Secretary-General of the African Continental Free Trade Area (AfCFTA), Wamkele Mene, has noted that intra-Africa trade is the only way to help African economies build robust and more resilient economies to absorb any shock – internally or externally.
This, he said, will help managers of African economies to stop running to theInternational Monetary Fund (IMF) and other financial institutions for monetary support whenever there is an economic meltdown.
Speaking at the AfCFTA Business Forum in Capetown, South Africa, Mr Mene disclosed that the Bretton Woods institution has diverted global capital targeted at helping ailing economies bounce back on track to the advocacy of climate change.
He stressed that intra-Africa trade on the continent will mitigate the risk of reduced support for development finance as there would be a boost in trade which would in turn reflect in the GDP of every African economy.
“What is clear from the statements that are coming from Washington from Monday until the end of the week is that the direction of global capital is going the wrong way. Global capital is not coming south, it is remaining north. The sovereign debt crisis that we are experiencing in Africa is clear from the statements that have come out that the posture is not to be sympathetic to the sovereign debt crisis in Africa,” he said.
The AfCFTA Secretary-General further said, “…What we are hearing is that the orientation for providing finance must move from development finance and fighting poverty to climate change…they say if you focus on climate change, all your problems will be solved…so my personal opinion is that we are not going to see increased volumes of development support from the institutions whose mandate it is.
“Intra-Africa trade is the best tool we have and resilience. Intra Africa trade is what is within our means as Africans to mitigate the risk of reduced support for development finance which I think is unfortunate. If we boost intra-Africa trade, we will see the contribution to GDP, to Africa’s combined GDP increasing,” he pointed out.
In the case of Ghana, the government on July 1, 2022, announced its decision to engage the International Monetary Fund (IMF) for $3 billion financial bailout programme amidst the economic crisis.
Subsequently, a team from the IMF arrived in the country from July 6 to July 13, 2022, to engage Ghanaian authorities for a possible economic support programme.
A staff-level agreement between the Government of Ghana and the IMF was reached in December 2022.
The IMF programme, according to the government is aimed at restoring macroeconomic stability and safeguarding debt sustainability among many others.
Meanwhile, IMF has assigned Leonard Chumo as Resident Advisor to the Bank of Ghana.
The government’s economic management team who have left for Washington to discuss concerns pertaining to its International Monetary Fund(IMF) program have no strategy this is according to managing partner of Ishmael Yamsom and Associates, Michael Harry Yamson.
According to him, despite having responded to various demands by the external creditors, the government has not communicated effectively with the citizenry its plans concerning the programme.
“Government didn’t seem to leave here with a game plan. Andgovernment has not been consistent in communicating its own game plan with Ghana. We are hearing government respond to the external partners are demanding. Ghana itself does not have a game plan.
“That for me is very obvious. Otherwise there shouldn’t even have been a hint of going back to pensioners,” he said on JoyNews’ Newsfile on Saturday 15.
Mr. Yamson lamented the demand of external creditors that requests Ghana to include domestic bondholders in its debt restructuring exercise. According to him, the approach sorts to exacerbate living conditions in the country.
He added that there is a lack of understanding about what the situation means for the average Ghanaian.
According to him, “if Washington and the externals care so much about Ghanaian citizens and living standards, then the question becomes how do you ask the government to come back and destroy household incomes in the name of debt restructuring?”
Mr. Yamson also highlighted the lack of political consensus on government’s inability to generate sufficient tax revenue while in pursuit of an IMF programme. He said the government should have engaged the two major political parties in order to solve tax revenue issues.
He expressed that government ought to have tried solving internal issues before heading for negotiations in Washington.
However, reporting live from Washington, George Wiafe of JoyNews indicated that things are looking quite positive for Ghana as personal engagements with some officials at the meeting show that the country has met almost every requirement for the programme.
“I had an interaction with one person yesterday who is one of the critical actors in Ghana’s programme, in terms of approval and all the rest. Ghana has met everything.
“The only issue right now is the external creditors which they believe that based on the behind-the-scenes engagement that they are also having with these creditors, it appears that these creditors will come on board to approve Ghana’s programme,” he said.
As part of the conditions to secure a US$3 billion extended credit facility from the International Monetary Fund, some taxes and tariffs must go up.
These include a power tariff hike, electricity tariff hike, and an upward adjustment of both the Value Added Tax and Electronic Transaction Levy (E-levy).
Among these conditions that were outlined by finance minister Ken Ofori-Atta are also the preparation of an ambitious 2023 budget, with a front-loading of the fiscal consolidation programme and a comprehensive set of structural reforms, notably a public expenditure review.
Also, the Bretton Wood institution expects to see continued monetary policy tightening by the Bank of Ghana to bring inflation under control.
Accra-based Joy FM reports that these were captured in the Investors Presentation by Ken Ofori-Atta and supported by the Governor of the Bank of Ghana, Dr Ernest Addison.
Ofori-Atta noted that the government adjusted revenue and expenditure measures to improve debt sustainability and restore macroeconomic aimed at addressing structural bottlenecks contingent liabilities of state-owned enterprises, commitment controls, and arrears accumulation, and domestic revenue mobilisation.
Mr Ofori-Atta also said the government is committed to rebuilding reserve buffers, mobilising external concessional financing from multilateral and bilateral partners, and suspending external debt service payments.
Also, he said the government will safeguard social protection programmes and ensure the burden of adjustment is fairly distributed.
Additionally, he noted that social spending will be targeted to protect the most vulnerable from the impact of the economic crisis and fast-track the implementation of growth-oriented socio-economic policies, such as Ghana CARES to mitigate the impact of the pandemic and support economic recovery.
As part of measures to secure the bailout, the government is aiming at reaching a 1.5% of Gross Domestic Product primary surplus in the medium term, bringing inflation below 8% in the medium-term and restoring external buffers with gross international reserves reaching 3 months of import cover by 2026.
Also, the government is targeting a real Gross Domestic Product growth of 5% over the medium-term and being competitive with exports surpassing 37% of GDP in the medium term.
According to Richard Ahiagbah, the director of communications for the ruling New Patriotic Party (NPP), the effects of Covid-19 and the Russia-Ukraine war on the world economy are visible.
He told Ghanaians not to be deceived by the main opposition National Democratic Congress(NDC) to think otherwise.
Despite the effect of these two exogenous factors, he said, the government of Ghana continues to pay salaries and provide essential public services.
“Ghanaians, we are going through difficulties, but we continue to pay salaries and provide essential public services.
“The impact of Covid-19 and Russia-Ukraine war on the global economy is real. Let’s not be deceived by NDC to think otherwise,” he tweeted.
Ghanaians, we are going through difficulties, but we continue to pay salaries and provide essential public services. The impact of Covid-19 and Russia-Ukraine war on the global economy is real. Let's not be deceived by NDC to think otherwise. #CitiCBS #CitiNewsroom #JoyNews… pic.twitter.com/1krde4mSex
— Richard Ahiagbah (@RAahiagbah) April 13, 2023
The Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva has also repeated her comment that Ghana’s economy has been negatively impacted by the Russia-Ukraine war.
She described Ghana as an innocent bystander that has been hit by the Covid pandemic and the war.
Speaking at the ongoing IMF/World Bank Spring Meetings in Washington, she said “we have been in constant contact with authorities in Ghana, we have worked very hard and very swiftly to have the programme, $3bn support programme, for Ghana in place.
“We have been urging Ghana’s creditors to act swiftly. My appreciation also for the proactive role of the Minister of Finance of Ghana in reaching out to the creditors. We are expecting that next week there will be discussions among creditors.”
She further indicated that the Fund has asked Ghana’s creditors to act swiftly to ensure that the deal that the country is seeking with the Fund is approved.
“I can tell you that I use every opportunity myself to urge them to act swiftly. Let us remember that Ghana for a long time has done really well to tap markets to finance its growth paths.
“It has been like all innocent bystanders hit by Covid, hit by the war in Ukraine. it caused complicated domestically, the ability to Finance the budget. So a country that has a long track record of sound macroeconomic management.”
After numerous deliberations and negotiations with the International Monetary Fund (IMF) for a $3 billion bailout, Ghana is set to secure the aid from the Fund by close of May 2023.
This is according to a Graphic Business report citing sources familiar with the matter.
The new development, however is as a result of government’s ability to take advantage of the goodwill of the Fund and key bilateral creditors to fast track the debt restructuring process.
Reports are that, the financial assurance from the bilateral creditors, which is the last hurdle for Ghana, is due later this month [April], to pave the way for the request to be submitted to the IMF Executive Board for consideration and approval in May this year.
“Once the request goes before the board, I am pretty sure it will not encounter any challenges and so a deal in early or mid-May is possible,” one source said in Washington D.C., where global leaders on the economy have converged for the IMF/World Bank Spring Meetings.
This new revelation cements assurance from the Managing Director of the IMF, Kristalina Georgieva, who had earlier expressed optimism, that the Fund’s Executive Board would soon grant final approval to Ghana’s bailout request.
According to Georgieva, her optimism stemmed from the swelling goodwill that the country was getting from the international community, including its creditors.
She added that, her outfit was pushing the bilateral creditors to quickly provide the financial assurance needed for the board to approve the deal.
“To tell you the truth, I am optimistic that we are going to move swiftly and so stay positive,” she said.
Ghana secured staff-level agreement (SLA) for the $3 billion request in December 2022 but efforts to move pass the final lap have dragged as bilateral creditors haggle over the terms for an external debt restructuring exercise.
This was made known in the recently launched Fiscal Monitor report released on Tuesday, April 11, 2023.
In the report, the Fund predicted that Ghana would end the year 2023 with an inflation rate of 45.5 percent and this would further decline by close of 2024 to 22.2 percent.
On Ghana’s fiscal deficit, the report projected that, the country’s fiscal deficit will reduce to 7.3 percent by the end of 2023, however, in 2024, the Fund expects that the rate would rise to 8.4 percent and take a dip to 7.3 percent in 2025. It will decline sharply to 5.9 percent in 2026, 5.3 percent in 2027 and end 2028 at 5.4 percent.
Although the IMF projects Ghana’s current fiscal deficit at 7.3 percent, it is lower than the Fund’s initial projection of a 8.6 percent rate. The new projection also beats the government of Ghana’s projection in the 2023 Budget statement which was pegged at 9.9 percent
Giving the fine details of Ghana’s projection at the ongoing IMF/World Bank Spring Meetings, Division Chief at the Fiscal Affairs Department of the IMF, Paulo Medas urged government to be consistent with its macroeconomic framework to enable the country attain macro stability and price stability.
“The problem is once you lose the inflation expectations then it’s going to be much more difficult because you are going to have both bites for longer so the cost is larger to bring back price stability,” he said.
The bond market witnessed a significant increase in volume as trades in the new bonds experienced an uptick last week, reaching GH¢227.44million – a 459 percent increase from the previous week’s GH¢40.72million.
Despite the increase in volume traded, liquidity on the fixed-income secondary market was lower than in the previous week.
The secondary market yields on the new bonds rose over the week due to the ripple-effect of the hike in policy rate from 28 percent to 29.5 percent, while the old bonds – those which were not traded in during the Domestic Debt Exchange Programme (DDEP) – recorded a slight decrease in yield.
The old bonds market was nearly inactive, with only GH¢10.37million in volume traded, making up only 2.12 percent of the market share. The volume traded for old bonds fell by 47.43 percent from the previous week’s GH¢927.9million.
Although the old government bonds, Treasury-bills and corporate bonds recorded a total of GH¢487.8million in volume traded, the money market instruments – particularly the 91-day variant, still dominated the market with a 97.44 percent share.
Treasury-bills remain the preferred investment option for risk-averse investors, with the recent Treasury-bill auction seeing government raise GH¢1.88billion – exceeding their target of GH¢1.77billion by 6.57 percent. Government plans on raising GH¢1.67billion at next week’s auction.
However, market activity has been comparatively uninspiring over the last two weeks, with total trading volumes falling to GH¢62.31million from GH¢299.58million the previous week. Market participants were less active last week due to the unexpected policy rate hike of 150 basis points (bps) to 29.5 percent in March 2023.
The policy rate increase resulted in the Bank of Ghana (BoG) issuing its 14-day and 52-day bills at 29.5 percent and 30.25 percent respectively last week. As a result, the attention of market participants was drawn to the primary auction, reducing trading volumes on the secondary bond market.
Despite the recent policy rate hike and reduced market activity, the market is expected to improve with the March inflation report’s release, which is expected to show a marginal drop in the inflation rate. This drop could further boost investor confidence in the market.
However, analysts are bearish on the market this week; predicting that activity on the market will remain lifeless as investors seek better investment alternatives. The holiday-shortened trading week is also expected to weigh on trading volumes.
This comes as government is seeking to secure a US$3billion facility for balance of payment support, and the passing of three revenue tax bills by parliament moves government closer to securing the International Monetary Fund (IMF) Executive Board’s approval.
Government has also begun negotiations with Ghana’s Eurobond holders, of which financial assurances are required by the IMF board before approval of the pending extended credit facility programme. These developments could further boost investor confidence in the market.
China and the World Bank are exploring compromises over how to restructure billions of dollars of debt held by poor nations, seeking a long-sought breakthrough that could unlock desperately needed aid.
Discussions on Wednesday, April 12, 2023, in Washington, during the World Bank and International Monetary Fund’s Spring Meetings, are aimed at ending a deadlock among the world’s biggest creditor nations on how to renegotiate several poorer nations’ debt, which had become unsustainable amid surging inflation and a stronger dollar.
