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. ????????
The Ministry of Financesays the Government of Ghana and the International Monetary Fund (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) on the sidelines of the annual meetings of the World Bank and the International Monetary Fund.
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.
Meanwhile the Government of Ghana has expressed its gratitude to the IMF, the World Bank, bilateral partners and external investors for their continuous support even as the country goes through a tough time.
Furthermore, “the Ministry of Finance and the Bank of Ghana thank the people of Ghana for their forbearance in what is undoubtedly a troubling and challenging time for our economy, and economies globally. Government will continue to work with a fierce sense of urgency, to stabilize the economy and place it back on a firm trajectory of growth.”
The Ministry has indicated it will continue to provide regular updates and further details on the country’s economic programme to the public immediately they become available.
“These updates will be posted on the Ministry’s website, under a section titled IMF Programme Updates,” the statement said.
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The majority of the nation’s domestic manufacturing industries are dying, claims the group, due to the high cost of inputs.
Therefore, it wants the government to move quickly before some industries fail.
Ashok Mohinani, vice president in charge of large manufacturing, told Joy Business at the “AGI BUSINESS FORUM” that the cost of inputs is having an impact on the viability of the regional manufacturing sectors.
“At the moment, there is quite lot of speculations and the biggest issue is the currency and we are nearly hitting ¢15. I think more communication will be very helpful”.
“Most inputs cost have gone up and the factories are facing issues of sustainability on whether they can survive. But if the government and others will communicate, I think that will calm nerves”, he said.
The Ghana cedi continue to fall and now is presently selling at ¢14.75 to one US dollar.
The government is presently negotiating an economic programme with the International Monetary Fund (IMF) that is expected address the imbalances in the Ghanaian economy.
According to World Bank Group President David Malpass, Ghana could have joined the Debt Service Suspension Initiative (DSSI) to benefit from a debt freeze while the nation restructured its debt. Ghana is a producer of gold, cocoa, and oil.
The World Bank and the International Monetary Fund pushed the G20 to create the DSSI at the outset of the Covid-19 pandemic.
The DSSI, which was established in May 2020, aided nations in focusing their efforts on containing the pandemic and defending the lives and livelihoods of millions of the most vulnerable individuals.
Forty-eight out of 73 eligible countries participated in the initiative before it expired at the end of December 2021.
The G20 also called on private creditors to participate in the initiative on comparable terms.
Regrettably, only one private creditor participated.
The World Bank and the IMF supported the implementation of the DSSI—by monitoring spending, enhancing public debt transparency, and ensuring prudent borrowing.
DSSI borrowers committed to using freed-up resources to increase social, health, or economic spending in response to the crisis.
They pledged to disclose all public sector financial commitments (involving debt and debt-like instruments).
They also committed to limiting their non-concessional borrowing under the IMF arrangements and the World Bank’s Sustainable Development Finance Policy.
Answering questions at a programme in Washington D.C. on debt cancellation for African countries and the apparent lethargy of the Bretton Woods institution in that regard, Mr Malpass said: “Kristalina [IMF Boss] and I were talking yesterday with the Group about the Common Framework. If countries could have a situation where the common framework clause allows the country to have a standstill on debt, that would help the country choose their path forward on debt restructuring. That would mean they would get a break on debt repayment while they work on debt restructuring”.
However, he said: “Nigeria and Ghana both, did not ask for the common framework treatment”.
Ghana is currently in negotiations with the IMF for a $3-billion relief to stabilise the faltering economy.
Though no deal has been reached yet, there have been talks in the media of a possible debt-restructuring agreement.
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.
“The currency depreciated as much as 9.6% on Thursday, heading for its biggest decline in 22 years. That took losses in 2022 to nearly 52%, the worst performance among 148 currencies tracked by Bloomberg,” the news portal reported.
In October this year, a committee was formed to hold talks with domestic bond investors on debt management strategy and how to negotiate the deal with the International Monetary Fund (IMF).
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.
Following their most recent visit to Ghana, which is looking for a $3 billion program to stabilize the economy, the International Monetary Fund stated that an agreement with Ghana would be announced as soon as it was practical.
The Bank of Ghana Governor Ernest Addison and his staff met with an IMF team led by Stéphane Roudet from October 11–19 in Washington, DC to continue discussions about a potential IMF-supported program.
“The Ghanaian team and IMF staff had extremely constructive discussions on the authorities’ post-COVID agenda for economic growth and accompanying policies and reforms that might be supported by a new IMF agreement,” Mr. Roudet said in a statement following the sessions.
“We made good progress in identifying specific policies that would restore macroeconomic stability and lay the foundation for stronger and more inclusive growth.
“Discussions will continue in the weeks ahead, with a follow-up mission to take place expeditiously.”
FAQs
What are the next steps in the discussion for an IMF-supported economic reform program? What is the possible timing for an IMF programme?
Following several visits in recent months to engage with the authorities on their homegrown reform program and broader stakeholders’ consultation, a Ghanaian delegation visited Washington, DC to continue discussions on policies and reforms that could be supported by an IMF lending arrangement.
The Ghanaian delegation and IMF staff had fruitful discussions on the authorities’ post-COVID program for economic growth and reforms that could be supported by a new IMF arrangement. The teams made good progress in identifying specific policies that would restore macroeconomic stability and lay the foundation for stronger and more inclusive growth.
Can the IMF confirm reports that Ghana is seeking a three-year Extended Credit Facility programme of about $3 billion?
The Extended Credit Facility (ECF) is the Fund’s main tool for medium-term support to countries facing protracted balance of payments problems, similar to Ghana’s.
The duration of such arrangement is between 3 to 4 years and extendable to 5 years. Ghana requested a similar arrangement in 2014 and which lasted 4 years. However, the level of access and the final programme design is ultimately decided by the IMF Executive Board. Since negotiations for the programme are starting now, it is too early to comment on the final form the programme will take.
Why is Ghana requesting an IMF programme?
Ghana’s fiscal and debt vulnerabilities are worsening fast amid an increasingly difficult external environment. During the COVID-19 pandemic, Ghana’s public debt increased from 65 per cent to 80 per cent of GDP.
At the same time, 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 domestic bond market and loss of access to international capital markets.
These adverse developments, further exacerbated by the price and supply-chain shocks from the war in Ukraine, have led to a large exchange rate depreciation, a surge in inflation (29.8 per cent year-on-year inflation in June) and pressure on foreign exchange reserves in the past months. In this context, the government has requested assistance from the IMF, and we have kick-started the initial discussions on how to best address Ghana’s challenges.
An IMF-supported programme aims to provide space for Ghana to implement policies which will restore macroeconomics stability and anchor debt sustainability while protecting the most vulnerable parts of the population.
It should help create the conditions for inclusive and sustainable growth and job creation. This will help strengthen policy credibility, alleviate exchange rate pressures, and provide catalytic effect on financing.
What type of programme is Ghana eligible for?
The IMF’s various lending instruments are tailored to different types of balance of payments need as well as the specific circumstances of a member country. See the IMF Lending webpage for different types of BOP need and the available instruments.
We are discussing with the ministry of finance and the central bank about the type of facility that would best fit Ghana’s needs.
By way of background, the previous arrangement in Ghana was a three-year ECF in 2015-2018, which was extended by a year to April 2019.
Is a programme the result of the spillover from the war in Ukraine?
The war in Ukraine has triggered a global economic shock that is hitting Ghana at a time when the government’s room for manoeuvre is already greatly limited. The shock compounds other pressing policy challenges, including debt vulnerabilities, the COVID-19 pandemic’s social and economic legacy, and the ongoing tightening of global monetary policy conditions which increases the cost of international borrowing.
What will be the objectives of an IMF programme with Ghana?
The goal of the government’s home-grown programme, which would be supported by IMF financing, is to restore macroeconomic stability and anchor debt sustainability, support the credibility of government policies, restore confidence in the central bank’s ability to manage inflation and accumulate foreign exchange reserves to help the currency withstand headwinds. Specifically on the fiscal sector, an important policy objective would be to increase revenues, critical for debt sustainability while safeguarding spending on health, education, and social protection.
Does Ghana need debt restructuring? When will a new Debt Sustainability Assessment (DSA) be published?
When a member country requests financing from the IMF, the Fund 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.
The DSA is forward-looking and considers steps being taken by the member to ensure sustainability over the medium term. 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. The IMF and World Bank still need to conduct a thorough update of the debt situation through a new DSA, which will then be presented to our Executive Board when it considers the authorities’ program request.
As background, the last DSA published in the 2021 Article IV Staff Report concluded that: “Public debt was sustainable conditional on a rigorous and credible implementation of the authorities’ medium-term consolidation plan to put debt on a declining trajectory and ensure continued market access.”
Will the programme result in cut in the free senior high school programme, or other flagship social programs and infrastructure projects?
We are still at an early stage in the discussions, but we believe that the free Senior High School (SHS) is an innovative policy that needs to be protected. In general, IMF-supported programmes seek to boost social spending while encouraging both efficiency and sustainability.
As discussed above, the IMF-supported programme would aim at protecting the vulnerable and creating conditions for an inclusive growth.
