty and inequality and strengthening social safety nets, its fiscal challenges constrain its scope for meaningful reduction in social risks given more than half of government revenue is consumed by interest payments.
Governance is highly negative with a G-4 issuer profile score. Overall, Ghana’s institutions have shown some effectiveness, however domestic revenue mobilisation challenges and significant constraints on fiscal policy effectiveness manifest in very weak debt affordability. The authorities have undertaken some institutional reforms on the revenue and competitiveness front, which will invariably take time to produce results.
The publication of this rating action deviates from the previously scheduled release dates in the EU sovereign calendar published on https://ratings.moodys.com. This action was prompted by the further acceleration in macroeconomic deterioration to which the sovereign’s credit profile is highly sensitive to.
GDP per capita (PPP basis, US$): 6,194 (2021) (also known as Per Capita Income)
Real GDP growth (% change): 5.4% (2021) (also known as GDP Growth)
Gen. Gov. Financial Balance/GDP: -8.8% (2021) (also known as Fiscal Balance)
Current Account Balance/GDP: -3.3% (2021) (also known as External Balance)
External debt/GDP: 46.1% (2021)
Economic resiliency: ba3
Default history: No default events (on bonds or loans) have been recorded since 1983.
On 28 September 2022, a rating committee was called to discuss the rating of the Government of Ghana. The main points raised during the discussion were: The issuer has become increasingly susceptible to event risks.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody’s would likely downgrade Ghana’s ratings if the likelihood of a debt restructuring that involved private sector creditors increased, with the extent of the rating downgrade depending on the rating agency’s expectations for financial losses.
Conversely, Moody’s would likely confirm Ghana’s ratings at their current levels if the government’s strategy to restore debt sustainability without a debt restructuring looked likely to be effective.
The principal methodology used in these ratings was Sovereign Ratings Methodology published in November 2019 and available at https://ratings.moodys.com/api/rmc-documents/63168.
Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
The weighting of all rating factors is described in the methodology used in this credit rating action, if applicable.
The cedi is ranked as the worst among the 30 top-performing currencies on the African continent.
In July, August and September the cedi lost almost 21% in value to the US dollar, pounds sterling and Euro.
The cedi’s woes come on the back of high debts and low investor confidence which has made it impossible for Ghana to access the international capital market for borrowing.
The government says the IMF support is to help the country recover from challenges caused by external factors such as the covid pandemic and the Russia-Ukraine war.
Bank of Ghana interventions to stabilise the cedi:
1. Once disbursed, the recently approved US$750,000,000 Afriexim loan facility by Parliament, is expected to boost Ghana’s forex position.
2. The Cocoa Loan is expected in the last quarter of the year. This facility will also help provide more foreign currency to help address the cedi depreciation.
3. Gold Purchase Programme to increase foreign exchange reserves.
4. Special Foreign Exchange Auction for the Bulk Distribution Companies (BDCs) to help with the importation of petroleum products.
5. Bank of Ghana is entering into a cooperation agreement with the mining companies to provide BOG with the opportunity to buy gold as when it becomes available.
7. The IMF programme once finalised, will also go a long way to help restore confidence in the economy and drive portfolio flows. These measures will go a long way to increase the foreign exchange reserve position of the Central Bank.
According to a Bloomberg analysis, the Ghana Cedi has the second-worst performance of any currency in the world, trailing only the Sri Lankan Rupee.
The Cedi’s value decline against the US dollar in the first nine months of 2022, according to the worldwide news portal, was the worst in more than 30 years.
As a result of the development, the Ghana Cedi is currently ranked 147th among all major currencies worldwide.
Bloomberg further said the performance of the Cedi has made it the worst among 30 top-performing currencies on the African continent.
Ghana’s Finance Minister, Ken Ofori-Atta recently disclosed that the Ghana Cedi depreciated by 37.1 percent against the US Dollar as of September 27, 2022.
At the start of 2022, demand for forex overtook supplies during a period when high debts and low investor confidence have made it impossible for Ghana to access the international capital market for borrowing.
The situation resulted in the persistent depreciation of the Cedi against the major trading currencies.
As at July this year, the cedi lost its value by more than 20 percent to the US dollar.
In addition, recent economic downgrades by international rating agencies such as Fitch and Standards & Poors’ has also impacted the investor community at large, while Ghana awaits an IMF support programme which is expected to be accessed in 2023.
Dr. Theophilus Acheampong, an economist, doubts government will be able to conclude the deal with the International Monetary Fund before the year ends.
