News Guide Africa

Category: Technology

  • 1st IMF review set for Sept 25,… Ofori-Atta confident of second tranche of $600mn

     

     

    Adnan Adams Mohammed

     

    Ghana’s economy managers are expecting the second visit by the International Monetary Fund (IMF) after the approval of a US$3billion Extended Credit Facility in May this year.

    The visit is set to take place from September Monday, 25, 2023, through the first week of October.

    The purpose of the visit is to conduct a comprehensive assessment of the implementation progress of Ghana’s Economic Recovery Programme. The approved programme is part of a USD3-billion three-year extended credit facility aimed at supporting Ghana’s economic recovery efforts.

    “We are ready for the mission that comes at the end of September so that we can try and get the staff level agreement while the mission is here, and then we go to the board in November for the release of the 2nd tranche, which will be $600 million”, Finance Minister, Ken Ofori-Atta, said at the 3rd Ghana Investment Promotion Centre (GIPC) CEO’s Breakfast Meeting held in Accra, last week.

    “In addition to that, there are certain things we need to do with the World Bank so that we can get our DPO, which will be another $300 million. I believe that we are on course to maybe get a billion dollar to support Bank of Ghana’s balance of payment issues”, he mentioned.

    The Minister emphasised that Ghana remains on course to receive the anticipated second tranche of the IMF bailout funds in December, earmarked to support the government’s balance of payments for the years 2023 and 2024.

    Recent data from the Bank of Ghana, as reported in the June 2023 summary of the Economic and Financial Stability Report, indicates that the country’s balance of payments at the end of June 2023 registered a deficit of USD107.8 million, equivalent to approximately 0.1 per cent of the Gross Domestic Product (GDP). Notably, this deficit is significantly lower than the corresponding figure recorded during the same period in the previous year, demonstrating improvements in Ghana’s economic performance.

    Mr Ofori-Atta expressed optimism about concluding discussions with the Paris Club and bilateral creditors by year-end.

    In May 2023, Ghana received the first tranche of $600 million of a $3-billion three-year extended credit facility from the IMF, aimed at revitalising the country’s economy.

    In August 2023, the IMF emphasised the importance of the Bank of Ghana maintaining its policy mandates, despite financial setbacks experienced in the preceding fiscal year.

    The IMF underscored the need for the central bank to take decisive actions to steer inflation back toward its target of 8 percent.

    While acknowledging the Bank of Ghana’s GHS 60 billion loss due to the government’s Domestic Debt Exchange, the IMF deemed this impairment necessary to restore macroeconomic stability and public sustainability.

  • Economist rubbishes calls for BoG Governor’s resignation 

     

     

    Adnan Adams  Mohammed 

     

    Economist, Dr Kwame Pianim, has rubbished calls for the resignation of the Bank of Ghana Governor and his deputies. 

     

    The calls were led by the Minority in Parliament base on the claim that, the central bank wrongfully financed the government. 

     

    But, the renowned economist has said that, Dr. Ernest Addison and his two deputies did nothing wrong for supporting an ailing economy. According to him, the Governor’s resignation would not solve any problem, adding, the economic crisis was not caused by the Bank of Ghana.

     

    “The Governor and his team did not perpetuate any fraud and therefore assertions of incompetence and mismanagement of the economy is neither here nor there”, Dr Pianim argued when he spoke to the media in Accra, last week.

     

    “Resignation doesn’t solve any problem. If the Governor resigns now, what happens, the same Minister of Finance [Ken Ofori-Atta] who is at the core of the economic crises recommends to the same president [Akufo-Addo] a new person? They appoint somebody who doesn’t know the terrain, who hasn’t gone through this experience to be able to solve the problem, No.

     

    “What I am saying is that was it through incompetence, No. Not incompetence. Was it through fraud? Did the Governor benefit? Did any of his company benefit from what he did? No.”, the renowned economists pointed out.

     

    Dr. Pianim furthered that BoG did nothing wrong for not going to Parliament before supporting the government to revive a struggling economy.

     

    According to him, the BoG did not need any parliamentary approval before supporting an ailing economy.

     

    “I don’t recall that they [BoG] need parliamentary approval. Remember, we suspended the Fiscal Responsibility Act. When the fiscal responsibility was removed it was saying in effect, we cannot obey the regulations that we have governing the fiscal, so we are suspending it”.