A proposal under discussion this week would see the World Bank provide fresh low-interest loans — known as concessional lending — and other grants to countries on the verge of default, in exchange for China dropping a key demand and agreeing on a timeline for debt relief. The talks were described by people familiar with the matter, who asked not to be identified because the discussions are private and the outcome is still uncertain.
Key to the compromise is the World Bank increasing its emergency assistance to countries in debt distress, something its outgoing president, David Malpass, said on Tuesday that the lender was already intending to do.
Officials from a number of countries cautioned, however, that a major breakthrough is unlikely this week, that China’s position remains unclear and the discussions are focused largely on the overall process.
People’s Bank of China governor Yi Gang is the highest-level official expected from Beijing to attend the talks this week, along with Deputy Governor Xuan Changneng, according to a person familiar with the matter. Finance Minister Liu Kun didn’t travel to Washington, with Beijing opting to send Vice Minister Wang Dongwei instead, said a second person.
The World Bank and US Treasury Department declined to comment, while the PBOC and IMF didn’t immediately respond to requests for comment.
The Wall Street Journal reported earlier on Tuesday on the possible compromise in the talks. Reuters reported late on Tuesday that China would drop its demand on multilateral loans, citing a source it didn’t identify.
The debt-relief efforts, begun by the G20 in late 2020, were intended as a way to coordinate traditional creditor nations, like the US and France, with emerging creditors, particularly China, the biggest lender to emerging economies.
Yet that mechanism, known as the Common Framework, has faced repeated delays over differences about how to treat various forms of debt. Beijing has been pushing for loans from multilateral development banks, such as the World Bank, to be treated the same as other debt — meaning everyone takes a similar “haircut”, or loss, on what’s owed.
That condition has been rejected by the US and others, who argue that such a move would harm multilateral banks’ preferred creditor status, which allows them to borrow and lend cheaply.
Debt distress
More than 70 low-income nations face a collective $326-billion burden. About 15% of low-income countries are already in debt distress and another 45% face high debt vulnerabilities, and the list is growing.
Among the compromises under discussion is a three-month deadline from when the IMF reaches a staff-level agreement with a debtor country for creditors to offer financing assurances, said two of the people. Such assurances are essential for the IMF’s board to sign off on any loans.
If consensus isn’t reached in that time frame, the IMF would be able to invoke its so-called lending into official arrears policy to disburse money. That provision seeks to prevent a creditor from blocking assistance to a cash-strapped country that’s shown commitment to meet loan conditions.
To help the Common Framework process work more smoothly going forward, Malpass said this week that the IMF and World Bank also might provide their joint debt sustainability analysis for debtors with all creditors at the same time, increasing transparency. China had earlier raised questions about the institutions’ analysis, further slowing the efforts to reach a consensus.
A breakthrough in talks this week could open the way for restructurings in nations including Zambia — the first African nation to default on its debt during the pandemic era — and help speed up the deployment of billions of dollars in IMF aid. The African country has been in talks to rework $12.8-billion in loans for more than two years.
The IMF’s decision is in line with concerns that debt pressure and funding constraints on most African countries would make it extremely difficult for African economies to expand at their full potential this year.
Ghana was not the only country to be lowered as Nigeria and South Africa were also cut to 3.2 percent and 0.1 percent respectively in the latest World Economy Outlook (WEO).
The World Economy Outlook which is published twice annually was released on April 11, 2023 at the ongoing IMF and World Bank Spring Meetings in Washington D.C-USA.
Touching on the growth of economies in Sub-Sahara Africa, Pierre Olivier Gourinc, the Economic Counselor and Director of the IMF , who also served as the presiding officer over the launch said growth in the Sub-Sahara Africa has also been revised to 3.6 percent from 3.9 percent as recorded earlier.
He added that, on the regional level, the debt debacle, surging inflation, falling currencies and the food shock across African countries were key drivers of the weaker growth.
Like the World Bank, the IMF urged all central banks in the Sub-Sahara Region to keep interest rates tight to help ward off inflation for growth to pick up.
Ghana’s revised growth forecast means government was unable to meet its target for the year, which was pegged at 2.8 percent in the 2023 Budget Statement presented in November last year.
Prices of crude oil on the international markets is expected to fall by 24.1 percent to sell at an average of $73.1 per barrel in 2023, this is according to the IMF’s April 2023 World Economic Outlook Report.
The development will be a significant reduction from the $96.4 per barrel sold in 2022.
The International Monetary Fund said price of crude oil will however continue to drop in the coming years to an average of $65.4 per barrel in 2026.
In its April 2023 World Economic Outlook Report, the Fund explained that “uncertainty around this price outlook is elevated in part due to the uncertain rebound in China’s growth, as well as the energy transition”
In the wake of tough economic conditions on the globe, prices of crude oil retreated by 15.7 percent between August 2022 and February 2023 on the back of weakened demand.
Market leaders like China have also witnessed their first annual decline in oil consumption due to a resurgence in COVID-19 outbreaks and concerns in the real estate market.
Fears of a looming economic recession, coupled with inflation hikes, banking sector crisis and tightening of monetary policies in key economies, have all impacted on the oil demand and pricing.
The IMF report however noted that on the supply side, Western sanctions against Russia and its efforts to export crude oil have also impacted on global market balances.
“As of March, Russian crude oil exports had held steady since implementation of the Group of Seven (G7) price cap and ban on crude oil imports on December 5 [2023]. Russia rerouted its oil, reportedly sold at a major discount to Brent oil prices, to nonsanctioning countries, primarily India and China,” the IMF report noted.
The UK is set to be one of the worst performing major economies in the world this year, according to a forecast.
The International Monetary Fund (IMF) says the UK economy’s performance in 2023 will be the worst of the G7 richest nations.
But it now also sees it as the worst performing of the wider G20 group, which includes sanctions-hit Russia.
It now predicts the UK economy will shrink by 0.3% in 2023, before growing by 1% next year.
It comes as the world economy continues to recover from the energy and pandemic shocks.
But the IMF now fears a “rocky road” from pockets of fragility in the global financial system since a series of bank failures around the world.
The IMF had already forecast that the UK would experience a mild downturn this year and be bottom of the pile of the G7 group of major nations, which it topped last year during the pandemic rebound.
The G7 group is made up of Canada, France, Germany, Italy, Japan, the US and UK.
While many forecasters think the chances of a recession are declining, the IMF still predicts the UK will shrink this year, alongside Germany.
The IMF also released a forecast for all the world’s economies, which showed the UK is predicted to be the worst performing of the wider G20 group of countries, which includes India, China and Russia.
IMF researchers recently pointed to Britain’s exposure to high gas prices, rising interest rates and a sluggish trade performance as reasons for the slowdown.
The new forecasts come against the backdrop of a world economy that continues to recover from both the pandemic and the Ukraine war energy shock.
But the body said there were concerns about the wider impact of recent fragility in global banking markets.
In March, Swiss banking giant Credit Suisse was taken over by its rival UBS. A number of US banks had already gone under earlier in the month, sparking fears of another financial crisis.
The IMF now expects global growth to fall from 3.4% in 2022 to 2.8% in 2023, before rising slowly and settling at 3% in five years’ time.
But it warned that if there is more stress in the financial sector, global growth could weaken further this year.
Rate predicted to fall
Separately, the IMF said it expects real interest rates – which take into account inflation – in major economies to fall to pre-pandemic levels because of low productivity and ageing populations.
Central banks in the UK, the US, Europe and other nations have been increasing interest rates to combat the rate of price rises, otherwise known as inflation.
In the UK, inflation is at its highest for nearly 40 years because of rising energy prices and soaring food costs. In response, the Bank of England has been raising interest rates, and last month increased them to 4.25%.
However, in a blog the IMF said that “recent increases in real interest rates are likely to be temporary”.
It added “When inflation is brought back under control, advanced economies’ central banks are likely to ease monetary policy and bring real interest rates back towards pre-pandemic levels.”
The IMF did not say, however, exactly when interest rates were set to fall back to lower levels.
The International Monetary Fund (IMF) has doubled down on its plea to wealthier nations to support Ghana and other weaker economies to help such countries extricate themselves from the shackles of debt.
The call also comes at a time when the fund has seen a $1. 6 billion shortfalls in its funding in the face of the seemingly global economic crises where funding to debt-distressed countries was at its highest.
Speaking ahead of the IMF and World Bank Spring Meetings in Washington, Kristalina Georgieva, the
IMF’s Managing Director said the fund and wealthier countries needed to make it easier for vulnerable ones to restructure their debts to help minimise the effects of the debt crises on lives and livelihoods of their people.
Developed economies must also commit more resources to the fund’s Poverty Reduction and Growth Trust (PRGT) – a concessionary lending window for low-income countries (LICs) – to help strengthen the global response to debt vulnerabilities, Ms Georgieva said in a curtain raiser speech before the meetings that opened yesterday, Monday, April 10.
Ghana’s case
The one-week meetings in Washington D.C. in the United States of America (USA) come off at a time when Low-Income Countries (LICs) are battling extreme debt pressures worsened by the COVID-19 pandemic and Russia’s invasion of Ukraine. Ghana, with a debt stock of GH$575.7 billion in November last year, is one of more than 10 LICs in debt distress.
The country defaulted in servicing its debt last year and is now working with bilateral creditors to restructure their component to be able to earn a US$3 billion IMF assistance to help slow down inflation, prop up the currency and return the economy to the path of growth.
Although discussions with some bilateral creditors under the G20 Common Framework are underway, talks with China, which holds US$1.9 billion of Ghana’s debts have dragged, fuelling doubts over the country’s ability to secure a package before May.
Costly delays
The IMF MD said such delays to debt restructuring requests were costly to the countries and the global economy in general, hence the need for additional support from wealthier countries for these “weakest members of our global family.”
“I wish to make a double plea on their behalf: help them to handle the burden of their debts, which has been made so much harder by the shocks of the past years; and secondly, help ensure that the IMF continues to be in a position to support them in the years ahead. Start with debt”, she pleaded.
About 15 per cent of low-income countries are already in debt distress and another 45 per cent face high debt vulnerabilities. And about a quarter of emerging economies are at high risk and facing “default-like” borrowing spreads.
This has raised concerns over a potential wave of debt restructuring requests—and how to handle them at a time when current restructuring cases are facing costly delays, Zambia being the most recent example,” she said.
Zambia started its debt restructuring in December 2022 but the inability to reach a consensus with China largely means that the process is yet to be concluded.
Stronger support
Beyond this, Ms Georgieva said the IMF needed more resources from wealthier nations “to bolster the IMF’s capacity to help our poorest member countries.”
“To support them, we have increased our interest-free lending more than four-fold to US$24 billion since the beginning of the pandemic. Now, we are urgently calling on our wealthier members to help address fundraising shortfalls in our PRGT,” she said.
In April 2020, the fund disbursed US$1 billion to Ghana under its Rapid Credit Facility (RCF) of the PRGT to fight the COVID-19 pandemic and its effects.
It said earlier this year that increased demand by countries hit by the twin effects of the pandemic and the war in Ukraine meant that the PRGT faced funding shortly of about US$1.6 billion.
As a result, Ms Georgieva said support from wealthier nations was critical to ensure that the IMF can continue to provide vital support and help catalyse financing from others.
“It is now more important than ever to step up cooperation—to strengthen the ropes that tie us together—on this issue and the full range of economic challenges, we face. Only then can we climb these hills together.
Growth
The IMF MD said global growth was also headed for the weakest since 1990.
She said as the debt pressures surged, the growth prospects remained subdued with the fund’s latest estimates showing that the global economy would grow below three per cent in the next five years.
“This makes it even harder to reduce poverty, heal the economic scars of the COVID-19 crisis and provide new and better opportunities for all,” Ms Georgieva said.
Interest rates in major economies are expected to fall to pre-pandemic levels because of low productivity and ageing populations, according to a forecast.
The International Monetary Fund (IMF) said increases in borrowing costs are likely to be “temporary” once high inflation is brought under control.
The Bank of England has been raising interest rates since December 2021, taking them from 0.1% to 4.25%.
This has raised mortgage payments for many homeowners.
Central banks in the UK, the US, Europe and other nations have been lifting interest rates to combat the rate of price rises, otherwise known as inflation.
In the UK, inflation is at its highest for nearly 40 years because of rising energy prices and soaring food costs. A number of factors are fuelling inflation, including Russia’s invasion of Ukraine which has helped drive up energy costs.
However, in a blog the IMF said that “recent increases in real interest rates are likely to be temporary”.
It added “When inflation is brought back under control, advanced economies’ central banks are likely to ease monetary policy and bring real interest rates back towards pre-pandemic levels.”
The IMF did not say, however, exactly when interest rates were set to fall back to lower levels.
The Washington-based financial institution said ageing populations would be one factor likely to lower inflation.
Explaining why older people affect inflation, George Godber, fund manager at Polar Capital, said that they tend to spend less.
“The amount that you spend relative to your income is highest when you’re in your 20s, 30s and 40s – often that’s maybe young families, when you’ve got households forming, you’ve got couples coming together, they tend to spend the most when they decorate and buy a car or whatever, and you as you get older in life you slow down your consumption,” he told the BBC’s Today programme.
“There’s less heading to Glastonbury and nights out on the town, there’s more sitting at home and watching the Antiques Roadshow, so therefore your spending patterns sort of reduce and you save more and so an ageing population tends to be disinflationary.”