“We have done our own Debt Sustainability Analysis as part of the budget cycle. When the IMF comes to town, they also do theirs, and then both sides sit to agree on the numbers, the debt schedule, how much of that will potentially have to be reprofiled, among others.”
“We are going to the conversation with a sense of where we are as a country, whilst the IMF is also coming with their own DSA. Beyond that, we have to look at how to bring our creditors together to restructure the debt. That is what could potentially extend the duration of the engagement exercise and that means that the December timelines we are looking at to conclude the IMF deal will actually slip a little bit,” he said on The Big Issue on Citi FM/TV,
He further explained that should any of the foreign creditors decide to trigger a number of the collective action clauses or decides to prolong the process, the process will be further delayed.
“From where I sit and given past experiences I struggle to see how we will conclude the Debt Sustainability Analysis and then sit down with the creditors to agree on some sort of Debt Restructuring package, after which we will go through the IMF board for approval and the programme signed.”
“I think we are looking at about a 6-month time period which could go into the first quarter of next year, especially when we are looking at a comprehensive package.”
Reacting to Dr, Acheampong’s projections, the New Patriotic Party’s Director of Communications, Richard Ahiagbah, said they are nothing but “mere speculations.”
He urged stakeholders not to jump the gun, but to be hopeful and see how things unfold.
The formal negotiations for a Fund-supported programme have begun, with the IMF team currently meeting government officials for a period of ten days.
Talks have begun on a comprehensive debt sustainability analysis with the IMF for a US$3 billion support programme.
Finance Minister, Ken Ofori-Atta on Wednesday, September 28, 2022, said government will fast-track negotiations with the International Monetary Fund (IMF) to ensure key aspects of the programme are reflected in the 2023 budget statement.
Professor Peter Quartey, an economist, is optimistic that the potential bailout plan from the IMF will increase investor confidence in Ghana.This comes after the Ghanaian government and representatives of the Fund started the exhaustive debt sustainability research that is necessary to come to an agreement.
A $3 billion dollar goal has been set for Ghana through an economic support program.
Speaking on the development, Prof. Quartey stated that the parties’ desire to negotiate a settlement will send a good message to investors.
“The IMF has its own processes that it goes through to ensure that it comes in to rescue the situation. Some might take six to twelve months. We heard the IMF director say hopefully by December, all things being equal, we’d have the program so we’re hoping for that.”
“Although given the situation that we find ourselves, we need an injection of foreign currency into the country. But the fact that the IMF is engaging Ghana and there is progress, I believe it’s gradually bringing in some confidence into the economy and I believe some investors, despite the Fitch downgrade, will still be looking at Ghana favourably in the coming months.”
The Director of the Institute of Statistical, Social and Economic Research at the University of Ghana said this in an interview with Citi Business News.
In the course of this year, demand for forex has overtaken supplies at a time when high debts and low investor confidence have made it impossible for Ghana to access the international capital market for borrowing.
This has led to the downgrading of Ghana’s creditworthiness to junk status by international rating agencies, culminating in the depreciation of the local currency, and other economic challenges.
The situation has since compelled Ghana to enter negotiations with the International Monetary Fund for a possible economic support programme which is expected to be accessed in 2023 once an agreement can be reached.
Treasury bills and short-term securities will not be affected by the expected debt restructuring programme that the Government of Ghana will undertake after the completion of the Debt Sustainability Analysis by the International Monetary Fund and the World Bank.
According to Associate Professor of Finance at Andrews University, Michigan, USA, Dr. Williams Peprah, the focus of the Debt Sustainability Analysis will be on long-term bonds or securities.
He added that the International Monetary Fund is likely to swap or take care of Ghana’s Eurobonds due in the next four years as part of the debt restructuring programme.
A total of $1.673 billion in Eurobonds will be maturing in the next four years.
They include $148.76 million maturing in August 7, 2023 and the $525 million Zero Coupon maturing in 2025.
Also, the $1 billion Eurobond (back-end amortization) which will mature in 2026 will be paid in three equal instalments. $300 million each will be paid to investors in 2024, 2025 and 2026 respectively.
Dr. Peprahtold Joy Business the Debt Sustainability Analysis will review thoroughly the country’s Eurobonds, local bonds, debt of State Owned Enterprises, government guarantee-backed debts and arrears.
