News Guide Africa

Category: Technology

  • Cedi to deteriorate further as S&P scares foreign investors

    Adnan Adams Mohammed

    The Ghanaian economy is to further suffer the consequences of another ratings from S&P Global Ratings as it downgrades the nations debt sustainability to CCC+/C, outlook negative.

    The ratings, released last week, has strong negative consequences on the deteriorating exchange rate, especially the U.S dollar against the local currency (Cedi), as foreign dominated investors in the countries debt instruments are recouping their investment.

    This, coupled with high import bills, has depleted the country’s international reserves to unsustainably low putting pressure on the Cedi as it’s currently trading on the forex market at GHC9.10 to a dollar. These necessitated S&P lowering Ghana’s foreign and local currency sovereign ratings to CCC+/C from B-/B.

    “Reflecting Ghana’s limited commercial financing options, and constrained external and fiscal buffers”, S&P justified its negative outlook for the country.

    The Covid-19 pandemic and the conflict in Russia have magnified Ghana’s fiscal and external imbalances, S&P said.

    Demand for foreign currency has been driven higher by several factors, including nonresident outflows from domestic government bond markets, dividend payments to foreign investors and higher costs for refined petroleum products, the agency said.

    The nation has also been affected by a lack of access to Eurobond markets, the agency said.

    Local authorities have passed a levy on electronic transactions and legislation to tighten exemptions on tax payments including for VAT, among other moves. “While these changes could improve the tax take going forward, the situation remains challenging, and over the first half of 2022, the fiscal deficit has exceeded the government’s ambitious target,” S&P said.

    S&P had affirmed Ghana’s ratings in February, as Moody’s downgraded the African nation to Caa1 with a stable outlook.

  • BoG Dollar Sales: supply fall short of about 80%

    BoG Dollar Sales: supply fall short of about 80%

    Adnan Adams Mohammed

    The Bank of Ghana (BoG) U.S dollar auctioning report indicates that, there is supply shortage of about US$82 million out of total demand of US$107 million as at last week, July 26, 2022.  

    Sales of the US dollar stood at US$25 million. This translate into a percentage shortfall in supply of about 80 percent.

    This indicates why the cedi has come under severe pressure in recent days, losing ground against the largest trading currency. The demand for the U.S currency has been very high.

    US$51.25 million of the 7-day tenor was the highest bid by the dealers, followed by US$28.75 million for the 15-day tenor.

    The 30-day tenor received bids worth US$19.75 million, whilst the 45-day tenor received bids of US$4 million.

    The rates for the 7-day tenor were priced within the range of ¢8.09 and ¢8.20. That of the 15-day were within the range of ¢8.14 and ¢8.25.

    Overall, 150 bids were submitted by the dealers, but 34 of the bids were accepted.

  • Interbank and forex bureau dollar rate differentials almost 14%

    Interbank and forex bureau dollar rate differentials almost 14%

    Adnan Adams Mohammed

    The foreign exchange rate of the U.S dollar to the Ghanaian cedi is trading at GH¢7.43 to US$1.0 on the interbank market as against GH¢8.32 to a dollar on the retail market (forex bureau) as at last week, July 25, 2022.

    This peg the difference in the market rates at about 14 percent or GH¢1.0.

    However the Summary of Economic and Financial Data by the Bank of Ghana, has indicated that, the cedi lost 19.2% in value to the US dollar in almost seven months of 2022.

    Some currency analysts have attributed the lack of dollar inflows, particularly Eurobonds as the main reason behind the volatility of the cedi.

    Others also believe the huge interest payments on borrowed funds (external) by government is a major reason.

    The Ghana cedi depreciated by 16.86% in value to the dollar in the first half of 2022 on the interbank market, but over 20% on the retail forex market.

    However, the rate of depreciation of the cedi slowed down in the May 2022 and June 2022, after stern monetary actions from the Bank of Ghana coupled with some fiscal measures to halt the free fall in the first four months of 2022.

    Indeed, the Bank of Ghana increased the policy rate by 2.5 percentage points to 17% in March 2022. Again, it enforced measures such as the increase in the Cash Reserve Ratio to 12%, the reset of the Capital Conservation Buffer to the pre-pandemic level of 3% and increased the Capital Adequacy Ratio to 13%.

    This move encouraged investors to invest in cedi-denominated assets, whilst inflation and money supply are effectively controlled.

    Again, investors were reassured that managers of the economy were keeping close eye on the causes of the value of the cedi.

  • Ghana’s Reserves: Finance Committee and BoG data conflicting

    Ghana’s Reserves: Finance Committee and BoG data conflicting

    Adnan Adams Mohammed

    In the wake of International Monetary Fund (IMF) engagement, as data credibility is key to ascertain true state of the economy, the Bank of Ghana and the Finance Committee of Parliament have released conflicting data on the country’s international gross reserves.