Andrew Bailey, governor of the Bank of England, said recently that in the UK, the share of adults aged between 20 and 59 years-old has fallen to below 65% in the past decade “and it is set to decline further in the coming years”.
He said that this has been driven by a decline in birth rates as well as people living for longer.
The IMF also said low productivity – the measure of how many goods and services are produced – would bring inflation down.
In a speech last month, Mr Bailey said that prior to the financial crisis in 2008, UK productivity had been boosted by the country’s manufacturing sector.
“But following the financial crisis, manufacturing productivity growth fell back sharply. This fall in manufacturing productivity is the main cause of the slowdown,” he said.
Just prior to the Covid pandemic, the UK’s interest rate was 0.75% but the Bank of England cut it twice in March 2020 to 0.1% as the country entered lockdown.
The rate of inflation has risen steadily over the past couple of years and hit 10.4% in February – more than five times higher than the Bank of England’s 2% target.
Following the decision to raise UK interest rates again in March, the Bank of England said that it expected inflation “to fall sharply over the rest of the year”.
This is due to the government’s continuing help with household heating bills through the Energy Price Guarantee scheme as well as falling wholesale gas prices.
However, Mr Bailey declined to say whether he believed that interest rates had reached a peak.
According to him, the Nana Addo Dankwa Akufo-Addo-led government is doing all it takes to stabilize and reboot the economy which has suffered from the aftershocks of COVID and the ongoing Russian-Ukrainian war.
He told party faithful at a rally in the Eastern Region on April 8, that by June, July 2023, a deal will be secured with the multilateral lender.
“Due to the challenges encountered by the economy in recent times the opposition NDC think they will win power.
“But the government has instituted measures to salvage the situation with impact already showing in the reduction in fuel prices and appreciation of the Ghana cedi against the major foreign currencies.
“The NDC was thinking that the election will be held at a period where the economy has been entangled with difficulties but the government will fix the challenges before that.
“I promise that by June/July this year the government will be able to secure a deal from the IMF to help drive the economy out of its current economic challenges and this will subsequently collapse the NDC,” he said in Twi.
Government hoped to secure a Board approval of the IMF for a US$3billion facility after securing a staff-level agreement late last year.
Government is looking to secure external debt restructuring agreements after a tumultuous domestic debt exchange programme was passed earlier this year.
A March ending timeline was missed but there has yet to be any official communication of when the approval is likely to be secured.
An International Monetary Fund (IMF) staff team, led by Mr. Olaf Unteroberdoerster, visited Abidjan from 1 – 14 March 2023 and agreed with the Ivorian authorities on all policy objectives and reforms for an economic reform program that could be supported by an IMF financial arrangement under the Extended Fund Facility (EFF)/ Extended Credit Facility (ECF).
A staff-level agreement has now been reached, including on the level of access to Fund resources of 400 percent of quota (equivalent to about US$ 3.5 billion) under the Extended Fund Facility (EFF)/Extended Credit Facility (ECF).
Mr. Unteroberdoerster issued the following statement on Wednesday, 5 April 2023: “The Ivorian economy proved resilient to the pandemic, but the economic rebound has softened in the face of adverse spillovers from Russia’s war in Ukraine and global monetary tightening”.
“Indirect and direct subsidies to curb price pressures, higher security spending, and worsening terms-of-trade amid robust domestic demand have led to a widening of macroeconomic imbalances in 2022”.
He noted: “Against this challenging backdrop, the authorities have requested Fund support under a blended EFF/ECF arrangement for their economic program. It aims to preserve fiscal and debt sustainability and anchor the 2021-25 National Development Plan (NDP) in key structural priorities to promote more inclusive growth led by the private sector and facilitate Côte d’Ivoire’s transition towards a middle-income country”.
“Staff fully support the authorities’ reform agenda and welcomes their deep commitment to fiscal and debt sustainability, and to building a more prosperous and inclusive society amid rapid demographic change and significant external challenges”, he noted.
The IMF team met with Vice President Tiémoko Koné; Prime Minister Patrick Achi; Minister of State and Agriculture Kobenan Adjoumani; Minister of Planning and Development Nialé Kaba; Minister of Petroleum, Mines and Energy Sangafowa Coulibaly; Minister of Economy and Finance Adama Coulibaly; Minister of Budget and State Holdings Moussa Sanogo; Minister of Commerce and Industry Souleymane Diarrassouba; Minister and Secretary General of the Presidency Abdourahmane Cissé; and other senior government and BCEAO officials, as well as representatives of the business and donor communities.
Ghana reached a similar agreement with the IMF a few months ago for $3 billion.
Ghanaian authorities were hoping for a board-level agreement by March but that did not happen.
Should Ghana secure a deal with the International Monetary Fund and implement it successfully, the gold-rich country would be able to contain some of its fiscal deficits, the World Bank has said in its April 2023 Africa Pulse report.
Ghana has reached a staff-level agreement with the IMF for a $3 billion extended credit facility.
The cocoa-rich country is yet to secure a board-level agreement.
Ghana is still talking to China and the Paris Club to restructure its $5.7 billion external debt after struggling to restructure the country’s domestic debt through a debt exchange programme.
The World Bank report noted that inflation in many Sub-Saharan African countries has remained elevated—above central bank targets and above inflation in advanced economies and the global economy.
For 2023, for almost 70 per cent of the countries in the region, the projected rate of inflation is greater than 4 per cent (the benchmark rate measured by the rate of inflation of advanced countries in the same year), and 25 per cent of Sub-Saharan African countries will suffer from two-digit inflation rates in 2023, the report said.
Looking at the fiscal policy outcomes, almost 70 per cent of the region’s countries posted a larger average fiscal deficit in 2022–23 than the 3 per cent of gross domestic product deficit that separates countries with and without fiscal space, it added.
The report said about half of Sub-Saharan African countries face both high inflation (low monetary policy space) and wider fiscal deficits (low fiscal policy space).
Notable cases include Ghana, Nigeria, Malawi, Zambia, and Burundi, among others.
By contrast, six countries (of a sample of 45) have some monetary and fiscal space to address macroeconomic stability and support aggregate demand.
Most of these countries are oil producers, such as the Republic of Congo, Chad, and Gabon.
Rising international prices for crude oil and the strengthening of their currencies are providing macroeconomic space in these countries, the report explained.
“Still, efforts should be undertaken to improve macro resilience”, the World Bank advised.
It said the deficit in Ghana “will remain elevated throughout 2023 to 25, with the large deficit being compounded by severe financing constraints resulting from a limited ability to issue long-term domestic debt and a lack of access to international capital markets”.
However, it said a “successful agreement on, and implementation of an International Monetary Fund (IMF)–supported programme would help contain the deficit and provide the necessary financing, including via the ongoing debt restructuring negotiations”.
In Zambia, the report said “fiscal consolidation will eventually bring the deficit down to 6.9 per cent in 2025”.
The path to consolidation, it noted, “will be supported by improved tax efficiency measures and containing public expenditure by strictly adhering to priority projects, cutting wasteful subsidies, and strengthening procurement procedures”.
Finally, higher government spending in South Africa on social grants, wage pressures, tapering of global commodity prices, and weaker domestic growth will weigh on the budget deficit this year.
The fiscal outlook is compounded by the conditional debt relief arrangement for the state power utility Eskom, which raises financing needs by an average 1.1 per cent of GDP over the medium term.
The budget deficit is estimated at 4.2 per cent of GDP in 2022 and projected at 4.4 per cent in 2023.
Former president of the African Development Bank (AfDB) Donald Kaberuka has diagnosed Ghana’s economic malaise at an event held by the Rwandan ruling party late last week.
Kaberuka, whiles sharing views about how African governments take actions that eventually wreck their economies decried economic mismanagement stressing that economic independence is a product of economic discipline.
Steering clear of mentioning the name of the specific country, he outlined how a West African country had returned to the International Monetary Fund (IMF) and was being forced to implement measures from the multilateral vendor.
He stressed that the said government was struggling because of failure to save for a rainy day. “A country in West Africa, please no names, which was back to the IMF to begin general economic reforms is back to the IMF today, please no names.
“Why? A combination of domestic indiscipline, macroeconomic indiscipline and these external shocks. As a result, they have lost what I call political, fiscal and policy space. The decisions they are now implementing are not their decisions.
“Why? Because during that day when things were very good, they did the wrong things, they ticked the wrong boxes. Massive borrowing for example, massive spending, huge deficit without building the resilience for the day things will be very difficult,” he stressed.
Kaberuka emphasized that aside from Ghaan, 14 countries in that zone were suffering similar plights, “economic independence begins by economic discipline,” he added.
The current economic situation in the nation would have been worse under an NDC administration, according to Justin Frimpong Koduah, general secretary of the ruling New Patriotic Party (NPP).
The country has seen a downturn since 2022 with the government embarking on a debt restructuring exercise, and it’s also seeking a $3 billion bailout from theInternational Monetary Fund(IMF).
Speaking on Face to Face on Citi TV with Umaru Sanda Amadu, Mr. Koduah stated that Ghanaians still have confidence in the government despite the economic challenges expressing hope that they will break the eight in the 2024 polls.
The NPP’s chief scribe indicated that even without the impact of COVID-19 coupled with the Russian-Ukraine war, the NDC wouldn’t have been able to manage the economy.
“Ghanaians still have confidence in this government despite the economic challenges, because they know that between the NDC and the NPP, NPP are better managers of the economy than the NDC. Ghanaians also appreciate the fact that had it not been NPP in power, and if it were the NDC, the situation would have been worse off than what we are experiencing now. I’m telling you if NDC were in government, the situation would have been worse off”.
He added, “Even without any COVID-19 or Russian-Ukraine war, they [NDC] wouldn’t have been able to manage the economy well. We saw what happened under H. E. President John Mahama’s tenure– four years of ‘Dumsor, the scrapping of the teacher/nursing trainee allowances, among others”.
Mr. Koduah called on Ghanaians to exercise restraint assuring that the country will come out of the challenges soon.
He said Ghana had been touted as the fastest-growing economy before COVID-19 struck.
“Ghana was touted as the fast-growing economy in the world until COVID-19. At the end of the day, we will come out of the challenges, unlike the NDC which told Ghanaians that children should stay home and not be allowed to go to school during COVID-19. When we discovered oil, they termed it as coconut oil ‘adwengu’. The same NDC told Ghanaians that free SHS is not possible. Can you tell us that they are better managers of the economy than NPP?” the NPP chief scribe stated.
Parliament on Friday, March 31, passed the Excise Duty Amendment Bill 2022, the Growth and Sustainability Levy Bill, 2022, the Ghana Revenue Authority Bill 2022 and the Income Tax Amendment Bill 2022.
The financial bills seek to raise about 4 billion Ghana Cedis annually as part of domestic revenue mobilisation.
The bills are also crucial to aid the government’s quest to facilitate the Board Approval for the $3 billion International Monetary Fund (IMF) Programme staff-level agreement.
Many industry players have kicked against the passage of the new taxes arguing that it will kill businesses.
The Lead Tax and Regulatory Partner at Deloitte- Ghana, George Ankomah says passing numerous taxes will not guarantee the country a green light for the $3 billion International Monetary Fund (IMF) cash.
This comes on the back of Parliament on March 31, 2023, through a Majority decision that has passed three new taxes which are to generate approximately GH¢4 billion per year to supplement domestic revenue.
These are Income Tax Amendment Bill, Excise Duty Amendment Bill, and Growth and Sustainability Amendment Bill.
Speaking on the Morning Starr with Francis Abban Monday, April 3, 2023, Mr. Ankomah indicated that the government will have to put more effort into reviving the economy rather than the passage of new taxes.
He emphasized that there underlying factors the government must meet and demonstrate to get approval of the IMF deal.
“We have not put forth a hundred percent all, what the IMF is asking for on what we need to do to have an IMF deal. You know the discussion around the debt exchange was very topical. We are taught after signing that then we are on course. It happened that after that we realized that there is something more that needs to be done and so that is where we are in terms of the taxes.
“We are told that once these taxes are passed then we will be able to secure an IMF deal. The IMF to the best of my understanding is not necessarily asking for a tax bill to be passed but the government demonstrates plans of how it is going to recover from the state in which we are.
“In terms of sustainable economic growth and how we are going to do that and macroeconomic stability and how we are going to do that. So the government is of the view that some of these taxes that have been introduced should be one of the considerations for the IMF to see that we have made an effort to rake in more revenue as far as Ghana is concerned to meet their requirement as a condition,” Mr. Ankomah stated.
The Minority in Parliamenthas disproved claims that the caucus didn’t make a valiant effort to oppose the three new tax legislation voted on Friday.
Member of Parliament for Ningo-Prampram, Sam Nartey George, on the Citi Breakfast Show on Monday suggested that the clerks in Parliament have some questions to answer on how they went about Friday’s head count.
“If we had acquiesced we wouldn’t have gone through the vote, we wouldn’t have accounted for our 136, we wouldn’t have challenged what appeared to be an error in counting. We are aware now that at the time we did the first count Ahmed Tuferu was not in Parliament.
“There are two [majority] MPs who also walked in after the clerks had finished taking the vote from the majority side, so clearly, that vote shouldn’t have read 136, 137, but be that as it may, the Speaker only announces what it is presented to him,” Mr George told host Bernard Avle.