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 request for a financial bailout from the International Monetary Fund (IMF) team, led by Stéphane Roudet, has indicated that there has been considerable progress.
The IMF team leader said both teams had a constructive conversation in identifying concrete policies that will restore macroeconomic stability after meeting with Ghana’s Finance Minister, Ken Ofori-Atta, and Bank of Ghana Governor, Dr. Ernest Addison, in Washington, DC.
“The Ghanaian team and IMF officials had very fruitful discussions on the authorities’ post-COVID economic growth agenda and related laws and reforms that may be supported by a new IMF agreement.
“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.
However, he insists that the economy is doing well despite the challenges it is currently facing.
While leading a delegation interacting with the International Monetary Fund (IMF) in Washington, he termed the depreciation rate as “perplexing” in an interview with a journalist from Accra-based Asaase Radio.
“It is quite perplexing to see where it is going,” he said about the continued depreciation of the cedi.
He ascribed the thirst for dollars to the October season when people will be looking for dollars in order to undertake imports for Christmas. “Of course, typically in October, people are importing for Christmas and maybe there is a rush for that.
“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,” he added.
He said the government was upbeat that a deal will be reached with the International Monetary Fund, IMF later this year to allow for the disbursement of funds in early 2023. “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. The depreciation rate is a contributory factor for the ongoing shop closures ordered by the Ghana Union of Traders Association (GUTA).
According to the group, the fast depreciation of the Cedi is eroding their profits and also increasing the cost of doing business.
He claimed that the key to winning over the Fund and the required benefit there is for the economy is to provide a strong program.
The former finance minister stated in a media discussion that obtaining funding from the IMF is essential given the current economic difficulties; as a result, the program should be carefully thought out.
“The global economy is becoming increasingly hostile, and I believe that given all we have been talking about, let us aim for a solid and good programme – making it slowly and not necessarily a fast one. One that can cover the nuts and bolts, otherwise it will come to haunt us; we might win the IMF and go back to where we were. Getting the programme is a must, otherwise things will go downhill.
“I think the goal should be a thorough discussion of all issues, so that we have a good programme. A programme that will make us win over the Fund in a very substantive and more realistic manner. From my experience I think it has always taken us a minimum of six months, sometimes with lesser headaches, to negotiate the programme,” he said.
Speaking on concerns that government seems to be protecting its legacy and flagship programmes, he said that it will have to relent to allow for progress in the negotiations.
Mr. Terkper further advised that there is a need to bring back some buffers and stabilisers and implement them so the country can fall back on them during difficult times.
“We must stretch into the medium-term to bring back some of the buffers and stabilisers that have been ignored, like the Sinking Fund. We cannot continue borrowing without paying. We must look beyond austerity to build solid sector policies to boost job creation for growth,” he said.
He also urged government to be open on issues with the citizenry to carry them along.
“Even internally, there are things that are unknown to the Ghanaian populace. Do we know all the costs outside the budget? The Fund will want to know. Do we know things that are coming up,” he questioned.
Enhanced Domestic Programme
The Ministry of Finance and Bank of Ghana have commenced a comprehensive debt sustainability analysis with the IMF for a possible US$3billion support programme.
Having reversed a policy of not seeking aid from the International Monetary Fund, government requested a balance of payment package following a serious economic crisis characterised by record-high inflation, currency depreciation and rising food prices.
The proposed programme should span a minimum of three years and seek to achieve the following objectives: strengthen government’s efforts to restore investor confidence in the economy, thereby regaining market access, boosting development partner disbursements and unlocking other financing sources; restore debt sustainability and macroeconomic stability to support green growth, economic transformation and job creation while protecting social spending.
Ghana must demonstrate that its debt levels are manageable, according to the International Monetary Fund, before the organization can accept an economic assistance plan for the nation.
Abebe Aemro Selassie, director of the IMF’s Africa Department, asserts that before an agreement can be achieved, Ghana must also provide a plan for economic transformation.
He continued by saying that the proposed strategy is currently being evaluated along with additional interactions with Ghanaian officials.
Speaking with journalists during a press briefing at the just-ended IMF/World Bank Spring meetings in the USA, the IMF Africa boss 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,”
Touching on Ghana’s debt sustainability analysis, the IMF Africa Director said the Fund and government are still waiting on the assessment to be completed.
“So, we are waiting for that assessment and I can tell you that we are doing our utmost, and we will do our utmost to make sure that we can provide support to Ghana as speedily as possible. So, that’s why, as I noted earlier, within a few days of the government requesting support, we fielded a mission, and we will do our utmost to avoid any kind of delay in terms of how we can support,” he added.
Ghana is targeting $3 billion from the IMF once an agreement can be reached. The support is expected to address the country’s macro-economic stability and among others.
Ghana currently has a startling 37.2% inflation rate, and the cedi is still losing value versus the US dollar and other key trading currencies.
Due to negative downgrades by rating agencies, Ghana is unable to obtain credit from the international market, and its debt has also grown to an unsustainable level.
The West African country is currently in talks with the International Monetary Fund to secure financial assistance.
But until the expected GH¢3 billion is secured from the IMF, the country’s woes continue with no end in sight.
Even though the Bank of Ghana has hiked the monetary policy rate to 24.5%, causing the interest rates for treasury bills to go up to about 30/31%, the rates are still lower than the country’s current inflation rate of 37.2%.
Also, Ghana is considering a debt restructuring program to ensure that its debts are sustainable and is able to secure funding from the IMF; however, when this happens, domestic investors may lose some part of their investments.
The question, “What should we do with our money” has become a very common phrase in recent times. Even though it cannot be an assured route to take considering the rate of the economy’s meltdown, here are a few options to choose from.
1. Treasury bills
Treasury bills have been known to be one of the safest forms of investment. Even though its interest rates are relatively lower, its yields are attractive to investors. Normally the rates are higher than inflation rates; therefore, investors have their returns secure.
At the current inflation rate of 37.2%, investing in Treasury bills will result in negative returns because interest rates are pegged below the inflation rate.
However, if you keep your money without any investment, inflation will still affect its value; therefore, investing in treasury bills may result in a loss of about 6 to 7%, whiles keeping your money will result in a 37.2% depreciation or even more.
2.Invest in an asset
Prices of goods and services keep increasing hourly and daily. It is advisable to convert liquid assets to fixed assets. These assets’ value will appreciate with time. With that, you may decide to sell it off and make your money back with a higher value when the economy stabilizes.
3.Keep a portion of your money in hand
Experts have advised that it is somewhat safer to keep a portion of your money in hand instead of keeping them in the bank. They explain that if Ghana’s economic situation persists, banks may be forced to enforce a withdrawal cap on withdrawals, and this may not be good for customers.
4.Buy a foreign currency
Even though increasing demand for foreign currencies is resulting in the constant depreciation of the cedi, you can decide to be “selfish” and buy some dollars or pounds to at least retain the value of your money.
5.Stock up (groceries, food, clothes, dresses, drugs etc)
Food prices especially have more than doubled this year and are expected to continue on the upward spree until some stabilization is achieved.
If you have some money currently, it is advisable to buy food in excess and shop for things that you may need in the next few months, especially essential needs.
6.Invest in a ‘necessity’ business
In the next three months, before the end of the year and the receipt of IMF support, investing in a business that provides a good or service of necessity will keep you afloat. Ensuring that you have a steady and secured source of income will reduce the pressure in the long run.
Major marketplaces in the nation, including Kejetia, Makola, and Kaneshie, account for a larger portion of this total.
On Wednesday, October 19, 2022, however, due to the nation’s current economic difficulties, markets and stores in Accra’s Central Business District were closed.
They assert that Ghana’s cost of living has soared as a result of the cedi’s rapid devaluation versus the US dollar and high inflation rates.
As a result of this, buyers have had to turn away as they could not get access to their respective items to purchase.
The traders told in interaction with GhanaWeb Business said the closure will continue until Monday, October 24 to demonstrate to the government the extent to which the economic meltdown is affecting businesses and livelihoods.
The closure will however mean that no sales will be made in the next three to four days, which is significant to the growth of the economy which is now seeking support from the International Monetary Fund.
Makola market, for example, comprises of several merchandises including clothing and textiles, footwear, food, drugs, groceries, raw material, and kitchenware among others.
Four to five days of little to no sales is estimated to cause huge revenue losses to the country as VAT payment and payment of other taxes will be impacted.
At a time when the government is finding it difficult to generate revenue, it is a bad omen for economic activity to somewhat shut down.
Some traders speaking with GhanaWeb’s Stella Dziedzorm Sogli said the activities of the black market have been the main reason for the increase in the exchange rates.
One of the traders, Abigail said: We are pleading with the government to arrest those in the black market. They are the main reason the dollar and CFA keep increasing. The dollar rates are changing too rapidly. In a day, the dollar can rise about three times within three hours.”
She continued, “It is unbearable,” she added.
Shaima, who retails socks and other clothing items recounted that “the black-market folks have hoarded the dollars. They are the reason the rates have gone up. What we know is that exchange is done in either bureaus or the bank, but now these black-market people have taken over.”