     

    “When the Minister of Finance went to parliament and they agreed to suspend the Fiscal Responsibility Act, parliament should have asked, what happens to the equivalent that is the Monetary Policy Act which is Article 36 of the Amendment BoG Act which says that if there is an emergency and BoG needs to be able to suspend the rules surrounding monetary policy what they do is to inform the Minister of Finance”, he explained.

     

    To him, “it is the Minister for Finance’s responsibility to report to parliament. We didn’t make BoG responsible to go to parliament. So when the Minister of Finance went to parliament to  suspend the Fiscal Responsibility Act, somebody from the opposition should have asked, what happened to Article 36 of the Banking Act. And the Minister should have said concurrently that part is also suspended because you cannot suspend the Fiscal Responsibility Act and leave the complimentary dimensions on the monetary policy side”.

  • Cedi to remain robust 

    Cedi depreciation9

    By Adnan Adams Mohammed

    Ghana’s fiat currency is likely to remain stable at the back of the implementation of the International Monetary Fund, (IMF) program.

    The Bank of Ghana is expecting the second tranche of the IMF Extended Credit Facility by November, in addition to the cocoa loan syndication as well as the World Bank support for the Ghana Financial Stability Fund.

    All these monies will support the stability of the local currency and also meet the dollar demands of importers for the festive season.

    Also, the positive sentiments from the full implementation of the IMF programme may continue to shore up the currency.

    The Ghana cedi has been relatively stable since February 2023, after depreciating sharply in January.

    The gains made by the cedi was on the back of positive sentiments over the IMF programme; disbursement of the first tranche of the ECF, which amounted to US$600 million; weakened demand pressures; weakness in the US dollar; forex purchases from the mining and oil sectors; and forex liquidity support through the BDCs FX auction.

    The Ghana cedi cumulatively depreciated by 22.0 percent, 26.3 percent and 23.8 percent against the US dollar, the pound sterling and the euro, respectively, in June 2023. This was against a cumulative depreciation of 16.9 percent, 7.7 percent and 9.9 percent against the US dollar, the pound sterling and the euro, respectively, during the same period in 2022.

    The Ghana cedi has generally remained stable since January 2023, with a cumulative depreciation of 1.8 percent between February and June 2023

    The Ghana cedi has depreciated by 30.7 percent in nominal trade weighted terms and 28.6 percent on forex transaction weighted terms on a year-to-date basis. This was against a depreciation of 12.0 percent and 19.4 percent in nominal trade weighted terms and nominal foreign exchange transaction weighted terms, respectively, over the same period in 2022.

    The cedi depreciated by 18.4 percent and 16.6 percent in real trade weighted terms and real forex transaction weighted terms, respectively, on a year-to-date basis. This compared with an appreciation of 3.2 percent in real trade weighted terms and a depreciation of 3.0 percent in real forex transaction weighted terms for the same period in 2022.

     

     

     

  • BoG to tighten policy rate further

    by Elorm Desewu

    The Bank of Ghana, (BoG), is likely to continue tightening the policy rate although inflation is expected to decline in the near term.

    According to the central bank, the baseline forecasts show a slightly higher elevated profile in the year ahead, which, if not contained, could embed in underlying inflationary pressures. It is important that policy responds appropriately and decisively to prevent these risks from becoming embedded and consequently derailing the disinflation process.

    The Bank of Ghana has disclosed that year on year inflation would settle at 29+/-3 percent and further decline to 19+/-2 by the end of 2024.

    The risks to the inflation profile were judged to be elevated as at July 2023, driven by second-round effects of food prices. Inflation has persistently hovered around 42 percent throughout the second quarter of 2023, even though central bank financing has been eliminated in the first six months of the year.

    These developments require decisive fiscal and monetary tightening to anchor inflation expectations firmly on a declining path.

    The headline inflation declined consistently between January to April but increased in May and June on account of a variety of factors, including higher food prices, implementation of new tax measures, and utility tariff adjustments.

    The overall inflation increased from 41.2 percent in April to 42.2 percent in May, then further to 42.5 percent in June and to 43.1percent in July. Underlying measures of inflation have all ticked up in May 2023. While core inflation picked up, consumer and business inflation expectations also increased slightly, while bank’s inflation expectations remained flat, but at an elevated level.

    The food inflation inched up to 54.2 percent in June 2023 from 51.8 percent in May and 48.7 percent in April. Non-food inflation, in contrast, declined to 33.4 percent in June 2023 from 34.6 percent in May and 35.4 percent in April.