He added that “the clerks have a question to answer as to how they managed to get 137.”
Parliament on Friday, March 31, passed the Excise Duty Amendment Bill 2022, the Growth and Sustainability Levy Bill, 2022, the Ghana Revenue Authority Bill 2022 and the Income Tax Amendment Bill 2022.
The financial bills seek to raise about 4 billion Ghana Cedis annually as part of domestic revenue mobilisation.
The bills are also crucial to aid the government’s quest to facilitate the Board Approval for the $3 billion International Monetary Fund (IMF) Programme staff-level agreement.
The Minority in Parliament earlier communicated its opposition to the bills, but the bills were passed despite an MP from the majority suffering a near-fatal accident on his way to the House.
The Growth and Sustainability Levy Bill 2022, the Ghana Revenue Authority Bill 2022, and the Income Tax Amendment Bill 2022 have all been approved by the parliament.
The financial bills presented to Parliament by the government seeks to rake in about 4 billion Ghana Cedis annually as part of domestic revenue mobilisation.
The bills are also crucial to aid the government’s quest to facilitate the Board Approval for the $3 billion International Monetary Fund(IMF) Programme staff-level agreement.
The Minority in Parliament earlier communicated its opposition to the bills.
Cape Coast South lawmaker, George Ricketts-Hagan ahead of the votes expressed the Minority caucus’ commitment to resisting the bills as a bold statement to the government that it cannot be reckless with its expenditure and expect Ghanaians to pay the price.
As part of measures to meet the criteria set by the IMF to qualify for a bailout, the government has completed tariff adjustment by the Public Utilities Regulatory Commission (PURC), Publication of the Auditor-General’s Report on COVID-19 spending, and Onboarding of Ghana Education Trust Fund (GETFund), District Assemblies Common Fund (DACF) and Road Fund on Ghana integrated financial management information system (GIFMIS).
The international and domestic bond markets are shut for the financing of government programmes, forcing the government to rely on Treasury Bills and concessional loans as the primary sources of financing for the 2023 fiscal year.
Government in justifying the introduction of the taxes said they are critical for recovery from the current economic crisis.
The Minority in Parliament have served notice of their intent to oppose the approval of some three revenue bills currently pending before Parliament.
This was disclosed by Tamale Central Member ofParliament, Ibrahim Murtala Mohammed during an interview on TV3 on Thursday, March 30, 2023. He emphasised that the bills if approved will further compound the hardship imposed on the people of Ghana by the current government.
“We think that it is unacceptable that they will overburden Ghanaians with such taxes. In any case, there is no reason why the government will want to burden the people of this country with more taxes.
“These taxes have nothing to do with the IMF arrangement and that is the story that has been peddled out there.”
The minority on Friday, March 24, 2023, suffered a woeful defeat after resolving to vote against the approval of six ministers nominated by President Nana Addo Dankwa Akufo-Addo.
The minority had agreed to follow a directive by its party, the National Democratic Congress to reject all the nominees in demand for a reduction in the size of the government.
However, at the end of a secret voting process, all six nominees received the votes of some members of the minority to augment the majority’s votes for approval.
This development has led to accusations of treachery being levelled against the minority with various criticism made against the caucus.
However according to Murtala, the caucus will this time push for an open ballot and vote against all three bills.
“Sometimes one gets extremely worried speaking on it, the good thing is that this vote is not going to be done through a secret ballot, it is going to be an open ballot so we are just hoping that we get our 136 and we are very convinced that the 136 are going to vote against those taxes,” he stated.
He pointed that the upcoming vote will serve as an opportunity for the MPs who betrayed the party to redeem themselves.
“I think that those who unfortunately betrayed the cause, they would have realized that considering the backlash and they need to make amends,” he said.
The three bills currently before parliament are the Income Tax Amendment Bill, Excise Duty Amendment Bill, and Growth and Sustainability Amendment Bill.
The government is seeking to pass these bills to generate approximately GH¢4 billion per year to supplement domestic revenue in an economy that is currently ravaged by serious challenges.
The government is set to miss a March ending timeline for a Board approval by the International Monetary Fund for a $3 billion facility.
The minority is against the new income legislation currently before Parliament, according toMahama Ayariga, the member of parliament from Bawku Central.
He said the Minority will vote against the bill when the time comes.
Mr. Ayariga indicated that, unlike the approval of the ministerial nominees where a secret vote was used, a headcount will be conducted to determine whether the new tax bills should be accepted or not and that will help in the rejection of the bills.
Making the declaration on Eyewitness News on Citi FM, Mr. Ayariga disclosed that “it is going to be a voice vote where if you are not satisfied, we call for a division and then there will be a headcount and the matter will be determined, and I am very confident that all our members will be in the House and vote in line with our position to vote against the bill.”
“You will stand and be counted and everybody including your constituents will be watching and so if you don’t go with your constituents, they will see and measure you accordingly,” he further explained.
Mr. Ayariga stressed that the Minority would have been considerate if the government was making efforts at cutting down on its expenditure but so long as it is “only interested in asking Ghanaians to pay more taxes and not cutting down on the consumption of the taxes,” it will not allow such burden on Ghanaians.
Government is under pressure to have three new revenue bills passed by Parliament as it seeks to rake in GH¢4 billion per year to shore up revenue to fix the ailing economy and secure a Board approval for a bailout from the International Monetary Fund (IMF).
The bills which include the Excise Tax Stamp and Excise Duty amendment bills, Income Tax amendment bill and Growth and Sustainability levy bill are already being rejected by some business groups.
Dr. Abdallah Ali-Nakyea, a tax expert and consultant, believes that certain charges in Ghana should be eliminated.
According to him, the economy is badly impacted by the ongoing implementation of levies.
Dr. Ali-Nakyea raised alarm about the country’s rate of new tax introductions every other time in a radio interview with Citi FM on Thursday, March 30, 2023, saying it was troublesome.
According to him, high taxes lead to circumstances that have an impact on both employment and productivity.
He claimed that the government should reduce spending rather than putting so much emphasis on tax introduction.
For Dr Ali-Nakyea, government should not be too motivated in introducing more taxes as part of a move to appear good in the eyes of the International Monetary Fund (IMF).
Three bills namely the Income Tax Amendment Act, the Excise Duty Amendment Act, and the Growth and Sustainability Act are currently before Parliament, with the government hoping to generate approximately GH¢4 billion per year if the bills pass.
The government fears failing to pass the new tax bills on Friday will jeopardize Ghana’s chances of a quick economic recovery and board approval for an IMF bailout (IMF).
The Chinese government has given a strong indication that it is willing to help Ghana secure the balance of payments bailout from the International Monetary Fund (IMF).
According to the Chinese government, it has an obligation to ensure the Ghanaian economy does not collapse.
This is according to the Chinese Finance Minister Mr Liu Kun.
Mr Kun explained that this is due to the confidence they have in the long-term economic prospects of Ghana.
“We know that these are short-term challenges which we as responsible creditors remain committed to resolving.
The long-standing and prosperous relationship between Ghana and China imposes on us, a responsibility to help”.
“Chinese authorities have confidence in Ghana’s economic management and its long-term economic viability.”
Mr Kun also added that “China believes in promoting debt sustainability and sustainable development.”
Mr Liu Kun made the comments when Ghana’s Finance Minister, Ken Ofori-Atta led a delegation to engage China over a $1.7 billion debt.
The Ghana delegation is made up of Technical Officials from the Ministry of Finance, the Ministry of Foreign Affairs and the Bank of Ghana.
Mr Ofori-Atta discussed the bilateral talks with China on debt restructuring as well as seeking financial assurances for Ghana’s programme with the IMF.
The objective of the engagement is not debt cancellation but to maintain that the issue will be discussed.
Mr Ofori-Atta has earlier said discussions with the Chinese government on the country’s debt restructuring programme have been positive.
According to him, Ghana will soon secure external assurances from China.
Mr Ofori-Atta in a tweet on Friday, March 24, also expressed optimism about the government passing the three new tax bills in Parliament.
The Investment Banker added that the government is making significant progress on securing a deal with the International Monetary Fund (IMF).
Passing revenue measures as a pre-condition for IMF Programme
Government is hoping to get parliament’s approval for three revenue bills which are key requirements for securing a deal with the IMF.
The bills are the Income Tax Amendment Bill, the Excise Duty Amendment Bill and the Growth and Sustainability Amendment Bill, all expected to rake in about GH¢4 billion annually.
Earlier negotiations with Paris Club Members
According to the government, there has been some significant progress made in negotiations with the Paris Club.
Details on China’s Debt
Ghana is hoping to restructure $5. 7 billion of its external debts, with China holding a third of the figure, amounting to $1.7 billion dollars.
Ghana’s total debt owed its external creditors is pegged at $29.2 billion.
The structure of Ghana’s External Debt showed that Ghana owes China about 1.7 Billion Dollars. Eurobonds is 13.1 Billion Dollars, Multilateral accounts for about 8.1 Billion Dollars.
The rest are Paris Club Countries – $1.9 billion and other creditors accounting for $3.2 billion.
At the 2023 Oxford Center for the Study of African Economies Conference at St. Catherine’s College, Oxford, Abebe Aemro Selassie, Director of the African Department of the IMF, said: “For cases where debt is unsustainable, it goes without saying that it needs to be restructured.”
In such cases, he said, “the burden of making repayments should not fall unduly on debtor countries”.
“But this is easier said than done”, he admitted, saying: “Debt restructurings have always been difficult, and even more so now in the context of a more diversified creditor base and more complex structure of public debt.
“Take domestic debt, which now accounts for about half of all public debt in sub-Saharan Africa.
“In cases where public debt is unsustainable, and this exposure needs to be included in the restructuring perimeter, careful consideration needs to be given to the effects on the domestic banking sector, how quickly market access can be regained etc.”, he advised.
“And with respect to external creditors, countries, of course, have even less sway over the pace at which restructuring can happen, as clearly shown by the ongoing challenges with the Common Framework”.
This, he noted, “is even more frustrating in unsustainable cases where the official creditors’ inability to agree on a needed debt treatment prevents the IMF from providing timely support to countries during periods of acute distress”.
Ghana restructured its domestic debt a few weeks ago and is currently in talks with China and the Paris Club to restructure the gold-producing West African country’s external debt of about $5.3 billion, of which $1.7 billion is owed to China alone.
Read Abebe Aemro Selassie’s full remarks below:
Prospects remains undiminished. As difficult as conditions are at the moment, I strongly believe that the vast majority of countries have reached a threshold where even in the face of the many challenges they face, they will get by; indeed, go on to prosper. Rather, what is frustrating is that with a modicum of increased support, the region could be helped to reach its full potential sooner and the global economy could be much better for it.
While countries have a clear role to play, what is required of the international community going forward are the following:
Much higher volumes of countercyclical flows, particularly from International Financial Institutions (IFIs), to neutralize the highly procyclical nature of private capital flows. At the Fund, for example, right now our ability to sustain our recent high levels of support is increasingly being constrained by the limited availability of concessional resources. A challenge that we are working very hard to address via pledges from our wealthier members.
A more agile and effective sovereign debt resolution framework. The G20’s Common Framework is an important innovation, and we would be in a much worse place without it. At the same time, it has not been able to provide the required financing assurances and debt relief in a timely manner. This needs to change, and quickly. Again, as an institution, we are working relentlessly to improve this process and, with the World Bank and the G20, launched a new Global Sovereign Debt Roundtable in February to bring together key stakeholders involved in sovereign debt restructuring to address the current shortcomings in debt restructurings.
Finally, more support from advanced countries is needed. As one British mandarin once put it to me, the “authorizing environment” for this is not exactly favorable. Indeed, we are seeing significant cuts in such flows, and a significant share of what is not being cut is instead being directed elsewhere. Two quick points on this. First, as the preceding discussion has, I hope, convinced you, this cut in aid, particularly its diversion away from budgets, is having the very significant effect of proportionally reducing development spending. Second, if it is perhaps too much to ask for higher aid, then one change that could at least be made is to ensure that there is much more progressivity in aid flows to the poorest and more fragile countries.
Again, absent making sure that we devote the resources needed now to build human capital and help integrate Africa into the global economy, it is not just slower growth and development progress in the region that is in store, but also a much weaker and less resilient global economy.
The Finance Minister, Ken Ofori-Atta, has noted that talks with Ghana’s bilateral creditors are progressing in the right direction.
Ofori-Atta in a tweet on March 24, 2023, stated that the government is hopeful of securing external assurances soon.
He wrote: “So far had very positive and encouraging meetings in China! Looking forward to securing external assurances very soon, even as we pass our outstanding domestic revenue bills back home. Great progress on all fronts…#ResolvingTogether #GhanaFirst.”
So far had very positive and encouraging meetings in China! Looking forward to securing external assurances very soon, even as we pass our outstanding domestic revenue bills back home. Great progress on all fronts…#ResolvingTogether#GhanaFirst
— Office of the Finance Minister-Ghana (@oofmghana) March 24, 2023
Finance Minister Ken Ofori-Atta left Accra for China on Sunday March 19, 2023.
Ofori-Atta’s trip to Beijing is hinged on efforts to secure a deal for restructuring of Ghana’s bilateral debts with the Asian economic powerhouse.
Even though Ghana is seeking a US$3 billion facility from the International Monetary Fund (IMF), the need to restructure both domestic and external debts has been given as a key conditionality.
China is a key player relative to Ghana’s external debtors, holding about $1.7 billion of Ghana’s $5.5 billion bilateral debt.