Last week, traders in Adum embarked on a similar protest to drive home concerns about the high cost of living in Ghana.
The persistent depreciation of the cedi has now reached alarming levels as the currency is now selling at GH¢13.65 at some forex bureaus in the country while the CFA is selling at GH¢17.50, as of October 20.
President Nana Addo Dankwa Akufo-Addo has for the first time taken the blame for government’s decision to resort to the International Monetary Fund for financial support.
This comes after government had occasionally insisted that it would not turn to the Bretton Woods institution for support as it believes in its homegrown solutions until government backed down on its stance on July 1, 2022.
Speaking on Kumasi-based OTEC FM during a tour of the Ashanti Region, President Akufo-Addo on October 18 said the decision to turn to the IMF had become necessary in the face of economic headwinds.
“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,” he explained.
“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,” the president said.
“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 added.
Officials from Ghana and IMF have been engaged in the second round of negotiations in the United States of America toward reaching an agreement with the Fund.
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.
Abebe Selassie, the African Director at the IMF, claims that Ghana is one of the nations where internal forces are mostly to blame for inflation.
As of September 2022, Ghana’s inflation rate—which has been rising since the year’s beginning—was 37.2%.
However, the government has stated that the COVID-19 epidemic and the Russia-Ukraine war are just two examples of the global events that have contributed to the inflation.
Speaking at a press conference at the recent IMF/World Bank Spring Meetings, Abebe Selassie, said “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.”
“But there are also quite a lot of other countries where the inflation we are seeing is more important, 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,” he is quoted by myjoyonline.com.
The IMF added that the adjustments of the monetary policy must be done swiftly because the adjustments affect how inflation is driven in the economy.
He said, “exchange rates are moving, commodity prices are moving, so it’s an area where calibration must be very, looked at again and again and again, as the months proceed.”
“That’s why, Central Bank can say you have to be forward-looking, data-driven, so our advice is also, very much, subject to those considerations,” he added.
According to the GSS, the factors that influenced inflation were, Housing, Water, Electricity, Gas and Other fuels (68.8%); Furnishings, Household Equipment, and Routine Household Maintenance (51.1%); Transport (48.6%); Personal Care, Social Protection and Miscellaneous Goods and Services (42.6%) as well as Food and Non-Alcoholic Beverages (37.8%).
He revealed this in response to a Bloomberg piece on Ghana’s economy, which indicated that the official government estimate of Ghana’s inflation rate—37.2%—was incorrect, according to the American economist.
Most media coverage on the nation’s economy are “either inaccurate or useless,” according to Prof. Steve Hanke, who has consistently reported on Ghana’s inflation rates.
Prof Hanke tweeted on Tuesday, October 18, “Bloomberg reports that #Ghana’s inflation has hit 37.2%/yr in September—a 21-yr high. That’s the official rate. It’s WRONG.
“Today, I measure Ghana’s inflation at 101%/yr. Remember my 95% Rule: 95% of what you read in the press is either wrong or irrelevant.”
Ghana’s inflation rate was 37.2% in September, the Ghana Statistical Service said, as it announced changes to the way it calculates the data.
The local currency, the Ghana Cedi, is struggling.
The Cedi has been reported by Bloomberg to be the world’s worst-performing currency this year as investors continued to squeeze foreign capital into the west African country before a deal with the International Monetary Fund.
The currency of the world’s second-biggest cocoa producer depreciated as much as 3.3% Monday, before paring the loss to 11.2750 per dollar at 3:30 p.m. in the capital Accra. That took its losses this year to more than 45%, the most among 148 currencies tracked by Bloomberg.
Dr. John Kwakye, an economist, has disputed President Akufo-assertion Addo‘s that the present finance minister, Ken Ofori-Atta, has performed his job admirably and does not require removal from office.
Speaking on Kumasi’s OTEC FM, the President insisted that there was no need to fire Ken Ofori-Atta since he thought it was the appropriate move to keep him on as his finance minister for another term.
“I came to office in 2017 under a stringent IMF programme. This same man was able to manage the affairs of our economy in such a way that the first four years of my first term, we were one of the fastest-growing economies in the world, an average growth rate of 7% a year from the beginnings of an IMF programme.
“An economy that allowed us to initiate the programme Planting for Food and Jobs. So, somebody who has been able to do that and the current economic difficulties are not his faults. So how do I do that (sack him)? What will be the basis? What will be the rationale?”
“If we were to say he didn’t do well in the first term, then I shouldn’t have repeated him for my second term? So, for me, their performance in my first term was excellent. Let me use that word. Excellent,” President Akufo-Addo said in an interview with the radio station.
But Dr John Kwakye reacting to the comments argued that Finance Ministers must always be held responsible for the economic situation of every country and must therefore take the blame.
“Finance Ministers must always be held responsible for a country’s economic problems no matter the source. Kwesi Kwarteng is a clear example,” The IEA director of research said in a tweet.
He however noted that the solution to Ghana’s current economic challenges cannot rest solely on the International Monetary Fund and the World Bank.
“The answer to our problems doesn’t lie in Washington. It lies right here in Ghana,” he stressed.
Touching on the depreciation of the cedi against the US dollar, Dr. John Kwakye called for urgent interventions to slow down its depreciation which is now reaching alarming levels.
According to African Director at the IMF, Abebe Selassie, Ghana is among countries whose inflation is caused mainly by internal factors.
In September 2022, figures released by the Ghana Statistical Service showed that country’s inflation has risen to 37.2%, making it one of the highest in 20 years.
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.
This dismisses the argument that inflation in the country is due to external factors such as the Russian/Ukraine crisis which has pushed prices of some foodstuffs, particularly wheat and cereals up
In a press conference at the recent IMF/World Bank Spring Meetings, African Director at the Fund, Abebe Selassie, said its analysis show that inflation is driven more by domestic factors than exogenous factors
“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.”
“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 the calibration of monetary policy must be always agile.
This is because the conditions that affect inflation are always changing, adding, “exchange rates are moving, commodity prices are moving, so it’s an area where, calibration must be very, looked at again and again and again, as the months proceed. That’s why, Central Bank can say you have to be forward-looking, data-driven, so our advice is also, very much, subject to those considerations”.
Inflation surges to 37.2% in September 2022
Inflation in Ghana shot by 3.3% to 37.2% in September 2022.
According to the GSS, five groups recorded inflation rates higher than the national average in September.
They were Housing, Water, Electricity, Gas and Other fuels (68.8%); Furnishings, Household Equipment and Routine Household Maintenance (51.1%); Transport (48.6%); Personal Care, Social Protection and Miscellaneous Goods and Services (42.6%) as well as Food and Non-Alcoholic Beverages (37.8%).
President Akufo-Addo says the decision to go to the International Monetary Fund (IMF) for a bailout was one of the most difficult choices he had to make to save the economy.
He cited the rising cost of crude oil on the international market as one of the factors that compounded the country’s economic woes, and one of the reasons government ran to the IMF for support.
Despite being a tough choice to make, Akufo-Addo says it was in the interest of the country and the economy to go to the Fund.
“You can imagine the difficulties that there were for the Bank of Ghana. So instead of now finding 64 dollars for each barrel of oil, the Bank of Ghana was now having to find 100 plus [dollars] and it stayed like that. In fact, it is only very recently that the price of crude oil has come down.
“I am just using this one very important fact to tell you what drove the government to this very difficult decision of going to the IMF. I don’t have any difficulty in admitting that it was a difficult decision for me to take but I felt that in the interest of the country, in the interest of our economy, we had to make that decision,” he said in an interview on Kumasi-based OTEC FM.
Amid a free-falling cedi, a rising cost of living, and skyrocketing fuel prices, the government is at the doors of the International Monetary Fund (IMF) to prevent a full-blown economic turmoil.
Meanwhile, the Minority on Parliament’s Finance Committee has cast doubts over government’s chances of closing a deal with the IMF by end of year.
Finance Minister Ken Ofori Atta had indicated that government was working hard to get a deal by November this year.
But speaking to Joy Business’ George Wiafe in Washington DC at the just ended Annual IMF/World Bank meeting, Ranking Member on the Committee, Dr Ato Forson said Ghana can only secure a deal with the IMF by the first quarter of 2023.
According to him, the IMF would rather look at the 2023 budget, which will be presented in November 2022 to finalise a programme with Ghana.
He urged government to rather focus on using the budget to rebuild investor confidence on toning down on borrowing, while sending signals of debt restructuring to the IMF.
This, Professor Mensah argued will give government some space to negotiate with the IMF from a strong position.
“I don’t think it is possible to get a deal with the IMF before the middle of November when we get ready to present the 2023 budget. My advice will be that we should rather use the budget to position the government for an IMF programme”, he stated.
He explained that the government and the IMF have a lot of processes and fine-tuning to do before signing an economic bailout deal.
He cautioned that the IMF will not just enter into a deal because a country is economically desperate for assistance.
“If you study the IMF carefully, they always want your debt stock to be at sustainable levels before they give you assistance. If your debt levels are bad, the IMF will ask you to do something about it before assisting the country”.
Citing Ghana’s debt levels as worrying, he stated that it is not surprising that the IMF is urging the government to restructure its debt as first requirement as part of the negotiations.