    The Finance Committee and the Central Bank have released different figures purporting to be the current level the country’s reserves as US$3.0 billion and US$7.6 billion respectively.  

    This is a disturbing development which might affected all data credibility that government will be submitting to the IMF team during the data reconciliation stage of the engagement for a possible ‘balance of payment support’. Aside, data credibility acceptance fear by the IMF, the reserve levels have great influence on the forex exchange rate as a low reserve level promote rush for the US dollar which results in hoarding and black-market control. A report of the Finance Committee on a Loan Facility Agreement between government of Ghana and the AfreximBank for a loan of up to US$750 million released, last week, indicated that, the country would have gone bankrupt without approval of the loan amount.

    “These challenges are further exacerbated by the rapidly dwindling reserves of the Bank of Ghana which has declined from $9 billion to about $3 billion”, the report of revealed. “With a monthly demand of over $600 million, the reserves of the central bank may be exhausted in a few months if urgent steps are not taken to shore up the countries reserves.” 

    Contrary, a Bank of Ghana document as published by Joy Business shows that, Ghana’s reserves has declined from $8.1 billion in May 2022 to $7.6 billion in June 2022, a 3.4 months of import cover.

    This has necessitated the Chairman of Parliament’s Finance Committee, Kweku Kwarteng, expected to make a statement on the floor of parliament about the committee’s report on the AfreximBank Loan Agreement and Ghana’s International Reserves.

    The committee report further revealed that, the Finance Minister, Ken Ofori-Atta, explained to parliamentarians that, the country needed this loan amount to shore up the reserve position of the Central Bank.

    “The Minister further indicated that, there is an urgent need for the government to secure the $750 million facility to help shore up the reserve position of the Bank of Ghana to avoid the country defaulting on its international commitments and also to avoid the country moving into insolvency.”

    The Minister said despite the facility seeming expensive in its face, it’s a reflection of the overall market conditions.

    The report mentions 11 projects the loan amount will be used to finance including the Ofankor – Nsawam road, the Suame Interchange and local road network project as well as the completion of the flower pot interchange.

    Parliament has since approved the loan agreement between the government of Ghana and the African Export-Import Bank (AfreximBank).

    Ghana’s Gross International Reserves dipped to $8.34 billion in April 2022, from $9.70 billion recorded in December 2021, data from the Bank of Ghana has revealed.

    This was equivalent to 3.7 months of import cover.

    In January 2022, the country’s Gross International Reserves stood at $9.76 billion, about 4.4 months of import cover.

    It further dropped to $9.54 billion (4.2 months of import cover) in February 2022 and $8.81 billion (3.9 months of import cover) in March 2022.

    According to the figures on External Sector Developments, the Heritage and Stabilisation Funds in April 2022 stood at $939 million. This is compared with  $971.4 million in December 2021.

    Ghana records $1.33bn trade surplus in April 2022

    Ghana recorded a trade surplus of $1.33 billion in the first four months of 2022, higher than the $1.107 billion recorded in the entire 2021.

    This is approximately 1.9% of Gross Domestic Product (GDP).

    According to the Bank of Ghana Summary of Economic and Financial Data, total exports in the 4-months of 2021 was $6.10 billion. This is against total imports of $4.77 billion.

  • BoG hopeful of cedi rebound

    BoG hopeful of cedi rebound

    By Elorm Desewu

    The Ghana cedi would soon rebound after it has experienced some level of depreciation during the first half of this year due to government’s decision not to issue Eurobonds this year.

    The Bank of Ghana has banked it hopes on the recent US$750million loan from African Export-Import Bank (Afreximbank) as well as this year’s cocoa loan syndication to build it reserves  which currently stands at US$7.6 billion representing 3.4months import cover according to BoG’s latest economic and financial data report released last week and also stabilize the currency.

    The local currency has depreciated by about 18.89% to the dollar on the interbank market and 26% on the retail market.

     Senior Economic and Currency Analyst, Courage Martey explained that market participants are not confident of the market outlook.

    He is therefore calling for new ways to cushion the country’s foreign reserves.

    “The cedi’s problem is idiosyncratic because of the fixation of regular Eurobond inflow’s which is now missing today. And the kind of the withdrawal symptom from the Eurobond market is really squeezing the cedi hard and the market is really not comfortable with the level of reserves [Ghana’s foreign reserves] they are seeing.”

    Furthermore, he said “in recent weeks or so, you’d also agree that there has been negative noise around the level of reserves that we have. And that also plays into the psychology of the market in a negative way and the cedi is really under serious selling pressure”

    Mr. Martey continued, saying, despite the approval of the $750 million syndicated loan by Parliament yesterday, the outlook of the foreign exchange market is not encouraging.