“There is a probability that the IMF will be swapping those Eurobonds due with the $3 billion facility to be given to Ghana to pay them off anytime they are due. This action of IMF will reduce the interest payment on Ghana’s Eurobonds and provide liquidity to support our balance of payment”.
“The conditionality in a way is to provide debt sustainability, and therefore payment in arrears to credit suppliers, statutory payments may be asked to take a ‘haircut’. Then local banks who have funded these credit suppliers by Ghana government will have to impair these loans example road contractors, power providers etc. Then BoG may be asked to give liquidity support to these banks, especially banks that do not have the capitalisation to absorb the losses”.
IMF to compel government to cut expenditures
Dr. Peprah also pointed out that the government will be compelled by the IMF to cut expenditures.
He also mentioned that the Fund support will be used to pay off some of the credit suppliers who may accept the haircut or discount their bills to the government”.
“The IMF support will also be used to pay off some of the credit suppliers who may accept the haircut or discount their bills to the government. This will be done with the aim of preventing government to go and borrow to pay them off”.
“Through government’s legal power and with the cooperation, collaboration and consultation with Parliament some payments which are in arrears may be stopped”, he added.
Ghana has $7.3 billion in principal repayments due on outstanding Eurobonds by 2032, according to Moody’s.
The Finance Minister, Ken Ofori-Atta, has stated that Ghana’s economy is on an upward trajectory despite the shocks that hit the economy.
According to him, the statistics show that the country can confront the challenges ahead.
He was speaking at a press briefing on Wednesday, September 28, 2022.
“Overall, our growth outturn of 3.4% and 4.8% in Q1 and Q2 of 2022 respectively, coupled with modest improvements in our fiscal position, suggests our economy is gradually on the upswing despite the numerous shocks we have faced over the past two years. These figures demonstrate that in spite of recent challenges, there has been economic growth, modest as the gains so far may be,” he said.
Ofori-Atta also stated that global external shocks have negatively affected the country’s balance of payment position.
“Undoubtedly, global risks remain on the horizon, including a strengthening US dollar and higher interest rates which negatively affect external borrowing,” he noted.
Finance Minister Ken Ofori-Atta has promised that the domestic financial industry will be protected during discussions at IMF negotiations while discussions on a sustainable debt path for the country are ongoing.
Given that a sustainable debt path is still essential for any IMF program, the Ghana Team, the World Bank, and the International Monetary Fund (IMF) are currently working on a debt sustainability analysis (DSA) to inform the program negotiations.
To sustain its development plans, the nation needs a strong domestic financial system, according to Mr. Ofori-Atta, particularly in the three years ahead with limited access to the international capital market.
“Therefore, everything must and will be done to protect our financial sector; and there must be room for a win-win conversation through extensive stakeholder engagement with both our domestic and external investors.
“Ghana has always had a collaborative approach with its partners, and we shall, I am confident, come out with a ‘historic arrangement’.
“The sanctity and well-functioning of the financial system is sacrosanct, and we need the support and trust of all Ghanaians to deliver this,” he said.
In view of this, a 5-member committee consisting of financial services professionals across the banking, asset management, pensions and insurance sectors is being formed to engage key stakeholders in the financial services sector.
“An announcement of the Committee Members will be made in the coming days, and they will immediately get to work to engage key stakeholders in the financial services sector – in addition to ongoing engagements with Civil Society Organisations (CSOs), social partners (labour unions, employers and FBOs), academia, industry professionals and the leadership of Parliament,” the minister mentioned.
He assured that government will ensure a comprehensive package is negotiated with the aim of restoring and sustaining macroeconomic stability, ensuring durable and inclusive growth and promoting social protection.
Debt restructuring concerns
Bankers have expressed concern about how an imminent debt restructuring will impact the asset structure, earnings and operations of banks.
The sector has entreated managers of the economy to be circumspect in their decision-making, so as not to destabilise the budding financial sector and erode recent gains made… especially as pertains to investor confidence.
According to budget figures, Ghana spent GH¢20.5billion (US$2billion) in first-half of the year paying its debts – or 68 percent of its tax earnings. By the end of June, the total amount owed by government had risen to GH¢393.4billion, or 78.3 percent of GDP.
In response, Ghana started a proposed three-year enhanced domestic programme engagement with the IMF in July for US$3billion – joining a number of emerging markets that are being forced to default or restructure some of their debts this year.
This was done after efforts to stop the sell-off of its Eurobonds and halt a record depreciation of the cedi currency against the dollar – including cutting discretionary state spending by as much as 30 percent – failed.