Providing some recommendations, Prof. Mensah advised that it will be prudent for government to come out and engage relevant stakeholders in the domestic financial sector to calm the market.
Such a move, he stressed will not only stabilise the domestic bonds market, but will bring some level of certainty among investors who are currently in the dark on the next move of government.
He warned that keeping investors in the unknown only sparks speculations which aggravate the economic challenges of the country.
He partly blamed the situation on the high inflation and the cedi depreciation, which he warns may get worse.
Speaking at a media dialogue on Ghana’s negotiations with the IMF in Accra on Friday, Mr Terkper, according to myjoyonline.com, said if the government failed to exhibit transparency with the data, the country would not get the programme as expected on time, and that would hurt the economy more.
“What has dominated the discussions during the first round and going into the second round is a possible debt restructuring, refinancing or however you may call it. And, we will give some examples, and that is because we all know that debt is a problem that faces the nation. But I also want to remind us that debt is the outcome of raising revenue and borrowing beyond that revenue to the point we are in debt distress….there should be no question about that. And therefore, we have also faced downgrades.”
He mentioned that a typical IMF programme would start from revenue, expenditure, and management of arrears “to give us the fiscal balance and go all the way to the fiscal and go into debt – where we are facing the difficulty.”
He said, “Everything shows clearly that we are protecting certain expenditures as seems to be what is coming from some government officials, then the Fund [programme] is a non-starter. Because it means that you are saying that the Fund gives you money to continue with the pattern of your behaviour. You should know that the Fund knows it all; if you read Article 4, they follow our debates, they know what is going on, they have an office here,” Mr. Terkper said.
He further pointed out that a fast programme from the IMF would depend on whether the country could provide all the available data for scrutiny and approval.
“So I think whether we can do a fast programme or not depends on whether we can lay it all on the table. It can be shocking, but we need to lay all on the table,” he added.
Seth Terkper also dismissed the perception that the rating agency have been harsh to developing countries, saying the developed countries have not been left out of the equation, citing the United Kingdom as an example.
Ghana’s cedi slumped to the world’s worst-performing currency to the dollar as wait-and-see investors continued to squeeze foreign capital into the west African country before its deal with the International Monetary Fund(IMF).
The currency of the world’s second-biggest cocoa producer depreciated 2% on Monday to 11.2625 per dollar, taking its losses this year to 45.1%, the most among 148 currencies tracked by Bloomberg.
The currency that derived its name from ‘sedie’, the local Akan language name for cowrie shell, switched position with the Sri Lankan rupee, which is now the second worst performer with a 44.7% drop to the greenback this year.
Ghana started engaging with the IMF in July but only began formal negotiations for an extended credit facility program with the lender last month.
The country is hoping to receive up to $3 billion in loans over three years under the arrangement to spur its finances and support the balance of payments.
Ghana reversed course to seek IMF help after homegrown policies, including cutting 2022 discretionary expenditure by up to 30%, failed to stem a selloff in its international bonds.
The premium investors demand over US Treasuries to hold Ghana debt has widened to 2,669 basis points.
For the currency, which has been steadily losing ground versus the dollar over the previous few weeks, this would be a new low.
The cedi is selling at a rate of GH12.50 to $1 as of October 15 according to checks done by GhanaWeb Business at various Accra-area forex bureaus, while the Bank of Ghana is selling at a rate of GH10.72 as of October 14.
As of October 15, 2022, the UK pound is valued at GH13.10 and the euro is at GH11.60, according to AfriSwap.
The development is likely to exert further pressure on the economy with many citizens already grappling with soaring inflation pressures, high cost of living, fuel price and tariff hikes among others.
Meanwhile, government has commenced negotiations with the International Monetary Fund in hopes of securing an economic support programme aimed at restoring macroeconomic stability.
The World Bank’s Africa Pulse Report estimates Ghana’s debt to be at a frighteningly high percentage.
Ghana’s debt will increase to 104.6 percent of GDP by the end of this year 2022, up from 76.6 percent in the World Bank’s October 2022 estimate.
Speaking about IMF issues on Starr FM’s Weekly Review Segment, Mr. Jantuah predicted that the Fund would be hesitant in part due to things like the World Bank’s disclosures.
“If the World Bank finds in their calculation that our debt is not sustainable, because there are other debts that we are not adding to the national debt and the IMF is working with data. If they add those other international debts and it goes way above this over 400 billion we are not going to get a pesewa from the IMF.
“But remember the IMF is in a dilemma. I don’t think the Finance Minister should have led this negotiation. The Finance Minister tells us that he is hurrying the process so that we will get a result by November. But this cannot be hurried if the IMF does not have the requisite data they are looking for they will not hurry it. So he shouldn’t be telling us that,” Mr. Jantuah advised.
He continued: “He shouldn’t be raising our hopes because some people will go by what he is saying and it doesn’t help. At this point let’s all come down home and take this thing together step by step. It will be egg on the Finance Minister’s face if by November which he is predicting the IMF doesn’t come through.”
The CPP member further advised that the government must give itself some time for a good package for the nation with the IMF.
“Because this is the 18th time we are going to the IMF and look at all the 17 we have been there and look at what happens anytime we come out of the program. We’ve always gone back to get it again,” Mr. Jantuah added.
Along with ensuring food security, the money will be utilized to try and lessen how Ghanaian agriculture will be affected by Russia’s war in Ukraine.
The EU Office in Ghana underlined in a tweet that the funds will also “strengthen ongoing programming as well as EU’s planned support to the agriculture sector in Ghana.”
The full tweet read: “#TeamEurope announces €10 million support for #FoodSecurity and to help #mitigate the impact on agriculture in Ghana of Russia’s war of aggression on Ukraine. Also to strengthen ongoing programme as well EU’s upcoming support to the agriculture sector in Ghana.”
The tweet was accompanied by two photos of the EU representative handing over a cheque titled: “EU SUPPORT TO FOOD SECURITY IN GHANA,” to the Deputy Minister of Finance, Abena Osei Asare.
The World Bank and International Monetary Fund, IMF, advanced different sums of money to the government to help mitigate the impact of the pandemic.
On the diplomatic front, Ghana has been one of the vocal African countries calling on Russia to stop its aggression on Ukraine. Ghana also voted YES in a UN resolution this week, condemning Russia’s annexation of Ukrainian territories.
Dmytro Kuleba, Ukrainian Foreign Minister picked Accra as one of three stops on his African tour that was truncated after Russian bombardments.
The World Bank’s Africa Pulse Report estimates Ghana’s debt to be at a frighteningly high percentage.
Ghana’s debt will increase to 104.6 percent of GDP by the end of this year 2022, up from 76.6 percent in the World Bank’s October 2022 estimate.
Speaking about IMF issues on Starr FM’s Weekly Review Segment, Mr. Jantuah predicted that the Fund would be hesitant in part due to things like the World Bank’s disclosures.
“If the World Bank finds in their calculation that our debt is not sustainable, because there are other debts that we are not adding to the national debt and the IMF is working with data. If they add those other international debts and it goes way above this over 400 billion we are not going to get a pesewa from the IMF.
“But remember the IMF is in a dilemma. I don’t think the Finance Minister should have led this negotiation. The Finance Minister tells us that he is hurrying the process so that we will get a result by November. But this cannot be hurried if the IMF does not have the requisite data they are looking for they will not hurry it. So he shouldn’t be telling us that,” Mr. Jantuah advised.
He continued: “He shouldn’t be raising our hopes because some people will go by what he is saying and it doesn’t help. At this point let’s all come down home and take this thing together step by step. It will be egg on the Finance Minister’s face if by November which he is predicting the IMF doesn’t come through.”
The CPP member further advised that the government must give itself some time for a good package for the nation with the IMF.
“Because this is the 18th time we are going to the IMF and look at all the 17 we have been there and look at what happens anytime we come out of the program. We’ve always gone back to get it again,” Mr. Jantuah added.
In order to get a bailout in 2015, the former president John Dramani Mahama’s administration turned to the International Monetary Fund (IMF).
He claimed that throughout his administration, there had been macroeconomic instability brought on by both domestic and external sources.
In an interview with VOA’s Straight Talk Africa program earlier this week, Mahama went into further detail, noting that the external element was primarily attributable to disruptions in commodities prices.
Regarding the internal component, he stated that an increase in worker compensation was a cause, adding that it “swallowed” up 73% of revenue produced.
The Single Spine Salary Structure was a policy for all public sector workers, no matter their area of specialization and the public organization they belong, to be placed or linked to one common salary structure.
“We are all members of the IMF. It is a body we go to when you have some macroeconomic instability and so at the time I was president, yes we suffered macroeconomic instability due to two factors: Internal and external.
“External…you will get shocked from time to time. We had the commodity price shocks; the slowdown in China. But internally, we overshot our expenditures because we introduced a new wage policy that sought to make the remuneration in the public sector more uniform and it shot the wage bill far above what we had anticipated. Almost 73% of our revenues was going to pay wages and salaries alone and so that forced us to go into the IMF,” Mahama told Hayde Adam in the interview aired on October 12.
