News Guide Africa

Category: Technology

  • Cedi depreciation to hike inflation further

    Cedi depreciation to hike inflation further

    Adnan Adams Mohammed

    The Government Statistician has indicated that the effect of the depreciation of the local currency,  the cedi against major trading currencies (especially, the U.S Dollar) would continue to affect the rate of inflation in the country.

    “The policy decision to be taken in the next few months will determine if the current volatilities in the exchange rate will continue to influence inflation or not”, Professor Samuel Kobina Annim said.

    Year-on-Year October 2022 inflation surged to 40.4% with imported inflation recording very high rate than locally produced items. Inflation for locally produced items was 39.1%, whilst inflation for imported items was 43.7% in the month of October 2022.

    This shows the sharp relationship the Cedi depreciation has on the untamed imported inflation. However, the Finance Minister has reiterated government’s commitment to stabilising the Ghana cedi by the end of the year. According to him, government together with the Bank of Ghana have adopted measures including dealing with speculation which he described as one of the major causes of the depreciation of the cedi in recent times.

    “As the Minister of Finance, no one needs to tell me the ravages of the cedi depreciation which has become an albatross on the neck of our local industries and the high cost of living for all citizens”, Ken Ofori-Atta admitted at an Association of Ghana Industries (AGI) forum in Accra, last week.

    Professor Annim, therefore, believes a drastic policy decision can make a huge impact on the rate of inflation.

    “In terms of how the exchange rate is impacting on this [inflation], one has to look at two things, thus the past through effects and how many items experience the effects as well as the timing of the effects”.

    “So it is possible that the impact of the exchange rate will linger on for a number of months. But the determination of the months will depend on the kind of policy to be introduced in the next two to three months”, he pointed out.

    He added that “so whether we peak or not will depend on what is happening and the items that are going to be affected and the price increases”.

    Meanwhile, Mr. Ofori-Atta after giving assurance to captains of industry, charged industry to increase their productive capacity to stimulate job creation, adding that “we cannot continue to be a nation of importers.”

    He cited an example such as the country imports about GH¢4 billion worth of fish, GH¢1.9 billion worth of chicken and GH¢487 million worth of meat in 2022.

  • BoG decry allegation of conspiring with third forces to transfer funds offshore

    BoG decry allegation of conspiring with third forces to transfer funds offshore

    The Bank of Ghana has debunked allegations by the Director of Research at the Ghana Trades Union Congress (GTUC), Dr. Kwabena Nyarko Otoo, that it is collaborating with some operatives at Cow-lane in Accra to illegally transfer funds offshore.

    The Central Bank says it vehemently denies the said allegations and also considers them extremely reckless.

    “We would have expected that such strong allegations would have been supported by the requisite evidence, and not left at pure conjecture, mere suspicion or hearsay. This is especially so considering the quarters from which the allegations were made”, it pointed out.

    Dr. Kwabena Nyarko Otoo according to the BoG passed the unfortunate remark about the Central Bank.

    “We advise the general public to completely disregard these comments and be assured that we, as a Central Bank, are focused on our mandate of price stability, and doing all within our power to reduce the rising general level of prices. We are doing this guided by our core values of accountability, professionalism and integrity, and in accordance with law”.

    The Bank of Ghana also noted that it is working with other stakeholders including law-enforcement agencies to discourage and sanction persons who engage in illegal foreign exchange activities in the country.

    The Central Bank, however, “advises the public to desist from making any such unfounded allegations in the future and to crosscheck same with Bank of Ghana”.

    The Central Bank also disclosed it is working with the law enforcement agencies to penalise illegal foreign exchange operators.

     “Bank of Ghana is also working with other stakeholders including the law enforcement agencies to discourage and penalise the activities of illegal foreign exchange operators in the country,” the BoG said.

    It also advised “the public to desist from making any such unfounded allegations in the future and to crosscheck same with Bank of Ghana.”