    Imported inflation inched up to 44.5 percent in June from 43.8 percent in May. This was in contrast to local inflation, which declined to 35.9 percent in June from 36.2 percent in May.

    However, the month on month, inflation slowed to 3.2 percent in June 2023 from 4.8 percent in May 2023. Monthly food inflation eased to 3.9 percent in June 2023 from 6.2 percent in May.

    Likewise, monthly non-food inflation eased to 2.6 percent, from 3.5 percent over the same period. Core inflation also inched up in the May and June. Core inflation, excluding energy and utility prices, increased to 43.5 percent in June 2023, from 42.8 percent in May, and 41.7 percent in April.

    Business and consumer inflation expectations also inched up slightly, while banking sector inflation expectations remained flat. The increase in headline inflation since the last MPC meeting reflected strong food price pressures, implementation of new tax measures, and utility tariff adjustments.

    These pressures were moderated by relative exchange rate stability, stable ex-pump petroleum prices, and the tight monetary policy stance that is supported by effective liquidity management by the Bank of Ghana.

     

     

  • Team ‘SAGLEMI NOT FOR SALE’ Joins Minority’s BoG Governor Must Go Demo

     

     

    Read Full Press Statement:

     

    TEAM SAGLEMI NOT FOR SALE JOINS THE NDC AHEAD OF THE ADDISON MUST GO DEMONSTRATION

     

    0593787825

     

    It has become relevant on the calendar of Team Saglemi Not For Sale to collaborate the unwavering efforts of the National Democratic congress in their undefiled determination and bid to demonstrate humongously against the inept administration of BOG Dr Addison’s led leadership especially on the recent gargantuan loss of over GHS 60billion owing to corruption, lawlessness and inept leadership.

     

    1. Team Saglemi firmly holds the position of the NDC that the B.O.G boss must resign immediately together with his team of directors for the GHS60.8 billion loss they have caused this country.

     

    2. Mr Addison together with his team of directors following the resignation must be arraigned before court for violating and contravening the Financial management act 5% treashold of printing money to cushion the central government especially when some transactions didn’t receive parliamentary approval

     

    3.Bank of Ghana must officially apologize to Ghanaians for their infamous act of collapsing our indigenous banks and other financial institutions. They have made more humiliating losses than them.

     

    4. More importantly, as the convener for Team Saglemi Not For Sale, I officially wish to declare solidarity and our unflinching stance to be part of the impending patriotic struggle targeted at corruption and greed

    Signed

    Nana Otu Darko

    0593787825

     

  • Fitch promises Ghana positive rating… if bond restructuring is successful 

     

     

     

    Adnan Adams Mohammed

     

    Fitch Solutions has prompted to assign positive ratings to parameters of Ghana’s economy if the debt-riddened West African nation is able to restructure it’s pension funds .

     

     

    Ghana’s LTLC IDR rating will be contingent on a forward-looking evaluation of the country’s commitment and ability to meet its local-currency debt obligations, the international rating agency said.

     

     

    “Once Fitch judges Ghana has normalised relations with a significant majority of non-tendered securities bondholders and completes the restructuring of local-currency bonds held by pension funds, the agency will assign Ghana’s LTLC IDR based on a forward-looking assessment of its willingness and capacity to honour its local-currency debt”, Fitch said.

     

    It added that “once Ghana reaches an agreement with private creditors on the restructuring of its foreign-currency-denominated debt and completes that restructuring process following the Common Framework official creditors’ claims treatment, Fitch will assign a LTFC IDR based on a forward-looking assessment of its willingness and capacity to honour its foreign-currency debt”.

     

     

    This, too, will be determined based on an assessment of Ghana’s willingness and capability to fulfill its foreign-currency debt commitments.

     

    The agency cautioned that a downgrade for Ghana could transpire if there is an elevated risk of the country failing to make its first coupon payments on the bonds scheduled for August 2023.

     

    Fitch employs its proprietary Sovereign Rating Model (SRM), which rates Ghana akin to ‘CCC+’ on the Long-Term Foreign-Currency IDR scale.

     

    It is important to note that the current ratings are not accompanied by the SRM and Qualitative Overlay (QO) explanations, as Fitch’s sovereign rating committee has chosen to adhere to the rating definitions for scores ‘CCC+’ and below.

     

     

    The SRM model developed by Fitch employs a comprehensive approach, factoring in 18 variables over a three-year period, including one year of projections.