Mahama intimated that issues such as the fight against corruption and the strengthening of state-owned institutions ought to be addressed in order for the economy to thrive.
This he said, the NDC will seek to achieve when given the opportunity to steer the affairs of the country.
He mentioned that the current return to the IMF to achieve debt sustainability and policy credibility should mark the start of governments prudently running the economy, stressing that it should be the last resort to the Bretton Woods institution.
“The economy is situated in an environment. It does not exist in isolation and so there are somethings that need to be done to create an environment for the economy to thrive. Some of them are governance issues, strengthening state-owned institutions, the fight against corruption and so many other things that create the environment for the economy to thrive.
“I think that when we go into this programme and we bring debts back to sustainable levels and we are able to get the bridging facility in other to achieve policy credibility so that investors again feel confident that they can bring back their money into Ghana, then we must start from there and maintain that prudence.
“This should be the last time we go to the IMF because going and coming, it creates a certain instability in the whole system and it also reduces the faith that people have in our democracy,” Mahama said.
Ghana initiated contact with the IMF in July after the economy experienced a downturn. The move was occasioned by downgrades of the economy by rating agencies such as Fitch, Standard and Poor and Moody’s which prevented the country from accessing the international capital market.
Ghana with its move is looking for a US$3 billion programme over a 3-year period. The government has expressed confidence that the programme will help return the country onto a path of growth.
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.
The IMF team visited Ghana in recent weeks to conduct a debt sustainability review and determine the level of the nation’s debt.
But the IMF might not give the government financial support if the debt load is determined to be unsustainable.
As a result, the government may have to take into account debt restructuring, a step that many have already suggested as a remedy for the nation’s significant debt problems.
What is debt restructuring According to Investopedia.com, debt restructuring is a process used by companies, individuals, and even countries to avoid the risk of defaulting on their existing debts, such as by negotiating lower interest rates.
Instead of waiting to go bankrupt, most institutions are advised to restructure their debt in a manner that gives them a longer duration to pay their debts or makes them less expensive.
Usually, when an agreement to restructure is reached, the lenders either decide to reduce the interest rates on loans or extend the due dates for the repayment of the credit facilities.
This gives the country or business ample time to pay their loans and avoid bankruptcy.
In Ghana’s case, debt levels have been on the rise as inflationary pressures, coupled with a deteriorating exchange rate have caused Ghana’s debt to plummet to GH¢402 million as of July 2022.
However, even though experts have noted that a restructuring may be the country’s best option, they have also explained that this may have grave effects on domestic investors.
A ‘haircut’ policy on the other hand is a debt restructuring method where the remainder of the debt is written off or the interest rates are reduced to make them less expensive.
Other types of debt restructuring include Debt-for-equity swap and Issuing callable bonds.
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.
An excerpt from a public release claims that Chinese lenders fined Kenya Sh1.312 billion for SGR loan repayment delays.
Thursday, the Treasury denied a government statement that said Chinese lenders fined Kenya Sh1.312 billion for late payments on loans used to construct the standard gauge railway (SGR).
Kenya has not gone into default on its public debt, according to Treasury Secretary Ukur Yatani, who also claimed that the nation has not accumulated repayment arrears for many years.
He was responding to a Business Daily article that detailed the Export-Import Bank of China’s (EXIM) delayed payments to Chinese lenders.
The story relied on confidential Treasury documents that revealed the performance of the SGR in the year to June, including the disclosure of the Sh1.312 billion penalties on the on-lent loan.
“We wish to state categorically that Kenya has never defaulted on settlement of its debts service obligations to any of its creditors,” Mr Yatani said Thursday.
“At no time has Kenya been flagged as a country defaulting on its external debt obligations.”
Taxpayers have been forced to shoulder the burden of the SGR loans because revenues generated from the passenger and cargo services on the track are not enough to meet the operation costs, which stood at Sh18.5 billion in the year to June against sales of Sh15 billion.
The Treasury document mentioned that Kenya defaulted on the on-lent loan linked to SGR even as the country wired Sh22.7 billion in loan repayments in the year to June.
“This relates to the cost of default on interest at one percent of the due amount,” says the disclosure documents seen by Business Daily in reference to the Sh1.312 billion penalty.
Analysts suggest that Kenya could have been fined for late payment, adding that technically there is a difference between default and delayed pay.
Legally an account goes into default if it’s closed by the lender following mounting arrears, and has the ability to affect a borrower’s or country’s creditworthiness.
The delayed payment came in a year when Kenya had asked for an extension of the debt repayment moratorium from bilateral lenders, including China, by another six months to December 2021, saving it from committing billions to the Beijing lenders.
But the lenders, especially the Exim Bank of China, opposed Kenya’s application for a debt repayment holiday in a standoff that delayed disbursements to projects funded by Chinese loans.
China postponed the repayments in January last year, helping Kenya temporarily retain Sh27 billion that was due for six months ending June 2021. The opposition from Chinese lenders forced Nairobi to drop its push for an extension of the debt repayment holiday to avoid straining relations with Kenya’s biggest bilateral creditor.
China, which accounted for about one-third of Kenya’s 2021-22 external debt service costs, is the nation’s biggest foreign creditor after the World Bank. Kenya spent a total of Sh117.7 billion on Chinese debt in the period, of which about Sh24.7 billion is in interest payments and almost Sh93 billion in redemptions, according to budget documents.
Repayment of the SGR loan started in January 2020 after the lapse of a five-year grace period that Beijing had given Kenya.
Former President Uhuru Kenyatta’s administration largely took loans from China from 2014 to build roads, bridges, power plants and the SGR.
The deal to fund the first phase of the SGR, Kenya’s single-largest infrastructure project by cost since independence, saw China overtake Japan as Kenya’s largest bilateral lender.
Kenya’s debt increased more than four-fold to Sh8.58 trillion under the Kenyatta administration.
The cost of servicing public debt is poised to jump by a third to a record Sh1.39 trillion in the fiscal year through June 2023, more than half of projected State revenue.
Kenya spent almost 57 percent of tax income in the past financial year on repaying loans, according to the Treasury, underlining the effects of the mounting public debt on State finances.
The terms of China’s loan deals with developing countries are unusually secretive and require borrowers to prioritise repayment to Chinese state-owned banks ahead of other creditors. A cache of such contracts was revealed in a past report by Reuters.
The dataset — compiled over three years by AidData, a US research lab at the College of William & Mary — comprises 100 Chinese loan contracts with 24 low- and middle-income countries, a number of which are struggling with mounting debt amid the economic fallout from the Covid-19 pandemic.
It uncovered several unusual features, including confidentiality clauses that prevent borrowers from revealing the terms of the loans, informal collateral arrangements that benefit Chinese lenders over other creditors and promises to keep the debt out of collective restructurings — dubbed by the authors as “no Paris Club” clauses.
The Paris Club is a group of officials from major creditor countries whose role is to find solutions to the payment difficulties of debtor countries.
President William Ruto last month reversed one of the most controversial policies of the previous administration that had made it compulsory for cargo clearance to be done at the inland container depots in Nairobi and Naivasha.
According to Ken Ofori-Atta, the Finance Minister, Ghana’s delegation to the Group of Seven (G7) conference with African finance ministers in the US would remain after the summit to wrap up negotiations with the International Monetary Fund, IMF, before returning to Ghana.
He believes that by giving the group more time, they would be able to reach some reasonable judgments.
We will continue with the Mission and the Work since, as you are aware, we are remaining past the Fund and World Bank meetings through, possibly, the 20th. We hope it will allow us enough time to make some fair decisions about the future.
“I can tell you that the Fund staff is very motivated, which is good and we are 24/7, so the combination of their own enthusiasm and our clarity on the work that has been done to fulfil the President’s promise. If you look at the turnout of discussions for this annual meeting clearly, the world is recognizing that something different has to be done,” Ken Ofori-Atta said as quoted by Accra-based 3news.
Meanwhile, it’s been reported that the G7 during the meeting asked the World Bank to provide financial support to Ghana and other African countries to enable them to deal with the impact of the economic crisis caused by force majeure.
The G7 is made of an informal grouping of seven of the world’s advanced economies; namely: Canada, France, Germany, Italy, Japan, United Kingdom, United States of America and European Union.
This group invited finance ministers from South Africa, Senegal, Togo, Zambia, Ghana, Guinea, Rwanda, Chad, Tunisia and Morocco for the all-important meeting.
The meeting with the African Financial Ministers 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.
According to the International Monetary Fund‘s most recent Fiscal Outlook Report, Ghana is expected to complete the year with a debt-to-GDP ratio of 90.7%.
The analysis predicts that Ghana’s debt-to-GDP would likewise reach 87.8 percent in 2023 and that GDP revenue as a percentage will reach 14.1 percent by the end of 2022.
In addition to the figures, the IMF classified Ghana as a Low-Income Developing Country.
This comes after the World Bank recently classified the nation as a High Risk of Debt Distress in its Debt Sustainability Analysis.
Also, the World Bank, in its October 2022 Africa Pulse Report, projected that Ghana’s debt-to-GDP ratio will reach 104 percent by the end 2022, which is more than the projection made by the IMF.