With the expectation of a tough business environment in the near-term, banks are reviewing existing operations and investment strategies to ensure sustainable performance as they remain risk-aware and undertake effective credit management processes.
“Overall, our growth outturn of 3.4% and 4.8% in Q1 and Q2 of 2022 respectively, coupled with modest improvements in our fiscal position, suggests our economy is gradually on the upswing despite the numerous shocks we have faced over the past two years,” he said at a press briefing on Wednesday.
“These figures demonstrate that in spite of recent challenges, there has been economic growth, modest as the gains so far may be,” the Finance Minister added.
Mr. Ofori-Atta said this progress gives Ghana a solid foundation to confront its economic challenges head-on.
“Undoubtedly, global risks remain on the horizon, including a strengthening US dollar and higher interest rates which negatively affect external borrowing. This development is exerting enormous pressure on our Balance of Payment position, and thus the need for us to expedite our engagement with the IMF.”
Ghana is currently seeking a $3 billion bailout programme from the International Monetary Fund (IMF).
Ghana was compelled to seek IMF support because of the worsening debt stock, fiscal challenges, depreciation of the cedi, upsurge in inflation, as well as shocks from COVID-19 and the Russia-Ukraine war.
Mr. Ofori-Atta told the press that the Ghana Revenue Authority has intensified its efforts to shore up domestic revenue mobilization, particularly in relation to the enforcement of compliance measures, in a bid to resolve the country’s fiscal challenges.
“The increased visibility of GRA officials at shopping malls and various commercial establishments and at our borders across the country is in pursuit of meeting our revenue objectives.”
Cedi depreciation
With regard to the cedi which has depreciated by 37.1% against the US Dollar as of Tuesday, September 27, 2022, Ofori-Atta said the government has put efforts in place to arrest the free fall of the currency.
He further indicated that the Bank of Ghana has introduced enhanced measures such as a Special Foreign exchange auction for bulk distribution companies and a Gold Purchase Programme to contain the depreciation of the cedi.
“As part of measures to shore up our reserves, improve exchange rate stability and address some of the funding needs, the Ministry successfully worked on a US$750 million Afreximbank loan facility which was received in August 2022. The traditional Cocoa Syndication Loan, expected in the last quarter of 2022 which will promote the cocoa sector, will further help us build our FX reserves and provide a strong buffer for the cedi in the last quarter of the year.”
“Additionally, the Bank of Ghana has introduced enhanced measures such as a Special Foreign exchange auction for bulk distribution companies and a Gold Purchase Programme to contain the depreciation of the cedi, which is now slowing down,” he added.
Mozambique and the IMF team reached Monday a staff-level agreement on the economic and financial policiesthat could support the approval of the First Review of the program under the ECF arrangement.
The ECF also known as Extended Credit Facility provides financial assistance to countries with protracted balance of payments problems.
“All quantitative and structural benchmarks set for the first review have been met and good progress was made on the broader structural agenda. Looking ahead, the macroeconomic environment remains challenging.”
“The authorities aim to continue implementing their ambitious economic reform agenda, including a sovereign wealth fund law, reform of public sector remuneration, and the amendment of the public probity law.”
The agreement awaits the approval of the IMF Executive Board in December, which would enable the disbursement of about US$63.8 million.
The Washington-based institution welcomed the Bank of Mozambique (BM) response to contain inflation which it called “proactive”.
The (IMF) granted May a 432 million euro loan to Mozambique, a first since it withdrew six years ago at the time after finding undisclosed debts in the so-called “hidden debt” scandal involving the government.
An agreement with the IMF is anticipated to increase investor confidence as Ghana’s fiscal and debt vulnerabilities intensify in the face of a challenging external environment.
According to a recent announcement made by the Ghana Statistical Service, July saw an increase in Ghana’s inflation rate to 31.6%, the highest level in 20 years.
The country’s already fragile economy has recently been significantly damaged by increases in food and gasoline prices as well as supply-chain shocks brought on by the conflict in Ukraine, forcing discussions with the IMF about a seventeenth bailout.
The price of diesel has more than doubled in one year, while petrol has increased by 83.2 per cent, provoking a hike in transport costs, with a rollover effect on the price of basic commodities.
Households in Ghana now deal with higher prices of imported and local food items: grapes, cooking oils, wheat flour, millet, Bambara beans, and watermelon are at least 50 per cent more expensive than last year. The prices of solid fuels such as firewood or charcoal increased by more than 80 per cent between 2021 and 2022.