According to the Ghana Business News portal, the specialised nature of their lending windows means that Ghana cannot add them to the model used to negotiate with the G20 and the Paris Club members.
Talks with China were originally slated for mid-February but they were postponed to late March 2023.
Ofori-Atta, has however met with representatives of the Chinese government and its quasi-agencies in Accra since the postponement was announced.
Despite securing an IMF Staff-Level Agreement last year, government is undertaking an external restructuring of its debts in order to get a Board Level of approval later this month.
The first two months of 2023 saw a heated domestic debt restructuring programme adopted under the Domestic Debt Exchange Programme (DDEP).
Meanwhile, the Minority in Parliament insists that the government’s plans to get the IMF Board approval by end of March will likely not materialize.
The International Monetary Fund (IMF) has called on all bilateral creditors to support Ghana’s efforts to restore debt sustainability, as the country works towards presenting its economic programme for IMF Board approval.
Speaking at a news conference in Washington DC, the Director of Communications at the IMF, Julie Kozack, stressed the importance of Ghana securing financing assurances from partners and creditors, as a necessary step towards the presentation of its program request to the IMF’s Executive Board for approval.
“We’re calling on bilateral creditors to support Ghana’s effort to restore debt sustainability, form an official creditor committee, and deliver the necessary financing assurances as soon as possible,” Kozack said.
“While the IMF is engaging the Ghanaian authorities on the progress made on its request, the Fund is also seeking assurances from Ghana’s partners.”
A self-imposed deadline of March ending has enabled Ghana complete most of its prior actions in record time, including a Domestic Debt Exchange Programme. Whilst Board Approval before the end of March is unlikely, it is obvious that the government’s “self-imposed” deadline has enabled rapid progress on all fronts, making board approval highly likely within the next month or two.
Finance Minister,Ken Ofori-Atta, is currently leading a government delegation to China, hoping to secure financing assurances and reach a deal with the Asian economic giant to restructure Ghana’s debt of ¢1.7 billion.
A tweet by Mr Ofori-Atta this morning stated, “So far had very positive and encouraging meetings in China! Looking forward to securing external assurances very soon, even as we pass our outstanding domestic revenue bills back home. Great progress on all fronts… #ResolvingTogether #GhanaFirst”
On their part, China’s Foreign Ministry Spokesperson, Wang Wenbin stated at a Regular Press Conference on Wednesday 22nd March, 2023, that China attaches great importance to resolving Ghana’s debt issues and understands the difficulties facing the country at the moment.
Confirming the ongoing visit to China of a high-powered government delegation led by Ken Ofori-Atta, Mr Wenbin stated, “We would like to enhance communication with Ghana to work out a proper settlement through consultation.”
With the support of bilateral creditors and partners, Ghana is working towards restoring debt sustainability and securing the IMF’s support for its economic programme.
The IMF programme aims to support Ghana’s efforts to restore macroeconomic stability, debt sustainability, protect the vulnerable, preserve financial stability, and lay the foundation for strong and inclusive growth under the Ghanaian government’s Post Covid Programme for Economic Growth (PC-PEG).
He is concerned that the economy in its current state risks collapse if the IMF deal is not sealed by the end of March 2023.
Mahama made the comment while delivering a lecture on political party financing in Ghana.
The lecture took place on Wednesday, March 22 at the University of Professional Studies-Accra (UPSA) auditorium.
“Whereas some political actors have advocated state sponsorship for political parties, the truth is, Ghana is today, broke.
“Ghana is struggling to secure an IMF programme lest the economy collapses totally by end of March 2023, according to the Minister for Finance. This being the case, Ghana cannot, at the moment, absorb additional expenditure streams,” he stressed.
The passage of outstanding revenue bills by Parliament remains critical to government programmes as well as to enable the state to complete four of the five agreed prior actions in the International Monetary Fund (IMF) Staff Level Agreement.
The outstanding bills are the Income Tax (Amendment) Bill, Excise Duty and Excise Tax Stamp (Amendment) Bills as well as the Growth and Sustainability Levy Bill. These bills, according to the government, are necessary for effective budget implementation. They will also boost efforts to increase tax-to-GDP from less than 13 percent to the sub-Saharan average of 18 percent.
Together, if approved, the bills will lead to a revenue yield of approximately GH¢3.96 billion this year.
So far in addition to the domestic debt exchange programme – awaiting completion of the external debt operation – government has completed three prior action – tariff adjustment by the Public Utilities Regulatory Commission (PURC), publication of the Auditor-General’s Report on COVID-19 Spending, and onboarding of Ghana Education Trust Fund (GETFUND), District Assemblies Common Fund (DACF) and Road Fund on the Ghana Integrated Financial Management Information System (GIFMIS) – as established in the Staff Level Agreement.
In an engagement with the media on the passage of these bills, the Director of the Revenue Policy Division at the Ministry of Finance, George Swanzy Winful, noted that government programmes are largely based on these revenue measures and that if not approved, will be of dire consequences to budget implementation.
“The passing of these bills is critical as it will have serious consequences on the management of public funds if not achieved. If the bills are not passed, there may be a need to revise the revenue estimate, which will affect the mobilisation of domestic revenue,” he said.
“The government is working with the IMF in this regard and has indicated what it can contribute to show its commitment to mobilizing domestic revenue. Without the support of parliament in passing these bills, the nation may find itself in a difficult situation,” he added.
Although the situation is gradually normalising, there are still hurdles to cross to get the country to a better position. The government needs parliament’s support in passing these bills to secure a brighter future for the nation.
Growth and Sustainability Levy Bill, 2022
This bill is to impose a special levy to be known as the Growth and Sustainability Levy to raise revenue for growth and fiscal sustainability of the economy. The levy is to be imposed on profit before tax of the companies and institutions and. on· production in the case of mining, upstream oil and gas companies.
The estimated revenue for 2023 is approximately GH¢ 2.216 billion. The Levy is subject to review by the minister responsible for finance in 2025.
Per the government, this comes on the back of the Coronavirus Disease (COVID-19) pandemic which led to a significant reduction in revenues and increased expenditure, as well as the Russian-Ukraine war which has also resulted in unprecedented global crises – depreciation in currencies and impacted living conditions and inflation levels.
The Ghanaian economy has not been spared these shocks. Further interventions are required to raise additional revenue for national development and social protection for the vulnerable. The introduction of the Growth and Sustainability Levy is part of the government’s efforts to raise funds for carrying out these interventions.
Income Tax (Amendment) Bill
The Income Tax (Amendment) Bill, 2022 is to amend the Income Tax Act, 2015 (Act 896) to revise the rates of income tax for individuals and introduce an additional income tax bracket, introduce a withholding tax rate on the realisation of assets and liabilities and on winnings from lottery, unify the loss carried forward provisions and revise the treatment of foreign exchange losses and increase the optional rate for individuals on the gain from the realisation of an investment asset.
Others include revising the upper limits for the quantification of motor vehicle benefits and increasing the concessional income tax rates.
The individual personal income tax bands have been reviewed to accommodate the minimum wage for 2023 as the basic tax free income and an additional band at 35 percent as part of the high net worth taxation policy. The upper limits for quantification of motor vehicle benefits have not been revised since 2015. Government has revised these upper limits to account for inflation.
These amendments are considered necessary to support the growing economy and will lead to a revenue yield of approximately GH¢ 1.29 billion.
Excise Duty (Amendment) Bill, 2022
The Excise Duty (Amendment) Bill, 2022 is to amend the Excise Duty Act, 2014 (Act 878) to revise the excise tax rates for cigarettes and other tobacco products to conform with the Economic Community of West African States (ECOWAS) Protocols and raise revenue to mitigate the harmful effects of these excisable products; increase the excise duty in respect of wine, malt drinks and spirits; and impose excise duty on sweetened beverages and electronic cigarettes and electronic liquids to increase revenue.
The government expects to raise about GH¢455 million from this bill.
The Growth and Sustainability Levy Bill, the Excise Duty and Excise Tax Stamp (Amendment) Bills, and the Income Tax (Amendment) Bill will be voted in parliament today, Thursday, March 23.
The Board’s approval of the staff-level agreement for the $3 billionInternational Monetary Fund (IMF) Programme would be made easier with the approval of these unpaid revenue mobilization bills.
The passage of all the outstanding revenue Bills which are necessary for effective Budget implementation as well as boosting efforts at increasing Tax-to-GDP from less than 13% to the sub-Saharan average of 18%
The passage of the Bills will enable the government to complete four out of five agreed Prior Actions in the Staff Level Agreement.
Already, the government has completed tariff adjustment by the Public Utilities Regulatory Commission (PURC), Publication of the Auditor-General’s Report on COVID-19 spending, and Onboarding of Ghana Education Trust Fund (GETFund), District Assemblies Common Fund (DACF) and Road Fund on Ghana integrated financial management information system (GIFMIS).
The passage of all the outstanding revenue Bills which are necessary for effective Budget Implementation as well as boosting our efforts at increasing our Tax-to-GDP from less than 13% to the sub-Saharan average of 18.
The international and domestic bond markets are shut for the financing of government programmes, forcing the government to rely on Treasury Bills and concessional loans as the primary sources of financing for the 2023 fiscal year.
Therefore, consideration and approval of fiscal measures by Parliament are critical for recovery from the current economic crisis.
Director of Revenue Policy Division of the Ministry of Finance George Swanzy Winful explained that the Growth and Sustainability Levy is to raise revenue for growth and fiscal sustainability of the economy.
This he said was necessary to bridge the financing gap created by COVID-19 and Russia-Ukraine war.
He hinted that Growth and Sustainability Levy is a temporal measure expected to apply from 2023 to 2025 to help correct the imbalances being experienced.
Mr Winful explained that Growth and Sustainability Levy replaces the National Fiscal Stabilisation Levy (NFSL).
According to him, National Fiscal Stabilisation Levy (NFSL) was being charged to 11 companies but the Growth and Sustainability Levy will apply to all companies.
He cautioned that if the bills are not passed, the government will be forced to review revenue estimates which will have serious consequences on public funds.
The Director of the Revenue Policy Division of the Ministry of Finance explained that the government has indicated revenue mobilization plans to IMF which includes the outstanding bills.
Therefore, he said failure to pass the bills will exacerbate the already difficult financial position of the country.
He pointed out that the country is in extraordinary times and appealed to the Members of Parliament to pass the outstanding bills today.
Mr Winful pledged that the Ministry of Finance will deepen stakeholder engagements to address the concerns of the public.
Income Tax (Amendment) Bill, 2022
The object of the Income Tax (Amendment) Bill, 2022 is to amend the Income Tax Act, 2015 (Act 896) to revise the rates of income tax for individuals and introduce an additional income tax bracket.
It will introduce a withholding tax rate on the realisation of assets and liabilities and on winnings from the lottery, unify the loss carried forward provisions and revise the treatment of foreign exchange losses.
The Bill will also increase the optional rate for individuals on the gain from the realisation of an investment asset, revise the upper limits for the quantification of motor vehicle benefits and increase the concessional income tax rates.
The individual personal income tax bands have been reviewed to accommodate the minimum wage for 2023 as the basic tax-free income and an additional band at 35% as part of the high net worth taxation policy.
The upper limits for the quantification of motor vehicle benefits have not been revised since 2015.
The government has therefore revised these upper limits to account for inflation.
Compliance with the requirements for payment of tax on the realisation of assets and liabilities is being made more efficient with the introduction of a return to be submitted within 30 days of the realisation and a withholding tax.
The optional tax rate for individuals on the gain from realisations has also been increased.
The rate for income from gifts will also be increased as a consequential amendment.
The loss carried forward provisions are being unified at five percent while the treatment of foreign exchange gains is being restricted to actual losses.
Foreign exchange losses relating to capital expenditure is also to be capitalised.
The income tax rates for temporary concessions are being reviewed upwards with the intent to gradually phase them out.
These amendments are considered necessary to support the growing economy and will lead to a revenue yield of approximately GH₵1.290 billion GH₵1, 290,000,000).
Excise Duty (Amendment) Bill, 2022
The object of the Excise Duty (Amendment) Bill, 2022 is to amend the Excise Duty Act, 2014 (Act 878) to revise the excise tax rates for cigarettes and other tobacco products to conform with the Economic Community of West African States (ECOWAS) Protocols and raise revenue to mitigate the harmful effects of these excisable products.
The Bill will increase the excise duty in respect of wine, malt drinks and spirits; and impose excise duty on sweetened beverages and electronic cigarettes and electronic liquids to increase revenue.
The ECOWAS directive on the harmonisation of excise duties on tobacco products directs that the excise duty on tobacco products must include an ad valorem duty and a specific duty.
Specifically, the ad valorem rate is required to be 50% or more while the specific tax is required to be the minimum equivalent of $ 0,02 per stick in the case of cigarette, cigar and cigarillo and the cedi equivalent of $20 per net kilogramme for all other tobacco products.
The Bill also seeks to amend Act 878 to implement this Directive in line with Ghana being a member of ECOWAS.
There has been an increase in the use of electronic cigarettes and other smoking devices over the last decade.
Currently, these products do not attract excise duty, but Excise duty will be imposed on these products as the nicotine and other chemicals used as additives are also harmful.
Apart from mineral waters and malt drinks, all other sweetened beverages, including processed fruit juices do not attract excise duty,
The Bill amends Act 878 to impose excise duties on these products and increase the excise duty on mineral waters and malt drinks.