  • BoG likely to tighten policy rate further

    BoG likely to tighten policy rate further

    By Elorm Desewu

    With the recent hike in the US interest rate to 3.75 percent, the Monetary Policy Committee, (MPC) of the Bank of Ghana, (BoG) is likely to raise the policy rate further.  

    The Federal Reserve last week increased the benchmark rate to its highest in 14 years. The bank hopes pushing up borrowing costs will cool the economy and bring down price inflation.

    The BoG has from November 2021 increased the policy rate to about 1000 basis points or 10 percent to settle at 24.5 percent in attempt to control the rising inflation as well as stem the speed depreciation of the Ghana cedi.

    Already, the Bank of Ghana is projecting a higher inflation due to the currency depreciation, and the recent upward adjustments in utility tariffs, transport costs, as well as general price increases.

    The revised forecast assumptions, together with worsening external financing conditions, heightened inflation expectations, and rising production costs are likely to shift inflation further upwards in the near term, the Bank of Ghana said in its report.

    The current assessment of inflation outlook largely points to significant upside risks, occasioned by price pressures from both domestic and foreign sources. Price pressures in the global economy have elevated and unfolded beyond the volatile items of energy and food, reinforced by the transmission effects of persistent global supply chain challenges and the Ukraine war. These have triggered aggressive monetary policy tightening in advanced economies with some spillovers on the domestic economy.

    On the domestic front, the upward adjustments in petroleum products and transport fares with associated second-round impacts on goods and services as well as the pass-through of currency depreciation have exerted significant upside risks on inflation and heightened inflation expectations. On the downside, however, it is expected that the harvest season and tight monetary policy stance would moderate some inflationary pressures in the medium-term.

    Consistent with development in headline inflation, underlying inflation pressures also remained heightened, suggesting that price pressures have become more broad-based than before.

    The Bank’s core inflation measure, which excludes energy and utility prices, increased to 32.6 percent in August 2022 from 30.2 percent in July. Nevertheless, trends in month-on-month inflation suggested a consistent deceleration for the third consecutive time. The monthly headline inflation declined to 1.9 percent in August 2022, down from 3.1 percent in July and 3.0 percent in June respectively.

    Month-on-month food inflation similarly dropped to 1.8 percent in August, from 3.3 percent in July and 2.3 percent in June 2022. Also, non-food monthly inflation decelerated to 2.0 percent in August 2022 from 3.0 percent in July, and further down from 3.6 percent in June 2022

    The increase in interest rate would make investing in the US economy better than Ghana, leading to capital flight and a stronger dollar.

  • Confirmed: ‘haircut’ of investors funds imminent as gov’t plans debt restructuring

    Confirmed: ‘haircut’ of investors funds imminent as gov’t plans debt restructuring

     Adnan Adams Mohammed

    An official source has confirmed an imminent ‘haircut’ of investors funds in Government of Ghana (GoG) issued domestic long and short-term debt instruments. 

    This means that, investors who have invested their private funds in Ghana government’s Treasury notes may only receive  a fraction, according to a widely circulated warning note by a Bloomberg publication. 

    The fraction, according various analyst, is currently pegged at 60-70 percent of investors total principal and interest invested. But, a finance and energy analyst, Alexander Kofi-Mensah Mould has further indicated that, what is yet to be established is if, at some later date, this haircut will apply to US$ denominated Eurobonds issued by GoG outside Ghana on the international Capital Markets;  the markets are mute on this but the Eurobonds are trading for 40 cents to the dollar (That is, a haircut of 60%). This unpleasant news confirms a publication of this paper earlier this month which indicated a possible ‘haircut’ of investors funds in government debt instruments. 

    “Any attempt by government to give investors a haircut on their investment principle will result in Ghana not being able to go to the Capital markets for many years to come”, Mr Mould, in that publication said.

    However, reacting to the confirmation to his earlier warner and caution to government on the implications of the possible ‘haircut’ alarm, the former Executive Director of Wholesale Banking at Standard Chartered Bank, asked the government to provide a solution that does not penalize Ghanaian citizens and rather favors foreign investors, that is, if they have no option but to give a hair cut to Investors – and to be fair to all Ghanaians in attempt to rebuild the collapsing economy. 