The current energy crisis has a twofold effect on Ghana. As oil is the second most exported product in Ghana – $2.71bn in 2020 – after gold ($5.93bn) and before cocoa beans ($1.28bn), the country’s petroleum industry is benefiting from the global surge in oil prices.
In the first half of 2022, the only revenue which exceeded the government’s budgetary assumptions was oil revenue, while cocoa production declined sharply compared to last year.
Paradoxically, however, Ghana relies heavily on refined oil imports for its domestic consumption. The only refinery in the country, Tema Oil Refinery, has a limited capacity of 30,000 barrels per day (bpd), whereas the country produces approximately 170,000 bpd of crude oil designated for exports.
Existing challenges exacerbated
This reliance on imports is exacerbating a precarious economic situation fuelled by high state spending prior to the COVID-19 pandemic.
Although inflation is a global phenomenon – the US inflation rate has almost quadrupled in the past two years – it has disproportionally affected Ghana since the start of the Ukraine war.
Apart from Nigeria, in which inflation rate rose by 18.6 per cent in June, other West African countries have experienced a much lower rise in the prices of goods. The inflation rates of Togo and Côte d’Ivoire, two of Ghana’s neighbouring countries, rose by only 5.4 per cent and 6.8 per cent respectively during the month of June.
“Even though countries are subject to similar economic shocks, they are experiencing different effects because of the pre-existing condition of the state of the economy before the shock hit,” the assistant professor of economics at Niagara University in Toronto, Dennis Nsafoah, explained.
In the case of Ghana, the country’s fiscal position was already a challenge before the COVID-19 crisis hit, with a debt-to-GDP ratio of 64 per cent in 2019, the reason being that, at the time, the government entered a phase of substantial public spending.
Two major fiscal policy measures have weighed on the government’s budget deficit: the clean-up of the banking sector, which saw a reduction in the number of banks, and the abolition of fees for senior high school, meaning that costs for education were assumed by the government for students between 15 and 18.
“The government’s strategy was to push the economy to reach certain objectives, which were to benefit the population in the long run, but they could not have anticipated the successive economic shocks that were to come,” says Mr Nsafoah.
“These programmes have eliminated Ghana’s fiscal space, and the country was thus severely hit by the economic downturn resulting from the Covid-19 pandemic.”
According to the IMF, Ghana’s public debt increased from 65 per cent to 80 per cent of GDP during the global pandemic.
“The government’s fiscal efforts to preserve debt sustainability were not seen as sufficient by investors, leading to credit rating downgrades, non-resident investors exit from the domestic bond market and loss of access to international capital markets,” says the Washington-based institution.
In addition, Ghana’s currency, the Cedi, has lost 47.1 per cent against the dollar since the beginning of the year, making it the worst-performing currency in Africa after Zimbabwe’s dollar, and contributing to the inflation of imported products.
How to counter rising inflation?
In response to an ever-increasing budget deficit, the Central Bank of Ghana has sold foreign assets to support the economy.
As a consequence, Ghana’s net foreign assets went from $3bn in May 2021 to a negative value of $126m in May 2022, according to the Bank of Ghana’s last monthly monetary survey.
Traditionally, Ghana’s balance of payments has experienced a current account deficit. In recent years its financial and capital account has remained relatively high as a result of foreign portfolio investment and foreign direct investment, mainly in the country’s cocoa, gold, and petroleum industries. However, about three months ago, Ghana’s capital account figures went negative as a result of the sales of all of its international reserves by the Bank of Ghana.
“This is not sustainable. The Bank of Ghana cannot replicate this model for the next half of 2022, or it will run out of international reserves, which will scare a lot of investors,” Mr Nsafoah argued.
“It is time for the fiscal government, namely the Ministry of Finance, to find a way to go on the international market and borrow on its own, instead of relying on the Bank of Ghana,” Mr Nsafoah said.
But because Ghana has missed its budget target several times in recent years, credit-rating agencies have constantly downgraded the country, making it difficult to attract investors.
On August 10, Fitch Ratings downgraded Ghana to CCC from B-, right after S&P lowered Ghana’s local and foreign currency credit ratings to CCC+/C from B-/B.
In response, the government said credit-rating agencies were preventing the country from accessing global capital markets.
“We are disappointed by S&P’s decision to downgrade Ghana despite the bold policies implemented in 2022 to address macro fiscal challenges and debt sustainability,” Ghana’s Ministry of Finance said at the time. — African Business