     

    This methodology generates a score that corresponds to the LT FC IDR rating.

     

     

     

  • BoG’s can’t be blamed for participating ‘haircut’ – IEA 

     

     

    By Ibrahim Awall

     

    The he Institute of Economic Affairs (IEA) has defended the Bank of Ghana (BoG) against undue blame for its participation in the government’s Domestic Debt Exchange Programme (DDEP), which contributed to the central bank’s financial loss in 2022.

     

    The Director of Research of IEA, Dr John KWAK YEARS, acknowledged the BoG’s responsibility for extending excessive loans to the government, yet he maintained that the central bank cannot be criticised for accepting a “haircut” as part of the DDEP.

     

    In the 2022 fiscal year, the Bank of Ghana reported a substantial loss of GH¢60.8 billion.

     

    Amidst repeated calls from the Minority in Parliament for the resignation of the Governor of the Bank of Ghana, Dr Ernest Addison, and his deputies over perceived recklessness in central bank management, Dr Kwakye elaborated, “As central bankers, financing the government’s deficit is the most inflationary thing to do. That is why the central banks set lending limits to their governments.

     

    “What has happened in our case [BoG] is that it looks like BoG went far beyond the sealing Act of last year’s revenue of 5%.

     

    “We are told that they lent almost GH¢44 billion, and that is the magnitude. Once you do that, you are already getting yourself into serious trouble.”

     

    He said the BoG’s involvement in the DDEP, which qualified Ghana for an IMF programme, the declared GH¢60.8 billion loss, a significant GH¢53.1 billion directly resulted from the DDEP. He emphasized that while fault could be attributed to over-lending to the government, it was essential to acknowledge the compulsion the BoG faced to engage in the DDEP.

     

    “BoG over-lent to government and then you bring in this DDEP which qualifies us for IMF programme. And IMF compels BoG to be part of it. Out of the GH¢60.8 billion loss they have declared, GHC53.1 billion is coming direct from DDEP.

     

    “So the question is will you fault them for that? We can fault them for over-lending to the government that is the problem, but why they were being forced to be part of the DDEP, is also another. That one, you can’t fault them for that”.

     

    Kwakye directed scrutiny towards the IMF, questioning their imposition of the DDEP on the Bank of Ghana in pursuit of a $3 billion bailout.

     

    Furthermore, Kwakye attributed a portion of the responsibility to the government for BoG’s losses, emphasizing their role in creating deficits that necessitate financing.

     

     

     

     

  • Ghana is only ECOWAS country in debt distress – AfDB

     

     

    Adnan Adams Mohammed

     

    The African Development Bank’s newest report, the 2023 West Africa Economic Outlook, ranked Ghana’s external debt to GDP of about 39.5 percent recorded in 2022 as 10 percent higher than the West African average of 29.6 percent.

     

    Ghana’s external debt stood at $29.0 billion as at the end of December 2022, ranking sixth highest on the continent.

     

    However, countries such as Cape Verde, Senegal and Niger that have high external debts to GDP are not in distress, but Ghana is the only ECOWAS country, in debt distress.

     

     

    “West Africa’s external debt increased from an average of 13.8% of GDP in 2014 to 29.6% in 2022. The debt accumulation was facilitated by a rise in the issuance of Eurobonds. Eurobonds have been issued by Côte d’Ivoire, Ghana, Nigeria, and Senegal since 2011, and by Benin since 2019”, the West Africa Economic Outlook 2022 noted.

     

    External debt accounts for the largest proportion of the total public debt portfolio in most countries except Nigeria and Togo in the sub-region.

     

    Meanwhile, the Report explained that, the external debt accumulation was facilitated by a rise in the issuance of Eurobonds. This suggested that exchange rate depreciation as well as the current normalization of monetary policy across the world, were important risks for these countries.

     

    It furthered that the key drivers of external debt dynamics in West Africa were the rapid exchange rate depreciation, especially in commodity-exporting countries as well as high primary fiscal deficits and weak economic growth caused by the COVID-19 pandemic in 2020 and Russia’s invasion of Ukraine in 2022.

     

    “Higher nominal interest rates due to the current tightening of monetary policy in advanced economies have also contributed significantly to higher debt burden in the region. Projected higher economic growth and efforts to reduce the fiscal deficit through domestic resources mobilization, fiscal consolidation and spending restraint are expected to contain external debt accumulation in the region in the medium term”, it added.