    “If you are bankrupt with ideas of how to meet your debt service and the only way is by reducing people’s savings,  then you need to be fair and also institute a haircut in government payroll as well”, He fumed when reacting to the Blomberg publication on the imminent ‘haircut’ of domestic debts by government.

    “It is absolutely unfair to penalize a group of Ghanaians that have decided to invest as a means of saving for future expenditure, and the poor pensioners who have put their trust in our government and invested in T-Bills, T-Notes and Bonds issued by GoG.  

    Mr Mould went on to reveal that “Not to be left out of this “haircut” are all workers of this country who have placed their funds, by law, in Pension Funds (including SSNIT and other private pension fund managers) who have invested in T-Bills and Bonds issues by GoG; Mr Mould alarmed that, the manner in which the government has planned to restructure it’s domestic debt will directly affect the banking sector negatively with banks posting losses, and also the pensions sector where the funds people have in their pensions being reduced significantly.

    Bank losses will affect their stock market prices with investors of these stocks posting instant losses; “Doing so will cause serious harm to the banking sector. People will lose confidence in saving – Without savings, there will be no funds for companies to borrow and Many businesses will grind to a standstill. This will lead to layoffs and an increase in unemployment ” Mr Mould also stated that this is just the beginning and he wont put it past this government, who seem bankrupt with ideas and desperate, to do the impossible in the near future  –  to inflict a similar haircut on salaries of government workers and also citizens’ bank account balances. 

    The Blomberg publication captured that, “the country’s largest debt investors including local banks and pension funds are preparing to engage in discussion on debt reorganization that could entail extension of maturities and haircuts on principal and interest payments, according to people familiar with the matter, who asked not to be identified because they are not authorized to speak publicly.” 

    Meanwhile, in the earlier publication on the ‘haircut’ of investors funds as published by this paper, Mr Mould cautioned that, “Any attempt by government to give investors a haircut on their investment principle will result in the Ghana not being able to go to the Capital markets fo many many years to come.”  

    “This also could be resisted by many investors and there could be lawsuits by investor blocks which could drag Ghana’s current credit crunch; this option is like a road to perdition and only reserved for the non salvageable economies in the world.” The finance analyst tabled some alternative ideas on how the ‘Nana Akuffo Addo/Dr Mahmoud Bawumia government ‘ could resort to on addressing the glaring default in it’s debts as he enumerated the following options during the interview on how government could deal with the imminent credit crunch it faces. 

    “In the discussions with the IMF, GoG will be required to bring a performance improvement plan (PIP), which should focus on government reducing its expenditure and increase its  revenue in the short term for the next two years to stabilize the fiscals, while IMF holds the government’s hand to seek some reprieve from Creditors (local and International) on its debt service. 

    “The first part, reducing expenditure could take the form of  the rationalization of employment in the public and civil service (ie reducing staffing and staff costs) and most likely a freezing any increases in salaries and freezing employment in non-critical and non-core sectors for a few years, as well as not embarking on any projects or capital expenditure that can wait a few years. 

    “Another area is that, the NPP government will be asked to focus on is in curtailing most of the politically-lead programs/projects which will not lead to any substantial increase the GDP in the short term.” The outspoken former government appointee noted that, the government needs to determine whether the current challenge it faces is a structural one or if it’s pure mismanagement (where drivers of fundamentals remain strong) since the antidotes to curing both differ. He furthered his assertion indicating that, “I see the problem akin to what we had in Blackstars a few months ago: Do you change the coach or all the players?” 

    He lay the blame squarely on President Akufo Addo for keeping, an investment banker (Ken Ofori-Atta) as the finance minister, instead of appointing an astute finance guru, or an astute commercial banker, both of whom may have better knowledge of the financial credit market as well as financial risk management, to salvage the mess the wonton-borrowing Ken Ofori Atta has created.