Ghana is now seeking an economic support programme from the IMF to restore macroeconomic stability among others. The country is targeting an amount of $3 billion once an agreement can be reached.
Officials from Ghana and the IMF Mission team are holding the second round of negotiations which will focus on debt sustainability analysis which is a key requisite process for an economic support programme.
Meanwhile, recent data from the Bank of Ghana showed that the country’s public debt hit GH¢402 billion as of July 2022, representing 68 percent of GDP.
According to reports, a debt restructuring scheme could potentially effect GH3.7 billion of the GH3.9 billion in Tier 2 pension contributions, or 94% of the total amount invested in government assets.
In an effort to make sure that its debt is manageable, Ghana has started having discussions about a potential debt restructuring scheme.
However, a debt restructuring will affect the returns on investments when the yield-to-maturity period is extended or a ‘haircut’ policy is implemented.
Debt restructuring simply means when a country or company reviews the terms and conditions of the payment of loans in order payment easier or more flexible.
A ‘haircut’ policy in debt restructuring, on the other hand, refers to when interest rates on outstanding debts are reduced.
From this narrative, in the case of Ghana, when debt restructuring happens, returns on Tier 2 pension contributions will reduce thereby affecting the maturities of the securities.
The Tier 2 contributions have been largely invested in government bonds due to their low-risk factor.
Meanwhile, a five-member committee has been constituted by the government to lead discussions with financial sector players on Ghana’s debt management.
The Finance Ministry noted that: “The Committee will be consultative and will among other things lead discussions with the financial services industry and other stakeholders to provide industry-wide inputs and transmit industry concerns on debt management strategy to the MoF and BoG.”
“The stability of the domestic financial ecosystem is critical to a successful IMF-supported economic programme. The Government will take all necessary steps to protect the sector as we have done in the past,” the statement said on October 11, 2022.
Steve Hanke, a professor of applied economics at Johns Hopkins University, believes that Ghana’s economic issues won’t be resolved by a new International Monetary Fund (IMF) agreement.
The economist mentioned Ghana’s national bond in a tweet on October 12 and noted that it has lost 50% of its value this year.
“While talk of a debt default swirls in Ghana, its sovereign bonds tank. They have depreciated over 50% this year. Now, Pres. Akufo-Addo passes the begging bowl to the IMF. SPOILER ALERT: like Ghana’s past 16 IMF programs, a new one will fail to fix Ghana’s problems,” Professor Hanke tweeted.
Ghana has since July this year been engaging IMF hoping to secure a US$3 billion deal which will be spread across a three-year duration.
Ahead of that, there are moves by the government to restructure debts of investors after the completion of a Debt Sustainability Analysis (DSA) by IMF.
A debt restructuring will result in a longer yield-to-maturity for government bonds and bills, or the implementation of the “haircut” strategy. Some investors’ returns on investments may be impacted by this.
Meanwhile, former President John Dramani Mahama in an interview on VOA’s Straight Talk Africa has called for an end to the country’s continuous resort to the International Monetary Fund whenever it is confronted with economic headwinds.
He said the “going and coming” to the IMF depleted people’s faith in the country’s democracy and it also created instability.
He mentioned that the current return to the IMF to achieve debt sustainability and policy credibility should mark the start of governments prudently running the economy.
“The economy is situated in an environment. It does not exist in isolation and so there are somethings that need to be done to create an environment for the economy to thrive. Some of them are governance issues, strengthening state-owned institutions, the fight against corruption and so many other things that create the environment for the economy to thrive.
“I think that when we go into this programme and we bring debts back to sustainable levels and we are able to get the bridging facility in other to achieve policy credibility so that investors again feel confident that they can bring back their money into Ghana, then we must start from there and maintain that prudence.
“This should be the last time we go to the IMF because going and coming, it creates a certain instability in the whole system and it also reduces the faith that people have in our democracy,” Mahama said.
The country should no longer continually turn to the International Monetary Fund whenever it experiences economic difficulties, according to former president John Dramani Mahama.
He claimed that the country’s citizens no longer had confidence in its democracy and that instability was a result of the “going and coming” to the IMF.
In an interview with VOA’s Straight Talk Africa program, Mahama said that the current return to the IMF has been prompted by two problems, namely excessive borrowing and revenue outpacing expenditure.
He opined that the onus now lies on the country to particularly bring debt to sustainable levels and also achieve fiscal consolidation.
“This government has twin problems. One is macroeconomic instability because expenditures far exceed revenues. Revenues are not performing properly. The second thing is also that they went on a borrowing spree and they have pushed our debts to levels that are unsustainable.
“Just recently the World Bank came and said we had almost 104 of debt to GDP and so we have twin problems. One to achieve fiscal consolidation and two, to bring debts back to sustainable levels. So that is what they are faced with,” he submitted.
Mahama intimated that issues such as the fight against corruption and strengthening of state-owned institution ought to be addressed in order for the economy to thrive.
“The economy is situated in an environment. It does not exist in isolation and so there are somethings that need to be done to create an environment for the economy to thrive. Some of them are governance issues, strengthening state-owned institutions, the fight against corruption and so many other things that create the environment for the economy to thrive.
“I think that when we go into this programme and we bring debts back to sustainable levels and we are able to get the bridging facility in other to achieve policy credibility so that investors again feel confident that they can bring back their money into Ghana, then we must start from there and maintain that prudence. This should be the last time we go to the IMF because going and coming, it creates a certain instability in the whole system and it also reduces the faith that people have in our democracy,” Mahama said.
Ghana initiated contacts with the IMF in July after the economy experienced a downturn. The move was occasioned by downgrades of the economy by rating agencies such as Fitch, Standard and Poor and Moody’s which prevented the country from accessing the international capital market.
Ghana with its move is looking for a US$3 billion programme over a 3-year period. The government has expressed confidence that the programme will help return the country onto a path of progress.
The growth rate for Ghana for the fiscal year 2022 has been reduced by the International Monetary Fund (IMF) from 5.2 percent to 3.6 percent.
In a recent economic forecast study, the IMF voiced concern that nations like Ghana might be affected by the continued economic problems in industrialized nations, according to a Joy Business story.
However, it warned that if action is not taken to reverse the general downturn in the global economy, it is likely that the economies of industrialized nations will experience contraction.
“Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades”, the report said.
“The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook. Global growth is forecast to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023. This is the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic,” it added.
Despite the forecast, the IMF has cautioned that decisions by central banks in developed countries in hopes of checking inflationary pressures will rather impact economies such as Ghana’s along with fallouts from the Russia-Ukraine tensions.
Meanwhile, the latest forecast by the IMF for Ghana is slightly lower than the 3.7 percent growth rate announced by the Finance Minister, Ken Ofori-Atta.
He said this when he delivered the Mid-Year Budget Review before Parliament on July 25, 2022.
For the 2023 fiscal year, the IMF in its latest outlook said economic growth will slow down to 2.8 percent and is expected to peak strongly in 2027 to reach 6.8 percent.
According to the Fund, pandemic-related factors have been particularly significant in China, where a recession in the second quarter slowed down global activity.
“Temporary lockdowns in Shanghai and elsewhere due to Covid-19 outbreaks have weakened local demand, which is reflected in the new-orders component of the purchasing managers’ index. Other data corroborate this picture of slowing economic activity in China. Manufacturing capacity utilization in the country, for example, slowed to less than 76% in the second quarter”, it said in its latest World Economic Outlook.
Global growth: near-term slowdown
The IMF also predicted a slowdown in global growth, from 6.0% in 2021 to 3.2% in 2022 and 2.7% in 2023.
This prognosis for the global economy, it said, is far below average – global economic growth averaged 3.6% during 2000–21 and the same during 1970–2021.
For most economies, the Fund pointed out that the outlook is significantly weaker than projected six months ago, in the April 2022 World Economic Outlook.
Forecasts are weaker than expected for 143 economies (accounting for 92% of world GDP) for 2023.
The forecast for 2023 is the weakest since the 2.5% growth rate seen during the global slowdown of 2001— with the exception of those during the global financial and Covid-19 crises.
“The world’s three largest economies – China, the euro area, and the US — will slow significantly in 2022 and 2023, with downgrades compared with the predictions made in April [2022] and, in most cases, July [2022]. The negative revisions reflect the materialisation of downside risks highlighted in the April 2022 WEO [World Economic Outlook] and July 2022 WEO Update and discussed at length in the previous section: tightening global financial conditions in most regions, associated with expectations of steeper interest rate hikes by major central banks to fight inflation”.
The IMF however said a decline in global GDP or in global GDP per capita—which often happens when there is a global recession—is not currently in the baseline forecast.
However, a contraction in real GDP lasting for at least two consecutive quarters (which some economists refer to as a “technical recession”) is seen at some point during 2022–23 in about 43% of economies with quarterly data forecasts (31 out of 72 economies), amounting to more than one-third of world GDP.
Moreover, projections for global growth on a fourth-quarter-over-fourth-quarter basis are pointing to a significant weakening, to only 1.7% in 2022 and to 2.7% in 2023.