Spirits have a higher alcohol content compared to beer but the excise duty on spirits is lower than that of beer.
To address this, the excise duty on spirits is being raised above that of beer in accordance with good practice on the imposition of excise duties.
Consequentially, the excise duty on wines has been reviewed upwards.
For ease of reference and the record, the descriptions of the various products are being revised to conform to the World Customs Organisation Harmonised Commodity Description and Coding System.
The Bill amends Act 878 by substituting the First Schedule with a new Schedule.
The rationale for the amendment is to revise the excise tax rates for cigarettes and other tobacco products to align with the ECOWAS Protocols and impose new excise tax rates on sweetened beverages. The passage of the Bill will yield approximately four hundred and fifty-five million Ghana Cedis.
Growth and Sustainability Levy
The object of the Bill is to impose a special levy to be known as the Growth and Sustainability Levy to raise revenue for the growth and fiscal sustainability of the economy.
The Coronavirus Disease (COVID-19) pandemic led to a significant reduction in revenues. and increased expenditure enormously.
The double jeopardy of the Russian-Ukraine war has also resulted in unprecedented global crises, depreciation in currencies and impacted living conditions and inflation levels.
The Ghanaian economy has not been spared these shocks.
Further interventions are required to raise additional revenue for national development and social protection for the vulnerable.
The introduction of the Growth and Sustainability Levy is part of the Government’s efforts to raise funds for carrying out these interventions.
The Levy is to be imposed on profit before tax of the companies and institutions and on• the production in the case of mining, upstream oil and gas companies specified in the first column of the Schedule.
The estimated revenue for 2023 is approximately GH₵2.216 billion.
The Levy is subject to review by the Minister responsible for Finance in 2025.
The National Democratic Congress’ (NDC’s) national communications officer, Sammy Gyamfi, claims thatCOVID-19 is not the cause for Ghana’s economy woes.
The Akufo-Addo administration has attributed Ghana’s economic crisis to the COVID-19 pandemic and the war in Russia and Ukraine.
The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva had earlier agreed that COVID-19 and the Russia-Ukraine war negatively affected the country’s economy.
But speaking on Face to Face on Citi TV with Umaru Sanda Amadu, Sammy Gyamfi, said the IMF Chief was being diplomatic with the truth on the true state of the Ghanaian economy.
According to him, the MD of IMF didn’t want to jeopardise the progress of the bailout the government is seeking to restructure its debt, hence the massaged facts regarding the economic crisis.
The NDC’s National Communications Officer reiterated that the economy was broken before the outbreak of COVID-19.
“The economy was worse before COVID-19 came in, even before COVID-19 our economy was broken. It’s not what the IMF or World Bank says, it’s about what the facts say. The IMF is like a doctor, doctors have a certain duty of care to their clients. They will tell you reasons for your sickness but in a diplomatic way and well-dressed manner”.
He maintained, “right now that we have gone to IMF for a bailout, they are our doctor, and we are the patient. They will definitely not say something that actually reflects the reality, knowing that it can hamper the bailout and economic recovery programme we are seeking from them. They were being diplomatic. In diplomatic settings, it’s very normal. If you listen to what these external players are saying, you will be deceived. You need to examine things for yourself, before COVID-19 what was the state of the economy?”.
Mr. Gyamfi asserted that the COVID-19 pandemic cannot be used as a justification by the government for the woes of the country slamming the government for spending money on wasteful ventures.
“They [NPP government] had more resources to transform this country than any government since Dr. Kwame Nkrumah’s tenure. Yet have wasted these funds on needless and useless ventures such that today they have very little to show for the unprecedented resources they had. These and many falsehoods were presented by President Akufo-Addo in his state of the nation address,” the National Communications Officer of NDC pointed out.
According to him, the local currency had depreciated by close to 13% against the dollar before COVID-19 describing as false claims that the economy was on a good trajectory before the pandemic.
“Before COVID-19, our cedi had depreciated against the dollar by close to 13%. That claim that we were on a good trajectory before COVID-19 is false,” he stated.
Today, Monday, March 20 the National Democratic Congress (NDC) will address the country on the theme ‘The True State of the Nation’.
Johnson Asiedu Nketiah, the Chairperson of the NDC, will deliver the speech during the event, which will be held at the University of Professional Studies Accra (UPSA).
The ‘True State of the Nation Address’ is expected to counter ‘The State of The Nation Address’ delivered by President Akufo-Addoon Wednesday, March 8.
The NDC address, under the auspices of the party’s National Communications Bureau, is expected to focus heavily on the economy and factors that have pushed the country for an IMF bailout.
Meanwhile, the Minority in Parliament says Ghana will not be able to secure the International Monetary Fund’s (IMF) board approval at the end of March 2023 contrary to claims by the government.
The opposition group explained that the government has not been able to satisfy the financing assurances regarding the bailout which includes the board documents.
“Mr Speaker, our President said on authority that Ghana would get an IMF Board approval by the end of this month, I don’t know who is briefing our President, but Ghana will not be able to get an IMF Board approval by the end of this month because even the board documents are prepared.
“We need to get China to give Ghana financing assurance and that they are ready to take a haircut and China has not agreed,” Minority Leader, Cassiel Ato Forson said.
Chief Executive Officer of C_Energy Ghana, Mike Cobblah has suggested that, as the country awaits an International Monetary Fund (IMF) board approval, the government should continually court investors’ confidence.
He said this should be done through government’s transparency on measures being put in place to ensure that “by the time the IMF programme kicks in, we have put our house in order and the economy is on a certain trajectory to experience the kind of growth that we expect.”
According to him, a failure to adequately address the uncertainties of investors on the government’s fiscal measures would be injurious to government-investor relations in the future.
Speaking on JoyNews’ PM Express Business Edition, he said, “I think that’s the kind of dialogue that investors are expecting. If we don’t address that uncertainty people will still be waiting and will adopt a wait and see approach, and that’s what’s happening in the investment world.
“Most of the transactions that are happening currently or are on the table, in the pipeline, investors are waiting to see how the IMF discussions pans out and when we are able to reach the fiscal agreement. It’s important that we set ourselves a realistic timetable and work towards it.
“And whiles we do that in the intervening period, we actually address investors and tell them what measures we’re putting in place within our domestic setting to make sure that once we tidy up our debt restructuring and the IMF programme kicks in, the fiscal sciences are being tackled, what are the things that we’re doing to make sure that we bring back that investor confidence that is quite desired,” he suggested.
Ghana is the most indebted African country to the International Monetary Fund though the country’s debt to the Fund was unchanged at $1.70bn in January 2023.
According to the Fund’s Quarterly Finances ending January 31, 2023, Ghana’s outstanding loans to the International Monetary Fund stood at 1.278 billion Special Drawing Rights (SDR 1.278 billion) at the end of January 2023, equivalent to $1.708 billion.
This is out of Africa’s total loans outstanding of SDR 16.15 billion to the Bretton Wood institution as of January 31, 2023.
The country has, however, so far repaid SDR 53 million, equivalent to $75.7 million to the IMF.
Ghana’s loan exposure to the Bretton Woods institution is classified as concessional lending. Concessional loan comes with a low-interest financing.
Democratic Republic of Congo and Kenya were ranked 2nd and 3rd in Africa with the largest outstanding loans of SDR 1.142 billion and SDR 1.015 respectively to the Fund as of January 2023.
They have also received a disbursement of SDR 304 million and SDR 239 to boost their balance of payments.
Sudan and Uganda were 4th and 5th respectively with their exposure to the Fund estimated at SDR 992 million and SDR 632 million. Uganda has also received a disbursement of SDR 180 million to aid its fiscal economy.
The rest of Africa was indebted to the tune of SDR 10.1 billion to the IMF. The African countries have so far received disbursement of SDR 1.25 billion post-Covid-19.
Former food and agriculture minister Dr. Owusu Afriyie Akotois certain that Ghana can reduce its reliance on the International Monetary Fund (IMF) if it gives the agriculture sector greater attention.
Speaking to the media, on March 15, Dr Akoto said the country’s economic fortunes can be improved by the agriculture industry.
“To be permanently out of the hands of these international institutions and bilateral donors we must focus on the agric sector; the literature is clear from which sector developed nations focused their energy,” he said.
“We’ve been mining gold for over 100 years, what has that gotten us. Oil same, we’re still in the hands of the IMF,” Akoto told the host Kwaku Nhyira-Addo.
“We’ve been borrowing heavily on the Eurobond marketfor the past few years. So, we shouldn’t go on that illusion that mining will take us out. We discovered oil during former president Kufuor’s time, what has that gotten us? Has it gotten us out of the clutches of the IMF?” Akoto asked.
For his most recent assessment of the economy, the academic who has recently released negative judgements on Ghana’s economy used inflationary data.
He maintains that the Ghana Statistical Service was producing inflation estimates that were significantly lower than the true rate, calling the rate “rubbish.”
“Ghana’s economic death spiral just continues to spin. Today, I measure inflation in Ghana at a stunning 84.95%/yr, ~1.58x the Ghana Statistical Services’ phony official rate. The GSS is producing RUBBISH,” Hanke tweeted on March 11.
The government only recently secured a Domestic Debt Exchange Programme (DDEP), which according to experts is a major conditionality of the lender in granting Board approval for a US$3 billion bailout.
The programme was meant to ensure the streamlining Ghana’s unsustainable debt. Government announced an 85% participation rate.
Ghana is hoping to get the first tranche of the bailout by March this year in order to among others rein in inflation and arrest the galloping depreciation of the cedi.
Talks are currently underway with Ghana’s external creditors in a bid to restructure loans in order to get IMF Board approval in March 2023.
President Nana Akufo-Addo has defended his government’s decision to borrow from the International Monetary Fund (IMF) during his State of the Nation Address in Parliament. He stated that his government has not been reckless in borrowing, despite questions about the country’s debt situation and the misuse of COVID-19 funds.
“Mr. Speaker, let me state emphatically that we have not been reckless in borrowing and in spending. Aside from the misuse of COVID-19 funds, we have only spent on urgent needs such as building roads, bridges, and schools,” Akufo-Addo explained.
The government announced on July 1, 2022, that it was seeking a $3 billion bailout from the IMF, which was subsequently agreed upon in December 2022. The Ministry of Finance is currently in negotiations with the IMF, with hopes of securing the support by March.
The President’s defense of the government’s borrowing intentions comes amid months of speculation and concerns about the country’s increasing debt.
President Akufo-Addo has urged Ghanaians to look for a bright spot despite the persistent economic gloom.
According to him, in light of events elsewhere, the crisis’ effects may have been worse.
Ghana is currently banging on the doors of the International Monetary Fund (IMF) for a bailout amid intensifying hardship, a rising cost of living and a depreciating cedi.
For him, other countries going through a similar predicament have seen chronic shortages seeing winding queues at fuel stations.
“Maybe we should also count our blessings and how together, we are managing the difficulties. We’ve all seen the images around the world. Here in Ghana, we have not had any fuel queues. We have not suffered shortages in food and essential items or the catastrophe of dumsor,” he said on Monday.
He made these comments at the 66th Independence Day Anniversary celebration at Adaklu in the Volta Region.
Addressing the gathering, President Akufo-Addo also communicated his administration’s resolve in finding solutions to the situation.
“We are working hard to resolve them,” he added.
Ghana has currently secured a staff-level agreement with the IMF in its bid to get a $3 billion bailout.
Ghana gained independence from British colonial rulers on March 6, 1957.
The path to emancipation was marked by many struggles, with many nationals laying their lives for the cause.
As a result, Ghanaians set aside the 6th of March each year to commemorate its independence and take stock of the country’s progress.
The theme for this year’s celebration is ‘Our Unity, Our Strength, Our Purpose’.
A finance lecturer at the University of Ghana Business School, Prof. Godfred Bokpin, has asserted that Ghana cannot celebrate its independence as long as social and economic advancement are still constrained by fraud and injustice.
In his opinion, these deeply rooted societal vices that are being left uncontrolled are what’s causing the current economic downturn.
Speaking to the media, Prof. Bokpin said “I think that what is also important is that merely spending on independence means nothing. We need clear timelines and targets to guide our next celebration and more importantly, during the 67th celebration, we should look forward to gaining independence from corruption, nepotism and low productivity.”
“We must look forward to something worth celebrating. It is not enough to spend millions of Ghana cedis to celebrate every 12 months. There are challenges and so if we can’t gain independence from corruption then, it is not worth celebrating anything anymore.”
Ghana’s economic metrics have recently been on the decline, with over 50% inflation and a depreciating cedi driving up living expenses.
In order to help the economy recover, the government has been forced to turn to theInternational Monetary Fund(IMF) for a $3 billion extended loan facility.
The government has implemented a domestic debt exchange program as part of steps to rescue the faltering economy and to satisfy the requirements of the IMF for assistance.
“What it is for us is to use the celebration to look at what the major misses are and what the major hits have been. But if you look at our trajectory since independence, it doesn’t look like we have gained independence. We have been lying to ourselves all this while. Whatever we sought to gain from our independence in 1957 in terms of having control and direction of our economy have not been achieved.”
“Ghana has out of these 66 years spent quality time under the direction, guidance and supervision of the West. So we should really think of independence. We have not been able to turn the aspirations and intents into real sustainable development,” Prof. Bokpin added.
Ghana’s cedi, the world’s second-worst performing currency this year, is heading for more pain after the West African nation missed a self-imposed deadline to restructure its bilateral debt and move closer to tapping foreign aid.