  • T’ Bills now selling at 31%

    T’ Bills now selling at 31%

    Adnan Adams Mohammed

    Investors in Treasury Bills (T’Bills) are happily cashing-in on the 182-Days Bills as it is now trading at 31.05 percent as at, last week, September 10, 2022.  

    The auction results as released by the Bank of Ghana indicate that government exceeded its target for the 13th week running. But, this comes with at a higher repayment cost. The sales were oversubscribed by 35% to the tune of GH¢2.287 billion.

    The continuous rise T’Bills rate, one of the most secured and risk free investment, will likely affect commercial banks loan’s to domestic borrowers as most of the banks will prefer to invest their deposits taking in a secured, yet, with high returns. Since inflation begun rising about five months ago, interest rates have been escalating consistently to compensate investors.

    “The 91-day Treasury bill went for 29.48%, compared to 29.04% the previous week, whilst the 182-Day T-bill traded at 31.05%, as against 30.22% the earlier week”, the auction results captured.

    Although, investors showed more interest in the 3-months bill that of the 6 months bill also witnessed significant interest this time around.  

    GH¢860.92 million worth of the bids came from the 182-day bill. ¢815.70 million were however accepted.

    For the 91-day bill, ¢1.427 billion of the bids were tendered in, but ¢1.410 billion were accepted.

    The target for this auction was ¢1.682 billion.

      Securities Bids Tendered (GH¢) Bids Accepted (GH¢)

      91 Day Bill  1.427  billion 1.410 billion

    182 Day Bill  860.92 million 815.70 million

    Total 2.287 billion 2.225 billion

    Target 1.682 billion

  • Policy rate to rise further

    Policy rate to rise further

    By Elorm Desewu

    With the steady surge in year on year inflation, the seven member Monetary Policy Committee, (MPC) of Bank of Ghana is likely to hike the policy rate further for next couple of months, as they commence their bimonthly meeting this week.

    Investors may be compelled to sell their cedi holdings, if the MPC committee decides to hold the policy rate at 22 percent.

    Inflation is expected to rise further as the increase in electricity and water tariffs have taken effect from September 1, 2022 coupled with a just announced 30% increase in commercial road transport fares scheduled for September 21, will exert intense upward pressure on inflation for this month. togel toto

    As inflation rises, inevitably so will interest rates and thus the cost of business financing.

    The policy  rate is the at which universal banks borrow from the central bank as their last resort and also serves as a bench mark in setting the Ghana Reference Rate.

     As a result of the inflation targeting, the BoG was forced to hike its MPR by 750 basis points since May this year, to 22% currently. This has drastically raised the cost of borrowing for government and businesses alike and will unavoidably curb Ghana’s economic growth.  But the central bank sensibly points out that strong economic growth is not sustainable with inflation so high anyway.

    This year, a combination of rising global energy prices, the reversal of capital inflows into Ghana by foreign bond investors and the inability to access the Eurobond market for hitherto customary annual forex funding has led to a 35% depreciation of the cedi against the United States dollar during the first eight months of this year, this fuelling import inflation.

    But the BoG has banked it hopes on the US$750 million Afreximbank loan as well as the pending US$1.3 billion cocoa syndicated loan to shore up it’s reserves and also stabilize the cedi.

  • Gov’t adds GH¢7.14bn to its debt

    Gov’t adds GH¢7.14bn to its debt

    Adnan Adams Mohammed

    Government, through the Bank of Ghana, has increased its domestic debt by GH¢7.148 billion through the sale of Treasury bills in August 2022.

    The sales realized were about 39.70% more than its target of GH¢5.117 billion, largely used to refinance maturing debts.

    However, the rising interest rates deepen investor interest in the short-term securities.

    The yield on the 91-day Treasury bills increased to 28.61% at the end of August 2022 (+227 basis points).

    The clearing rates for 182-day and 364- day maturities were however 29.94% (+188 basis points) and 29.52% (+167bps) respectively.

    Meanwhile, the government will this week raise ¢1.682 billion across the 91-day to 182-day Treasury bills.

    The funds will be used to refinance total maturities worth ¢1.567 billion.