     

    Therefore Ghana’s economic challenges may not be only due to the high debt burden, but rather a myriad of issues.

     

     

     

  • Economic activity begins to pick up

    By Elorm Desewu

     

     

    Economic activities in the country for the first five months of this year have improved considerably.

     

    The Bank of Ghana’s high frequency real sector indicators all showed signs of recovery in economic activity, albeit at a slower pace.

     

    The updated real Composite Index of Economic Activity (CIEA) contracted by 3.7 percent in May 2023, compared to a contraction of 5.4 percent in April 2023, and a growth rate of 1.7 percent in the corresponding period of last year.

     

    The main indicators that weighed down the Index during the period were port activity, cement sales, credit to the private sector and imports. Domestic VAT collections, industrial consumption of electricity and exports, however, improved.

     

    The results from the Bank’s latest confidence surveys conducted in June 2023 reflected mixed sentiments. While consumer confidence softened on account of an uptick in prices of goods and services, which also led to some concerns about future economic conditions, business sentiments, on the other hand, remained largely unchanged.

     

    Businesses’ optimism about the impact of stable macroeconomic conditions on their operations was offset by concerns about the cost implications of recent tax and utility tariff increases.

     

    Similarly, Ghana’s Purchasing Managers’ Index (PMI) dipped to 50.4 in June 2023 from 51.3 in the previous month. The index however remained above the 50.0 mark for the fifth successive month, signalling stable business conditions.

     

    Monetary aggregates for June 2023 showed an increased pace of growth in broad money supply (M2+) on year-on-year basis. Annual growth in M2+ accelerated to 44.4 percent in June 2023 relative to 19.1 percent in June 2022. In terms of components, the growth of M2+ was reflected in both domestic and foreign currency deposits.

     

  • Govt recapitalizes state interest banks by September

    By Elorm Desewu

    The government plans to recapitalize all the state interest banks in the country by the end of September this year.

    Cabinet has approved an amount of GH¢22.8 billion or 2.6% of GDP to further strengthen the financial system and rebuild capital buffers to improve resilience. This overall resource envelope will be deployed under the framework of the Ghana Financial Stability Fund (GFSF) in phases with an initial commitment of the Ghana Cedi equivalent of U$750 million.

    The initial commitment will consist of a funded portion of US$250 million from the World Bank/IDA and US$500 million to be funded from the issuance of marketable debt to help rebuild capital buffers of affected banks and other eligible financial institutions.

    The support for the financial system under the GFSF framework will be based on transparent eligibility criteria for Financial Institutions (FIs) which include full participation in the DDEP, a viable capital restoration plan notwithstanding the GoG debt restructuring impact (discounting regulatory forbearance and other reliefs), and existing GoG/GAT equity participation.

    Under the GFSF framework, Government’s direct budget funding will focus on ensuring the recapitalization of state interest banks such as GCB, CBG, ADB and NIB, among others. Specifically, all state interest banks will be capitalised by endSeptember 2023. Government will also streamline the strategic focus of all stateowned banks to ensure that they better support areas of the economy such as agriculture, industry, and key SMEs.

    The Bank of Ghana expects banks to submit recapitalization plans with regulatory approval for such plans scheduled for end-September 2023.

    For privately owned FIs, a commitment will be required from other shareholders to inject additional capital to complement GoG’s funding support to ensure that dilution of private shareholders is kept to a minimum.

    Evidence of strong governance and prudent management is also required to be demonstrated. For example, banks which are to benefit from the arrangement must achieve a minimum of 75 percent implementation rate of the most recent on-site examination prescriptions, and full compliance with the BoG’s Corporate Governance Directive, Cyber Security Directive, and Risk Management Directive.

    Government will also strengthen and preserve the resilience of the insurance industry, including the recapitalization of the stateowned SIC Life Insurance Company, and work to restore normalcy in the debt capital market to improve liquidity, especially for capital market institutions. This is important in positioning the country to continue to expand the frontiers of private sector growth.

    The Government will also support GAT-assisted banks and other locally controlled privately-owned banks that request assistance from the GFSF in line with the operational framework agreed with the IMF and the World Bank. The World Bank facility under the GFSF will provide a debt only (non-equity dilution) capital support to banks, both foreign-owned and locally-owned to support their strong recovery post the DDEP.

    The Ministry of Finance is working with the Bank of Ghana and other regulators to ensure that the framework of the GFSSS is finalised, and its operationalisation commences immediately after the approval of the Mid-year budget.