Finance Minister Ken Ofori-Atta wanted to reach a restructuring agreement with bilateral creditors by the end of February to help qualify for a $3 billion International Monetary Fund program.
So far, Ghana has only partially completed the domestic-debt part of the exchange program.
The cedi has slumped 21% against the dollar in 2023, the worst performer among more than 100 currencies tracked by Bloomberg after the Lebanese pound.
Still, the missed deadline doesn’t automatically derail the talks. Rather, it highlights the difficulties Ghana faces as it tries to reduce its debt load and contend with critics ranging from international bondholders to local trade unions.
“For the foreseeable future the cedi will continue to be volatile until we are able to make substantial progress on the external debt restructuring front,” Kweku Arkoh-Koomson, an economist at Databank Group, said by phone.
“The IMF deal is what will cause a clear stability in the cedi,” he added.
Ghana is trying to restructure most of its public debt, estimated at 576 billion cedis ($45 billion) at the end of November. Local bondholders have been asked to voluntarily exchange 130 billion cedis of debt for new bonds that will pay between 8.35% and 15% interest, compared with an average of 19% on old bonds.
Ghana stands to ask external creditors to write off as much as 50% of the debt it owes them — far higher than the 30% the government initially considered, S&P Global Ratings said in a report Tuesday.
“Uncertainty on when the rest of the restructuring will be completed” is influencing cedi volatility, said Courage Boti, an economist at Accra-based GCB Capital Ltd. “To the extent that those things are hanging in the balance now — in that timelines are not very certain — the volatility of the cedi will continue.”
To date, local investors have exchanged 87.8 billion cedis, or 67.5% of bonds under restructuring, for new securities, against an overall target of 80%. The country will have to reorganize obligations owed to local pension funds to complete the domestic exchange, a move that’s running into criticism from trade unions.
The government aims to start “substantive” discussions with international bondholders and their advisers in the coming weeks, Ofori-Atta said last month, offering Eurobond holders some losses while seeking to reschedule payments on bilateral obligations.
German Ambassador to Ghana Daniel Krull has observed that China’s hesitance to come to the external debt restructuring table could be due to fears over implications for its dealings with other African countries.
China’s current position as the leading creditor to African countries, the diplomat explains, means that whatever arrangement it ends up making with Ghana in terms of ongoing debt restructuring to help the country meet requirements for an International Monetary Fund (IMF) bailout must be done to all the others that are looking to reduce sovereign debts or heading to the Bretton Woods Institutions for bailouts.
“China has been very reluctant in terms of setting up a creditors committee, which is a key decision to take now; and we are aware that, so far, the Ghanaian government has not been able to enter into direct talks with them; so we are trying to talk to them, but China is a big player and has its agenda for dealing with Africa.
“We must also be aware that other countries are having similar challenges, and that is making it so complex because it might not be with only Ghana but other African countries. So, this is not only with Ghana but all of Africa; and that explains China’s hesitance in negotiating with Ghana. Let’s not also forget that China’s economy has also been hit hard by COVID-19 and is not in the best of shape,” he said.
Imperatively, he urged China to take a bold internal decision as soon as possible and come to the negotiation table in order to enable Ghana chart a pathway to recovery from the ongoing economic challenges characterised by unsustainable public debt.
Touching on what the German government is doing to help Ghana out of its woes, Mr. Krull emphasised that Germany remains committed to supporting the country in these hard times; nonetheless, every help must be given within the remit of international conditions and policies.
“The recent visit of top German ministers and parliamentarians to Ghana in recent times is a clear sign of our commitment and preparedness to support in all times, and especially in times of crisis like this one. We are prepared to live up to our responsibility as one of the major bilateral creditors to Ghana, but we are ready to do so with certain criteria adhered to,” he said.
He stated that the G20 has a common framework for handling such crises and that Germany is committed to respecting the framework irrespective of the fact it might not be perfect.
The ambassador further called on business moguls who have good relationships with China to also get involved in lobbying the Asian nation to come to the aid of Ghana.
The ambassador made these remarks in his engagement with the press at his residence to brief them on the state of bilateral relations between the two countries after the German employment minister’s visit.
China-Ghana debt restructure status
The Minister of Minister, Ken Ofori-Atta, disclosed last week that government’s planned high-level meeting with Chinese creditors over Ghana’s debt restructuring has been postponed to late March 2023.
For many stakeholders, this could affect Ghana’s timelines for an economic bailout of US$3billion to build back the economy, as the country needs to conclude its debt restructuring negotiations with its creditors to be able to secure the Fund’s executive board approval for the bailout programme.
China and its agencies hold about US$1.7billion of Ghana’s US$5.5billion bilateral debt, and the specialised nature of their lending windows means that Ghana cannot add them to the model used to negotiate with the G20 and Paris Club members.
Germany asserts that it is ready and eager to assist Ghana in getting its debts reduced, but emphasises that it will only do so if Ghana’s leadership cleans house first.
On Friday, February 3, 2023, President Nana Addo Dankwa Akufo-Addo urged Germany to “push” China, an ad hoc member of the Paris Club, to help Ghana’s debt restructuring initiatives.
In order to support the initiatives that would enable Ghana to resume economic recovery, he said it was imperative that the Paris Club quickly set up a creditors committee with the participation of other official creditors.
The Ghanaian leader made the call when the visiting German Finance Minister, Christian Lindner, called on him at the Jubilee House, Accra.
Linden, who led a delegation from his country, held bilateral talks with the President aimed at boosting relations and economic ties between the two nations.
President Akufo-Addo told the minister that the main concern for his government was to conclude negotiations with the International Monetary Fund (IMF), particularly at the Board Level and seal a deal with the Bretton Woods institution by mid-March this year.
“Our main concern right now is the arrangements that we are in the process of concluding with the IMF…and the specific assistance that will be useful to us and help us fast-track the process”.
“Our target is that by the middle of March, we should be before the Board for the full agreement. We have already taken one important step forward in concluding a staff-level agreement with the IMF and we are now looking to go the full haul in concluding the agreement. We are hoping that it will be done by the middle of March”.
“One of the steps towards that has been the domestic debt exchange programme that we are on, which fortunately, we have quite a lot of difficulties, has now been virtually concluded,” he stated.
However, President Akufo-Addo stressed that there was a vital need for other creditors to support the efforts that his government was undertaking to restructure both the external and domestic debts of the country, to enable the IMF deal to fall through quickly.
“We now have our relations with the Paris club and the common framework, and we are looking for as quickly as possible a creditor committee to be established, so we will have the body with whom we can engage to bring those discussions as quickly as possible”.
“We have good relations with China. We will like you to encourage China to participate in these programmes as quickly as possible…A very important consideration for us is the financial stability fund that has been promised us as one of the key outcomes of these negotiations and definitely once again, your voice in trying to bring that into being is something that we would appreciate very much,” President Akufo-Addo told Finance Minister Lindner.
The President commended the German government for extending support to Ghana to enable her to overcome the current economic difficulties. He said the German government had proven to be a reliable ally and Ghana would continue to count on the European nation as “a privileged partner” as the country seeks a bailout from the IMF.
The IMF, last December reached a Staff-Level Agreement on a $3 billion, three years Extended Credit Facility with Ghana to relieve its debt.
Speaking with Accra-based Joy News on the president’s appeal to the German Finance Minister for debt relief help, as far as China is concerned,
German Ambassador to Ghana, Daniel Krull, said laid out some conditions that he said Ghana must first meet before his country could offer the requested assistance of convincing China to restructure or forgive Ghana $1.7 billion of the West African country’s total debt portfolio of $5.7 billion owed its bilateral partners.
Mr Krull said: “First of all, we insist that those measures that can be taken here in this country have to be taken”.
“The second condition is that; yes, we are willing to take our share of responsibility as one of the major bilateral donors to Ghana but only if all the others also join in this effort”, the ambassador pointed out, adsing: “And there is a multilateral framework that was set up exactly for these kinds of crises and we urge and try to convince all stakeholders in this process to stick to this agreed framework. It’s the G20 framework”.
Being more specific about the pre-conditions, Mr Krull outlined: “Let me point to three elements: the biggest loss maker in Ghana is the energy sector. In this sector alone, each year, GHS1.5 billion in new debt is piled up. So, if that is not solved and you can ask the IMF for $10 billion, you still will not solve the problem in the medium term”.
“So, there has to be an answer in Ghana to the 50% technical and non-technical losses in the energy sector”, Mr Krull notes, stressing: “If that is not resolved, I don’t see how we can make finding a sustainable solution for the financial problems of the country”.
“The second part”, the ambassador said, “is on the other side of the budget and that is the revenues”.
“Ghana has the lowest; one of the lowest tax-to-GDP ratios, not even 13%. So, we have been cooperating with the local authorities and setting up a very smart system of property tax collection”.
“So, I think that is an important way forward and this has to be done and processes and decision-making have to be faster to meet the goals, to be able to meet the targets that have been agreed with the IMF”.
The Ambassador also said he is “still amazed on the procedures for how the budget is set up and how difficult it is to get an understanding of how this all works”.
“And, I think that is something that has to be [improved]. He is, however, confident that with the necessary political will, new opportunities will be created to enhance economic growth”.
This, Daniel Krull attributes to China’s unwillingness to engage in possible debt relief.
“The biggest elephant in the room is China. China is the largest creditor to Ghana and so far, it’s not fully supporting the setting up of the creditor’s committee where all the creditors will sit down and agree on a package for Ghana,” he said in a yet-to-be-aired interview on Foreign Affairs on the Joy News Channel.
“Time is of the essence, time is running out. Without this agreement with the bilateral creditors, the IMF package is in severe danger,” he added.
For this reason, he encouraged Members of Parliament as well as Ghanaians with strong ties with China to convince them to come to the table and agree on a package.
According to him, Germany is ready to come to the table and assist Ghana.
A high-powered government delegation is set to jet off to China in March, hoping to restructure $1.7 owed China as Ghana hopes to complete restructuring of its external debt as part of conditions required to secure an IMF programme.
The meeting with China on debt cancellation was postponed to late March 2023, following the upcoming National People’s Congress of China meeting scheduled for early March.
According to the government, the feat which was achieved on February 21, 2023, marks a significant leap as talks with the International Monetary Fund for the implementation of the post-COVID-19 programme for economic growth.
The successful conclusion meant that the government issued 16 series of new bonds to eligible holders whose tenders were accepted by the government.
This is in respect of the GHS-denominated bonds issued by the government, E.S.L.A Plc, or Daakye Trust Plc.
A statement issued by the Public Relations Unit of the Finance Ministry said, “This successful result is a significant achievement for the Government in the implementation of the economic strategies of the post-COVID-19 Programme for Economic Growth (PC-PEG) during this current economic crisis.”
“The settlement was made pursuant to the terms and conditions set forth in the 2nd Amended and Restated Exchange Memorandum dated 3rd February 2023 (the “Exchange Memorandum”),” the statement added.
Below are the full details of the settlement 1. On the Settlement Date, 16 Series of New Bonds were issued to Eligible Holders whose tenders were accepted by the Government. Pursuant to the Exchange Memorandum, the principal amount of the New Bonds per holder is composed of the outstanding principal amount of Eligible Bonds tendered by such holder plus any amount of Accrued Interest Payable in respect thereof and was allocated among holders based on each holder’s category pursuant to the Exchange Memorandum. On the Settlement Date, such principal amount was credited to their respective securities account at the Central Securities Depository (“CSD”) from which each holder’s Eligible Bonds were tendered.
2. Pursuant to the Exchange Memorandum, all tenders accepted by the Government resulted (i) in the case of the Eligible Bonds issued by the Government, in electronic cancellation of such Eligible Bonds at the CSD on the Settlement Date, and (ii) in the case of Eligible Bonds issued by E.S.L.A. Plc and Daakye Trust Plc, in the transfer, on the Settlement Date, of such Eligible Bonds in favour of the Government who became the holder thereof.
3. On the Settlement Date, the Government signed the New Bond Documentation, consisting of the new Deed of Covenant under which the New Bonds were constituted and issued (including the Terms and Conditions governing the New Bonds attached thereto) Pricing Supplement specific to each Series of New Bonds. Copies of the New Bond Documentation have been made available on the dedicated websites of the Ministry of Finance (https://mofep.gov.gh/news-and-events/debt-operations) and the CSD (https://www.csd.com.gh/dde), and on the Invitation Website (https://projects.morrowsodali.com/ghanadde). Moreover, copies of the New Bond Documentation have been made available for inspection by holders of New Bonds at the CSD.
A Senior Lecturer at the Department of Economics of the University of Ghana, Prof. Eric Osei-Assibey says Ghana should expect more downgrades from rating agencies until a deal is reached between government and external debt holders, as well as the International Monetary Fund (IMF).
Speaking to Joy Business at the American Chamber of Commerce-Ghana 2023 Economic Outlook Report, Dr. Osei-Assibey described the recent downgrade by ratings agency, Fitch on Ghana’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating to Restricted Default from ‘C’ as worrying.
“This is not good but once you have this negative information coming up every now and then affecting your currency and others, we should expect more of this until government reaches an agreement with the IMF and external debts holders”, he stated.
With the right policies in place, Dr. Osei-Assibey is hopeful the economic can see a rebound in the medium term.
“These things will come but I’m sure with time the economy will be stable with the IMF programme. Government as I said earlier should support various sectors of the economy”, he stressed.