    Due to increased sovereign risk, investors reduced their exposure to Government of Ghana bonds, increasing demand for T-bills.

    The Treasury exceeded its target for last week’s T-bill auction with a target-coverage ratio of 1.03, raising ¢1.776 billion.

    The Treasury accepted all bids with a discount rate quote of 26.50%-27.47% for the 91-day, 25.33%-26.84% for the 182-day, and 22.50%-23.20% for the 364-day.

    The 91-day bill cleared at 29.05% (+43bps), with the 182-day and 364-day bills settling at 30.23% (+29bps) and 30.02% (+49bps).

    T-bills sale begun the year with a yield of 12.52% for the 91-day bill and 13.19% for the 182-day.

    Government was expected to borrow ¢4.59 billion as fresh funds in the second quarter of this year to finance part of its budget.

    This was higher than the ¢3.78 billion borrowed in the first three months of 2022.

    Chunk of the monies were expected to have come from the 91-day and 182-day Treasury bills.

  • Cedi begins to recover after free fall

    Cedi begins to recover after free fall

    By Elorm Desewu

    The Ghana cedi has begun to recover after it has depreciated against the major trading currencies since the beginning of this year.

    But just last week, the Cedi appreciated against the greenback as the US$750 million loan from the African Export Import Bank (AFREXIMBANK) has hit the accounts of the Bank of Ghana (BoG).

    The cedi is also expected to appreciate further in the wake of the first tranche of the annual cocoa syndication loan which would hit the accounts of the BoG next month.

    Last week on the Interbank, Cedi was trading against the dollar at a buying price of 8.2284 and a selling price of 8.2366.

    However, at a forex bureau in Accra, the dollar was being bought at a rate of GHC9.79 and sold at a rate of GHC9.98.

    Against the Pound Sterling, the Cedi was trading at GHC9.5820 and a selling price of GHC9.5924. At a forex bureau in Accra, the pound sterling was being traded at GHC11.10 and sold at a rate of GHC11.60.

    The Euro was trading at a buying price of GHc8.2867 and a selling price of GHC8.2950. At a forex bureau in Accra, Euro was being bought at a rate of GHC9.55 and sold at a rate of GHC9.85.

    The cedi has dropped more than 38% this year making it the worst performing currency after Sri Lanka’s rupee among 150 economies tracked by Bloomberg.

    “Ghana’s assets are facing pressure and this is common across high-yield emerging markets,” said Yvette Babb, a Netherland’s based fixed-income portfolio manager at William Blair International “The move, however, has been particularly pronounced in Ghana.”

    Investors have dumped the cedi and the nation’s bonds this year as concerns about the impact of a global slowdown in demand for commodities such as cocoa have risen. Those movements fed an inflationary surge and pushed Ghana to begin talks with the IMF in July over an assistance package of as much as $3 billion.   

    The Bank of Ghana earlier last month increased its benchmark interest rate by the biggest margin on record to 22% to slow the decline. A depreciating currency will add to the import bill of a country that purchases most of its fuel from abroad and has been struggling with inflation at the highest levels since 2003.

  • Eurobonds and treasuries investors jittery over possible ‘haircut’

    Eurobonds and treasuries investors jittery over possible ‘haircut’

    Foreign and domestic investors in Government of Ghana’s (GoG) Eurobonds and treasury bills are jittering over rumours of that, their principal investments might be given a ‘haircut’ as they mature.

    This means, the investors will receive only a fraction of their investments. Further to the meaning of the ‘haircut’, is that, the investors will receive some pesewas to each Cedi (for GoG Treasury Investors) they invested in and/or cents to each dollar (for Eurobond Investors) of their principals invested.  

    According to financial analyst, it is a deadly idea to be conceived in the first place by GoG not to talk of the implementation. One of the renowned analyst warned that, any of such move may result in Ghana not being able to go to the capital markets for many years to come.

    “Any attempt by government to give investors a haircut on their investment principle will result in the Ghana not being able to go to the Capital markets fo many many years to come”, former Executive Director at Standard Chartered Bank, Alex K. Mould has warned in an interview.