The IMF added that negative revisions are more pronounced for advanced economies than those for emerging market and developing economies, for which differing exposures to the underlying developments imply a more mixed outlook.
Overall, it said the outlook is one of increasing growth divergence between advanced and emerging market and developing economies.
A five-member committee has been established by the government to coordinate discussions on managing Ghana’s debt with participants in the financial sector.
According to a statement released by the Ministry of Finance on Tuesday in Accra, the committee established by the Ministry of Finance and the Bank of Ghana (BoG) is chaired by Albert Essien, with Simon Dornoo serving as vice chair.
The action is a part of the government’s efforts to maintain control and confidence in its current negotiations with the International Monetary Fund (IMF).
The other members of the Committee are Mr Alex Asiedu, Ms Mabel Nyarkoa Porbley, and Peter Enti.
The statement noted, “The Committee will be consultative and will among other things lead discussions with the financial services industry and other stakeholders to provide industry-wide inputs and transmit industry concerns on debt management strategy to the MoF and BoG.”
The statement reiterated the Government’s commitment to protecting the domestic financial sector, noting that: “The stability of the domestic financial ecosystem is critical to a successful IMF-supported economic programme.”
“The government will take all necessary steps to protect the sector as we have done in the past,” the statement said.
It was noted that the government needed the support and trust of all Ghanaians to ensure that a historic arrangement was reached with the IMF.
“We are confident that such engagement and collaboration will enable us to recover very quickly and strongly from our current macroeconomic challenges,” the statement noted.
It was also stated that a similar engagement would be held with Ghana’s external bondholders.
Ghana is currently engaging with the IMF for a loan facility to support the implementation of its homegrown economic programme to ensure a stable and resilient macroeconomic environment, ensure debt sustainability and maintain social cohesion.
The question of whether the Bank of England was correct to indicate the end of its market intervention was repeatedly avoided by the business secretary.
Although he stated his support for the Bank of England governor, Jacob Rees-Mogg challenged the idea that pension funds face “systemic” risk.
Speaking to Sky News, the business secretary said “of course” he has confidence in Andrew Bailey, describing him as “respected”.
He questioned, however, whether there was a “systemic problem” with pensions after the Bank of England expanded its market intervention to help pension funds for the second time in two days on Tuesday by buying up index-linked gilts.
The Bank had warned of a “material risk to UK financial stability” with “fire sales” of assets if it did not act.
The business secretary said that on the whole, pension funds “aren’t at risk”, but added: “Some pension funds have taken some high risk investments.”
He told Sky News that the “rightly independent” Bank intervened to protect these “risky investments”.
The Bank confirmed yesterday that its emergency support operation to protect pension funds would end this week.
Mr Rees-Mogg repeatedly refused to be drawn on whether the Bank was right to signal an end to its market intervention.
“I’m not going to criticise the Bank of England or the governor,” he said. “It is not for me to speculate on what the Bank of England is doing.”
He also insisted to Kay Burley that parts of the economy were in a “good state” as he admitted that after the economic turmoil of recent weeks his own mortgage payments have gone up.
“Mortgage rates have gone up for everyone who has a mortgage, and I have a mortgage,” he said.
“Any floating rate mortgages have gone up.”
Earlier this morning, new Office for National Statistics figures indicated that the economy shrank by 0.3% between July and August, a fall from downwardly revised growth of 0.1% the previous month.
Mr Rees-Mogg urged caution in interpreting them.
“The previous quarter’s figure showed a contraction [and] was then revised to show economic growth. So, be very careful about how you interpret figures immediately after they’re released,” he told Sky News.
“It’s a small amount of a very large economy, but these figures are notorious for being revised afterward.”
The business secretary also refused to indicate his own view on whether benefits should rise in line with inflation, an issue that has split the Conservative Party.
“We haven’t yet had the inflation figure on which benefits will be set. So, that is something that will be decided once the figure is available,” he said.
“Most predictions, most economic forecasts, turn out to be inaccurate rather than spot on. So, one has got to be careful about forecasts.”
Are we set for another era of austerity?
‘Routine decision-making’
Mr Rees-Mogg said the decision on benefits would be made once inflation figures come out.
“There is a process for making this decision,” he said.
“The statutory instrument has to be laid in November to put through the increase. That will be done in the normal way. This is completely routine governmental decision-making.”
In the Commons on Tuesday Julian Smith, a former cabinet minister, warned Kwasi Kwarteng, the chancellor, that the government must not balance tax cuts “on the back of the poorest people in our country”.
The government has already been forced to abandon plans to scrap the top 45p rate of tax in the face of a threatened revolt.
Liz Truss, the prime minister, will face MPs in the Commons on Wednesday for the first time since Mr Kwarteng’s £43bn tax-cutting mini-budget caused economic turmoil.
On Tuesday, the International Monetary Fund warned that Mr Kwarteng’s package of unfunded tax cuts was making it harder for the Bank to get soaring inflation rates under control.
The Institute for Fiscal Studies has warned the chancellor he will have to find £60bn in public spending cuts if he persists with his tax plans.
Investors are reportedly in a panic due to the speed at which the Government of Ghana and the International Monetary Fund (IMF) are negotiating a US$3 billion program, according to Dr. John Kwakye, Senior Economist and Director of Research at the Institute of Economic Affairs (IEA).
He claims that the Ghana cedi has been more negatively impacted by this investor panic than the US dollar.
He bemoaned in a series of tweets that rather than responding to it, economic managers are sitting aloof and acting as if nothing is occurring.
This, behaviour, Dr Kwakye added, is unacceptable.
“The IMF is moving at a snail’s pace in negotiating Ghana’s program, as if nothing is at stake. The delay and uncertainty are fueling speculation and panic in the investor community, causing continued damage to the cedi. Yet our economic managers stand aloof. This is unacceptable!” Dr. Kwakye tweeted.
He further observed that the government of Ghana at the moment does not have enough money to meet its economic obligations which have exacerbated its inflation growth.
“Sadly, the economy is being run aground. Gov’t doesn’t have money to meet its obligations. Ghana has one of the highest inflations in the world. The cedi is one of the worst-performing currencies. Our debt is rising to pre-HIPC levels. And yet our economic managers stand aloof,” Dr. Kwakye tweeted further.
A 5-Member Consultative Committee, led by savvy banker Albert Essien, has been established by the government to coordinate stakeholder engagements in the financial industry in order to reach an agreement with the International Monetary Fund (IMF) about Ghana’s debt restructuring.
Before agreeing on a financial sector solution with the IMF for an economic program, the group will consider opinions from financial industry participants.
The organization is distinct from the credit committee, Joy Business has learned.
The other members of the committee are Alex Asiedu, Mabel Nyarkoa Porbley, and Peter Enti.
The committee will be giving counseling and will among other things, lead discussions with the financial services industry and other stakeholders to provide industry-wide inputs and transmit industry concerns on debt management strategy to the Ministry of Finance and the Bank of Ghana.
The expectations and goals are to ensure orderliness and confidence in government’s negotiations with the IMF.
The committee, Joy Business, understands is expected to give more power to the industry players on any decision that government will reach going forward in dealing with Ghana’s debt and the IMF programme.
Why this consultative group?
The Finance Minister, Ken Ofori-Atta at a press briefing on September 26, 2022 announced that the committee will be set up for some broader stakeholder consultative inputs in finalising any deal with the IMF for an economic programme.
Scope of the consultative group?
The Finance Ministry has also disclosed that a similar engagement will be undertaken with Ghana’s external bondholders.
“The stability of the domestic financial ecosystem is critical to a successful IMF-supported economic programme and government will take all necessary steps to protect the sector as we have done in the past,” the ministry said.
“We need the support and trust of all Ghanaians to ensure that a historic arrangement is reached with the IMF. We are confident that with such engagement and collaboration the Ghanaian way, will enable us to recover very quickly and strongly from our macroeconomic challenge”, it said.
Who is Albert Essien?
Mr. Essien is a seasoned financial specialist with 30 years of experience in the banking sector.
He is the former CEO of Ecobank Group. Albert serves on several boards including the Development Finance Institute (Fin Dev), Canada, Old Mutual – South Africa, LMI Holdings as well as Jumo Africa.
He is also the Board Chairman of Ghana Amalgamated Trust. Albert 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.
Senior presidential advisor Yaw Osafo-Maafo revealed that the government’s flagship Free Senior High School, or Free SHS, program will continue unaffected while negotiations for a financial rescue plan are underway with the International Monetary Fund, or IMF.
The programs and social interventions in the school sector in general won’t be influenced by ongoing discussions, he revealed during a gathering in Accra on Monday, October 10.
He rejected requests for the IMF to make changes to the Free SHS budget, while he did acknowledge that requests for a review of the program’s implementation were warranted.
“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.
“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.
Some Ghanaians were unaware that the Ghana Cedi had now reached the GH11 mark to the US$1 mark when they awoke on Monday, October 10, 2022, to read the news or conduct business.
The unexpected turn of events occurs at a time when practically all economic indices in Ghana are ringing alarm bells, prompting Ghana to request financial assistance from the International Monetary Fund.
The sustained depreciation of the cedi versus the US dollar has left the typical Ghanaian struggling to make ends meet while others appear to be in a panicked state due to the country’s ‘falling’ economy.