The American Chamber of Commerce Ghana 2023 Economic Outlook Report provided insight into government’s tax provision, fiscal and monetary development, debt sustainability and key macroeconomic performance and targets.
Minister of Finance, Ken Ofori-Atta, has said that a planned high-level Government Delegation to China has been postponed to late March.
According to him, the postponement is due to the National People’s Congress of China which is scheduled to take place earlier in March this year.
He made this known when he held bilateral talks with the German Federal Minister for Economic Cooperation and Development (BMZ), Ms. Svenja Schulze in Accra on February 22, 2023.
The Finance Minister however said the bilateral talks with China will continue ahead of this important mission.
The government of Ghana has started to actively engage external debtors with the view to getting debt cancellation, especially from the Paris club of creditors.
The first stop of a government delegation seeking debt restructuring will be in China with Minister of FinanceKen Ofori-Atta will be leading the team expected in Beijing.
China holds a third of Ghana’s external debts amounting to $1.7 billion out of a total of $5.7 billion.
Government only recently concluded a Domestic Debt Exchange Programme (DDEP) as part of efforts to secure an International Monetary Fund (IMF) bailout by March 2023.
The Ministry of Finance (MoF) on Friday, February 3, 2023 released the second Amended and Restated Exchange Memorandum offering to issue new bonds for institutional and individual bondholders invested in Government of Ghana (GoG), ESLA Plc and Daakye Trust Plc bonds to the tune of GHS130 billion.
The debt exchange programme comes in the wake of challenging economic conditions in 2022 which, according to the finance minister, has left Ghana’s public debt unsustainable. Data from the Bank of Ghana’s Summary of Economic and Financial Data shows that the cedi depreciated by 30% against the US dollar in 2022 while inflation reached 54.1%, a rate not recorded since the 1990s.
Prospects for an economic recovery largely hinge on the receipt of board approval for a $3 billion Extended Credit Facility (ECF) from the International Monetary Fund (IMF). Disbursements from the fund will provide both budget support to the government and balance of payments support to the central bank.
This, in addition to a successful debt exchange programme, will contribute to the reopening of access to the international capital markets for the country and hopefully place the public debt of GHS 575 billion (93.5% of GDP) back on a sustainable path.
While every significant investment decision one takes should involve a licensed financial advisor, as someone who has closely followed a wide range of investments in Ghana, I believe I can share some insights that would prove useful to people who are wondering what options are available to them on the Ghanaian market and beyond.
The debt exchange has unsettled many investors (domestic and international) who considered government securities as the best form of investment in Ghana. Billions flowed into government bonds and for good reason – the minimum capital required was low, the returns were generous, and the risk was (supposedly) non-existent. However, the debt exchange has shown that bonds are not without risk and they may not be the gold standard for investment that they had hitherto been viewed as.
Treasury bills are fixed interest government securities ranging in maturity from 91-days to 364-days. These are also popular forms of investment, with well over GHS1 billion invested in them every week. Nevertheless, treasury bills in the past several months have lost their inflation-protection quality as the interest rates of about 35% they return are far below the inflation rate of 54.1%. Also, the government’s fiscal struggles have dented the perception of treasury bills as a risk-free investment.
Another popular investment in Ghana is the shares of companies listed on the Ghana Stock Exchange (GSE). However, stocks as measured by the GSE Composite Index have yielded negative returns in 4 of the 5 years from 2018 to 2022. This is not even accounting for inflation or currency depreciation. The current difficult economic conditions unfortunately does not augur well for the future of the bourse.
Collective Investment Schemes (CIS) such as mutual funds and unit trusts pool funds from several investors to purchase a wide range of assets. However, regulations have ensured that Ghanaian collective investment schemes are invested in the same government securities and shares available to individual investors and they have therefore suffered a similar fate to the investments already discussed.
Investing in foreign stocks, particularly in US stocks, is gradually becoming popular with a section of investors. However, this is not a fool proof investment. Apart from the high transaction fees one would pay to get invested, there are also taxes on capital gains and a volatility which does not make it suitable for just any investor. Also, 2022 was a bad year for US stocks as the S&P 500 (a measure of the top 500 publicly traded US stocks) declined by more than 19%.
Cryptocurrencies such as Bitcoin and Ethereum have also been considered by younger investors as an exciting new investment opportunity. However, these are even more volatile than stocks. For example, the price of Bitcoin reached an all-time high of US$65,000 in November 2021 and has since declined by 66% to be trading at around US$22,000 as at the time of writing.
As for fixed deposits and savings accounts, it is clear that their returns are insufficient to counter the harsh economic realities that investors are up against. It is an unfortunate reality that many of the investments usually considered by investors as low-risk, inflation-protecting or lucrative have been through a rough patch and failed to deliver the returns that investors sought.
There is a desperate need for an investment which is not correlated with all these other investments and can deliver superior returns in both good and bad times. And in this article, I will explain why real estate is exactly that investment vehicle.
Ghana’s housing deficit is estimated to total about 1.8 million housing units. Despite what may seem like a construction boom, there’s still a huge demand for housing to shelter a population that now has more than 50% of people living in urban areas. Adding to this demand for real estate has been Ghana’s emergence as a destination for people in the diaspora seeking to establish some form of permanent presence in the country. This healthy demand has ensured that despite the economic downturn, real estate prices have remained on the ascendancy, delivering healthy returns to investors.
Investing in real estate serves several purposes beyond just the lure of immediate financial returns. The ownership of property, whether as an individual or a business, is one of the cornerstones of wealth building and capital preservation. It is also one of the biggest financial commitments anyone can make. It is therefore essential that in securing property, you do not compromise in the selection of a credible, experienced, and trusted partner. And Devtraco Plus Properties is such a partner.
Devtraco Plus Properties is an industry leader in the development of exclusive premium housing units in the prime areas of Accra. As part of the larger Devtraco group, we have a foundation of excellence that we have relied on to provide suites, studios, 1-2-3 bedroom apartments, and 5 bedroom townhouses with a quality to match the highest standards. When you buy property from us, you are buying a top-end asset built with comfort and security in mind.
When you invest in real estate through Devtraco Plus Properties, you are acquiring a steady cash flow because of the high demand for rental of our properties. Whether you want to rent out for short stays or longer leases, your property ensures that you have a reliable source of income which you can plan with. Apart from being a source of steady passive income, the returns from investing in real estate compares favourably with other investments. This is because the returns are negotiated by the owners themselves through the rent they charge to tenants. These rents can also be adjusted to match with the cost of living, thus providing an in-built inflation hedge that other investments cannot provide.
According to the Global Property Guide (2021), gross rental yield in property in Accra is about 8% to 11%. This means that the rental income on property is about 8% to 11% of the value of the property each year. And as the value of the property increases (due to a burgeoning urban population, inflation, currency depreciation, and demand from foreign investors) the rental income grows at the same rate. This would mean that even as the value of your property appreciates, rental income will be able to generate nominal returns equal to the value of the whole property in anytime between 9 to 11 years.
Even if you do not intend to use your property as a cash-generating asset, the appreciation in the value of the property over time is an excellent protection against inflation and currency depreciation. Owning a property from Devtraco Plus also provides you an advantage when you are seeking credit facilities. This is because valuation of the property can be ascertained with relative ease, and any institution would consider the property as acceptable collateral.
As the icing on the cake, consider that if you are acquiring residential property through a mortgage from a recognized financial institution, the mortgage interest is deductible from your income for the purposes of tax assessment. Essentially, the government promotes the acquisition of property by not taxing the portion of your income that is used in paying interest on your mortgage. One can hardly find other investments which the government subsidises in such a manner.
So why not take a major step today towards securing your financial future, diversifying your investment portfolio and building a solid foundation for wealth? Visit devtracoplus.com and take a look at our exciting projects in Cantonments, Labone, Roman Ridge, Dzorwulu, Airport Residential area, and other prime locations in Accra. Talk to Devtraco Plus Properties on +233 (0)27 000 0004 and let’s get you started on this exciting wealth-building journey.
The Finance Minister, Mr Ken Ofori-Atta has appealed to Members of Parliament (MPs) to support the Government in efforts to secure the International Monetary Fund (IMF) Board approval to restore macro-economic stability in the country.
That would ensure debt sustainability and provide critical social protection for the benefit of Ghanaians.
Mr Ofori-Atta made the appeal on the Floor of Parliament, when he presented the Government’s policy brief on the Domestic Debt Exchange Programme (DDEP).
He said debt operations were a composite part of a broader government response strategy for addressing the current challenges Ghana faces.
“While we continue to secure an IMF programme to boost confidence in the economy, we are complementing this by enhancing our domestic mobilisation efforts,” he said.
In November 2022, the Finance Minister briefed Parliament that Ghana lost access to the International Capital Market (ICM) at the beginning of that year, while, at the same time, budget implementation was confronted with domestic financing challenges at the auction market as well as lower than estimated domestic revenue mobilisation.
“These presented a very challenging macroeconomic environment during 2022, leading to a widened financing gap of the budget and, therefore, became necessary for the Bank of Ghana to fund shortfalls at the auction market to avoid a disorderly default and prevent a deeper crisis,” he said.
Mr Ofori-Atta said under those circumstances, it was necessary for the Government to seek financing from the Bank of Ghana to augment its fiscal operations for the year.
The Central Bank, last week, concluded work on its financial accounts for 2022 and reported that the total overdraft extended to government, that year, was GHC37,956.82 million.
He said in line with Section 30 (6) of the Bank’s Act, 2002, (Act 612), he was informing the Legislature of the financing of the budget by the Bank of Ghana.
The Domestic Debt Exchange exercise and the External Debt Restructuring Programme would make such financing unnecessary, going forward in 2023 and beyond.
“Mr Speaker, all these efforts would be greatly enhanced if the Income Tax (Amendment) Bill, Excise Duty and Excise Tax Stamp (Amendment) Bills as well as the Growth and Sustainability Levy Bill, which are outstanding in this august House, could be prioritised and passed.”
Mr Ofori-Atta said the passage of those bills would enable the Government to complete four of five agreed Prior Actions in the Staff Level Agreement.
This is because Tariff adjustment by the Public Utility Regulatory Authority, Publication of the Auditor-General’s Report on COVID-19 Spending, and Onboarding of GETFUND, District Assembly Common Fund and Road Fund on the Ghana Integrated Financial Management Information System (GIFMIS) had all been completed.
“Mr Speaker, I cannot emphasise enough, the need to secure the Board Approval for our IMF Programme by the end of March, 2023,” he said.
“I, therefore, entreat the House to prioritise the approval of the outstanding Revenue Bills and the various concessional facilities.”
Market watchers are optimistic about the cedi’s year-long prospects, with analysts at the research arm of RMB Africa projecting the currency to end 2023 at around GH¢13 to US$1.
If attained, it will represent a significant improvement over the cedi’s performance in 2022 – when it depreciated by 30 percent against the US dollar, according to the Bank of Ghana (BoG), compared with the 4.1 percent dip in 2021.
The cedi’s performance is closely tied to the country’s efforts to secure a US$3billion bailout from the International Monetary Fund (IMF), and recent developments have brought the country closer to this goal. According to analysts, confidence in the local market is expected to rebound later in the year; which could bode well for the local unit.
“We expect confidence in the local market to resume, which could be supportive of the currency later in the year. Our base case is for the cedi to end the year at levels closer to US$/GH¢13.1,” RMB Africa said.
RMB expects the cedi to firm-up in the second half of the year, as it believes that approval from the IMF is likely to be achieved in the second quarter of 2023 – with the first IMF disbursement following soon after – due to the outstanding renegotiation of external debt after suspending interest payments on its Eurobonds.
Already, government has initiated discussions to create an official creditor committee with holders of its external debt, including bilateral lenders, with support from the Paris Club.
In the interim it is anticipated that there will be minor fluctuations due to the pockets of uncertainty, but nothing erratic is expected.
Despite the cedi posting a mixed performance against the major trading currencies and across the market segments last week – unchanged against the US$ from the previous week, gaining 1.2 percent versus the euro and dipping marginally relative to the British pound (GBP) on the interbank reference market.
It however regressed by 1.2 percent versus the US$ on the retail market, but appreciated against the euro and the GBP last week.
This, GCB Capital Limited’s (GCL) research team says, is attributable to suspension of the external debt servicing as well as the muted activity in secondary bonds market amid the prevailing uncertainty.
“We envisage depreciation risks from speculative activity, as the FX market remains highly uncertain and news-sensitive,” it added earlier this week.
Inasmuch as some hurdles remain, analysts are cautiously optimistic about the cedi’s prospects and some are already positioning themselves for a potential recovery in the currency.
On Tuesday, the Finance Ministry announced that its Domestic Debt Exchange Programme (DDEP) had received acceptance from approximately 85 percent of bondholders; an essential step in securing the IMF bailout.
Data from the ministry finance reveals that the educational infrastructure-focused Daakye bonds recorded the highest participation rate, followed by Government of Ghana (GoG) and ESLA bonds.
Of the GH¢1.45billion worth of eligible Daakye bonds, GH¢1.36billion, representing 93.89 percent, were tendered. GoG bonds recorded an 85.19 percent participation as GH¢77.98billion in old bonds were tendered from a stock of GH¢91.53billion. With the ESLA bonds, investors were willing to exchange GH¢3.66billion, or 76.66 percent, from a total of GH¢4.77billion.