    “This also could be resisted by many investors and there could be lawsuits by investor blocks which could drag Ghana’s current credit crunch; this option is like a road to perdition and only reserved for the non salvageable economies in the world.”

    However, the analyst tabled some alternative ideas on how the ‘Nana Akuffo Addo/Dr Mahmoud Bawumia failed government ‘ could resort to on addressing the glaring default in it’s debts.

    Mr Mould enumerated the following options during an interview on how government could deal with the imminent credit crunch it faces; “In the discussions with the IMF, GoG will be required to bring a performance improvement plan (PIP), which should focus on government reducing its expenditure and increase its  revenue in the short term for the next two years to stabilize the fiscals, while IMF holds the government’s hand to seek some reprieve from Creditors (local and International) on its debt service.

    “The first part, reducing expenditure could take the form of  the rationalization of employment in the public and civil service (ie reducing staffing and staff costs) and most likely a freezing any increases in salaries and freezing employment in non-critical and non-core sectors for a few years, as well as not embarking on any projects or capital expenditure that can wait a few years.

    “Another area that, the NPP Govt will be asked to focus on is in curtailing most of the politically-lead programs/projects which will not lead to any substantial increase the GDP in the short term.”

    The outspoken former government appointee noted that, the question the government needs to address is, if the challenge is a structural one, or if it’s pure mismanagement (where drivers of fundamentals remain strong) as the antidotes to curing both differ.

    He furthered his assertion indicating that, “I see the problem akin to what we had in Blackstars a few months ago: Do you change the coach or all the players?”

    This portal promise to bring our readers (Part 2) of the interview which will deal with the challenges government faces with Creditors and the debacle Creditirs holding GoG securities have.

  • Cedi to loose 43% value to U.S. dollar in 2022 – Fitch Solutions

    Cedi to loose 43% value to U.S. dollar in 2022 – Fitch Solutions

    Adnan Adams Mohammed

    Fitch Solutions has projected that the local currency, the Cedi will depreciate in value of about 43 percent to the US dollar by end of this year.

    The investor firm is also projecting a 30.1% fall in value of the cedi to the dollar in 2023. This means, the woes of the cedi will not get better anytime soon.

    Disclosing this in its latest report on the country dubbed “Ghana’s Private Infrastructure Investment Set For Medium-Term Recovery”, it said, the continuing investor concern over the country’s large fiscal deficits puts downward pressure on the cedi.

    “We expect weakness for the Ghanaian cedi to persist throughout the near term, as we currently forecast the currency to depreciate by 43% and 30.1% against the US dollar in 2022 and 2023, respectively”.

    “We expect that Ghana’s inflation rate will remain high in the near term in the face of spiking global food and fuel prices and as continuing investor concern over the country’s large fiscal deficits puts downward pressure on the cedi”, it added.

    Again, it pointed out that the currency’s weakness will keep revenue risks elevated for foreign investors dependent on revenue streams in local currency.

    This is despite an expected $2 billion inflows from the Afrexim Bank and COCOBOD syndicated loan.

    Furthermore, it said in the light of the reliance of Ghana’s construction industry on imports, the cedi’s weakness will add to upward pressures on prices of construction materials from existing supply chain disruptions.

    This, in turn, will further contribute to increased project costs and potential investment delays in the near term.

    “In 2021, Ghana’s trade deficit for iron and steel products is estimated to have exceeded $1.2 billion, up from an estimated deficit of over $780 million worth of iron and steel products in 2020. In light of the Ghanaian construction industry’s reliance on materials imports, we expect that the cedi’s weakness will add to upward pressures on construction materials prices from existing supply chain disruptions. This, in turn, will further contribute to increased project costs and potential investment delays in the near term”.

    The cedi has since the beginning of the year lost about 36% in value to the dollar, according to Bloomberg.

    It depreciated by a little over 4% last week, starting the week at ¢10.10 pesewas to the American ‘greenback’.

    This has drastically shot up the prices of some goods and services, increasing both the cost of doing business and living in the country.