In plain terms, the cedi’s performance has culminated in rising inflation figures, huge debt costs, credit rating downgrades, policy rate hikes, increasing cost of living, and a general atmosphere of frustration among the average Ghanaian.
This has placed the cedi in a perilous position after it has been ranked as the second worst-performing currency among 150 currencies in the world, according to Bloomberg.
GhanaWeb Business in this article takes a look at the trend of the cedi’s performance against the US Dollar.
Why the cedi is on a free fall
At the beginning of January 2022, the cedi was trading at a rate of GH¢5.9 to the US dollar, according to data from the Bank of Ghana.
But it shortly depreciated to GH¢6.02 at the inter-bank level, indicating a depreciation of nearly 12 percent – a signal which sparked the current performance of the cedi.
The government, in presenting its 2022 budget, had hoped to pass a number of key policies to boost the country’s domestic revenue but that hit a snag as debate over the passage of the E-Levy rocked parliament.
This then sent wrong signals to investors in both domestic and international markets.
Also, demand for forex had overtaken supplies during a period when high debts and low investor confidence made it impossible for Ghana to access the international capital market for borrowing.
Cedi breaks the 8 in March 2022
In March 2022, the Ghana Cedi continued its free fall against the US dollar, crossing the GH¢8 mark and selling at GH¢8.12 as of the 15th of the month.
The local currency at the time was trading against the dollar at a buying price of GH¢7.94, while the British pound was selling at GH¢10.17 and buying at GH¢10.17.
The currency however still went on a free fall despite witnessing some marginal appreciation.
Cedi hits the 10 mark in September
Although the government began to adopt certain measures in hopes of containing the cedi’s depreciation, the local currency’s woes continued as it reached the GH¢10 to $1 mark in September.
This signaled more concerns over the government’s ability to fully address the development, despite adopting a Special Foreign exchange auction for bulk distribution companies and a Gold Purchase Programme.
As of Monday, September 5, 2022, some forex bureaus in Accra were selling $1 for GH¢10.12 and buying it at GH¢9.90.
And as of September 27, the Minister of Finance, Ken Ofori-Atta, said the cedi had lost its value by about 31.7 percent to the US dollar.
The local currency was selling at around GH¢10.50 to the US dollar on the retail market and forex bureaus.
Cedi reaches unprecedented GH¢11 mark in October
Despite the assurance from the government that measures were being adopted to address the cedi’s performance, the dollar hit the unprecedented GH¢11 to $1 mark at some forex bureaus in the country.
As of October 8, 2022, checks by GhanaWeb Business showed that the cedi was selling at GH¢11.2 to $1 dollar. This has now renewed further concerns over the demand and supply of US dollars which now seems to be scarce in circulation.
While Ghana waits to access an IMF-supported programme in 2023 amid ongoing negotations, recent downgrades of the country’s creditworthiness by international rating agencies: Moody’s, Fitch, Standard and Poors’, all paint a rather gloomy picture of the economy.
The Central Bank on October 7 announced a further hike in the monetary policy rate by 250 basis points to 24.5 percent from an earlier 22 percent to stem inflation pressures.
But the Governor of the Bank, Dr. Ernest Addison, is convinced that the outlook of the Ghana cedi will improve, aided by the recent disbursement of a $750 million loan facility from Afreximbank.
He added that the signing of the $1.13 billion COCOBOD syndicated loan and an agreement with gold and oil firms to purchase repatriated foreign exchange earnings will help stabilize the exchange rate.
Dr. Kofi Amoah, an economist, says it is time for the NPP government to implement some of the cost-saving recommendations and ideas made by well-known Namibian politician McHenry Venaani when Namibia faced a comparable situation in light of Ghana’s glaring revenue challenges and mounting debt debacle.
Kofi Amoah claimed in an interview with GhanaWeb that “Ghana may gain not just in cost savings but we can gain with basic lifestyles of leaders to show that we are not a rich country but a poor, struggling one.” Amoah based his statement on a viral video.
“The Namibia example of cost savings must be replicated all over Africa, especially in “broke” Ghana.
Our expenditure patterns have created an unpardonable class structure… the HAVES and HAVENOTS, where the Haves live as vampires on the blood of the nation, and the HAVENOTS are the victims and poor losers.”
It is not a secret that Ghana’s economy has been ailing in the last couple of years, with high inflation, a weakening cedi due to depreciation, and rising debt service cost.
The current economic turmoil may not be peculiar to Ghana alone. However, Dr Kofi Amoah says certain proposals and measures by other African countries who have faced or facing the same challenges can be adopted as part of the recovery process.
According to Dr Amoah, the suggestions espoused by Namibia’s popular Democratic Movement (PDM) leader McHenry Venaani is worth emulating and implementing.
In 2019 during a press conference, Namibia’s opposition leader told the government that they must first introduce harsher austerity measures like reducing the number of vehicles assigned to politicians. “If they want the public to contribute 2% of their salaries”, Venaani charged.
He made these remarks after the call by the government for people to voluntarily contribute a once-off 2% of their salaries for drought relief, at a media conference held in Windhoek.
McHenry Venaani also called for a halt to the practice of government officials travelling first class, something he says should alone be the preserve of the president and not regular government officials. “There is no justification for that, no justification unless you are super rich.”
He also touched on government officials travelling with their wives who are also given different allowances for hotel even though they are expected to share a room with their partners.
He also advocated for the abolishment of perks such as Entertainment Allowance for senior government officials.
He also wants the reduction in the number of motorcades for top government officials in these harsh economic periods so the country can save money to improve the lot of the citizens.
Meanwhile, President Nana Addo Dankwa Akufo-Addo this year announced that he has slashed his salary by 30% due to current economic difficulties.
Speaking as the guest of honour at this year’s Eid Al Adha prayers in Accra, the president announced the cut to send a signal to citizens about the need to sacrifice as the country goes to the International Monetary Fund for support.
He also announced a 50% cut on fuel for government machinery.
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) has described its second round of negotiation with Ghana for a loan support facility for the country’s homegrown economic programme as constructive.
The Fund, however, said, the team would advance its technical work including further progress on assessing Ghana’s debt sustainability in the weeks ahead, including discussions at its Annual Meetings in Washington D.C.
Mr Stéphane Roudet, the IMF Mission Chief to Ghana, at the end of the meeting on Friday, said: “We had constructive discussions on policies aimed at restoring macroeconomic stability and laying the foundation for stronger and more inclusive growth.”
“We reaffirm our commitment to support Ghana in these challenging times, consistent with the IMF’s policies”.
He expressed the IMF team’s gratitude to the Ghanaian authorities, private sector, civil society, development partners and other stakeholders for their constructive engagement and support during this mission.”
The second in a series of negotiations dealt with issues including ensuring public finance sustainability while protecting the vulnerable, bolstering the credibility of monetary and exchange rate policies to reduce inflation and rebuild external buffers.
The discussions also touched on preserving Ghana’s financial sector stability, and steps to encourage private investment and growth, including by improving governance, transparency, and public sector efficiency.
The IMF team was in Ghana from September 26 to October 7 and discussed policies that could be supported by an IMF arrangement to help the country navigate through the current economic hardship and improve its fiscal balances sustainably.
They met with President Nana Addo Dankwa Akufo-Addo, and his Vice, Dr Mahamudu Bawumia, as well as the Finance Minister Ofori-Atta, and Bank of Ghana Governor, Dr Ernest Addison and their respective teams.
The IMF team also met with the Parliament’s Finance Committee, and representatives from various government agencies, the Trades Union Congress, the private sector, civil society organizations, and development partners.
In order to quickly achieve an agreement with the Washington-based lender, senior lecturer at the University of Ghana’s Business School, Prof. Lord Mensah, has advised the government to be open with the International Monetary Fund (IMF) about Ghana’s debt problem.
His remarks follow the World Bank’s Africa Pulse Report, which places Ghana’s debt at a horrifying percentage level.
According to the World Bank’s estimate for October 2022, Ghana’s debt will increase from 76.6 to 104.6 percent of GDP by the end of this year 2022.
The government’s debt deficit, growing debt costs, and the ongoing depreciation of the cedi were also discussed.
Commenting on the report on Morning Starr with Francis Abban, Prof. Mensah said unless the government has a restructuring investment plan with the IMF they will not get any deal with the Washington lender.
“The government seems to be wobbling on its decision to either call for debt restructuring and they are waiting to come and tell us that it’s the IMF that is calling for debt restructuring. But I am telling you that the IMF will not call for debt restructuring.
“But for us to get a program with them we have to do that because they will not lend to any country that is in debt distress. So we may have to negotiate on our debt and I am expecting the government to be bold enough to come out,” the senior lecturer advised.
He continued: “Now they are playing politics with it. So effectively they don’t have that confidence in coming to the investor and telling the investor look this is the situation we find ourselves in and as a result of that we may have to restructure your investment.”
Prof. Mensah, however, advised the government to improve its internal revenue generation and export ratio, adding that the government must be quick in telling Ghanaians about the economic situation before going into any deal with the IMF.
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.