    “The good news is that yesterday parliament approved some $750 million, out of the $1.0 billion. However, the understanding is that it doesn’t fully resolve our total external financing means for the year [2022] and so the market doesn’t have that full confidence that the supply side or the gap between demand and supply is fully met with this approval”.

    So that limited supply without options to beef up the reserve right now is really playing  

  • IMF’s Country rep defends mixed assessment of Ghana economy in July 2021

    IMF’s Country rep defends mixed assessment of Ghana economy in July 2021

    The International Monetary Fund’s Resident Representative to Ghana, Dr. Albert Touna-Mama, defended his outfit’s mixed assessment of Ghana’s economy during the July 2021 Article IV consultations, which said Ghana’s economic outlook was improving.

    Speaking on the Citi Breakfast Show,

    Dr. Touna-Mama, explained that the assessment that preceded the dire economic downturn in Ghana was based on projections.

    Ghana has now turned to the IMF for support.

    Such assessments are “made on a forward-looking basis, and we take into consideration the plans and policies that the authorities want to put in place to address whatever vulnerability,” he said.

    The IMF had noted, among others, that Ghana’s monetary policy stance was “broadly appropriate.”

    The IMF also welcomed the fiscal adjustments envisaged in the 2021 budget, while stressing that fiscal consolidation was needed to address debt sustainability and rollover risks.

    Dr. Touna-Mama conceded that there had been drastic changes on the global scene.

    “Last year there was still a debate globally on whether the amount of fiscal stimulus push by bigger economies, the US specifically, would generate inflation.”

    Since then, he said that “it has become clear, inflation is a factor and will remain with us for a long time.”

    He also noted red flags started to appear after the 2022 budget was revealed by the government.

    “That budget was really scrutinized given the direction and whether Ghana would be able to address those vulnerabilities.”

    After the 2022 budget statement, he recalled that Ghana’s Euro bond spread widened and “investors started requesting a higher premium in order to lend to Ghana.”

    “This was a signal that the direction they were seeing in the budget was unfortunately not convincing for them,” Dr. Touna-Mama added.

    This notwithstanding, he said the government was given a more blunt warning about the pitfalls ahead for Ghana’s economy last year.

    While the Article IV consultation features diplomatic wording, Dr. Touna-Mama said, “the report that we [the IMF] leave with the top policymakers is very candid and very direct.”

    Ghana’s economy has faced turbulent times in 2022, with inflation reaching a 19-year high of 29.8 percent.

    The cedi has also been regarded as the worst performing currency against the dollar after depreciating over 20 percent in 2022.

  • 91% Ghanaians lack confident in judicious use of E-Levy funds – report

    91% Ghanaians lack confident in judicious use of E-Levy funds – report

    Adnan Adams Mohammed

    Ghanaians have registered their lack of trust in the government and fears the 1.5 per cent currently being charged on Electronic transactions (E-levy) will be used to fund development projects across the country an Afrobarometer Report has revealed.

    The survey report released by CDD-Ghana shows, out of the total sample size, only 9 percent of Ghanaians are confident that the government will use revenue from the E-levy to fund development. This means, about 91% Ghanaians have no confident in the government when it comes to judicious utilisation of tax monies.

    Amidst the high lack of no confident and on the issue of transparency, key stakeholders in the telecommunication space have advocated the rollout of measures and strategies that will inform people of how their taxes are being used.

    “I think it is fair to ask that if we’ve decided that we are taking this tax for a particular purpose, we are able to go back and see if it is being used for that particular purpose. For me, as a corporate governance student, I think that transparency and providing information, by the people who are in positions of responsibility is important”, Chief Executive Officer of the Ghana Chamber of Telecommunications, Dr. Ing. Kenneth Ashigbey, noted in a radio discussion last week.

    “And I don’t think we do enough of that. It is something we need to do constantly if we want to take out all the clouds and perceptions of suspicion. If we could even have a website that customers can go to find out with regards to how much is coming in and what the funds are being used for, it will be helpful,” he added.

    According to the Afrobarometer report, 51% of Ghanaians do not think government will invest the proceeds generated from the E-levy into development projects.  The report indicates that 24% of Ghanaians are not very confident that the revenue generated from the E-levy will be used for its intended purpose, while 15 per cent are somewhat confident that government will indeed use the accrued revenue for its purpose.

    Also, 47% of Ghanaians despite the charges on electronic transactions say they will continue to use electronic financial transactions.

    However, the report further indicated that, 49% of Ghanaians have disclosed that the E-levy will make them avoid or stop using electronic financial transactions.

  • Pursue efficiency in spending – WB advises Ghana 

    Pursue efficiency in spending – WB advises Ghana 

    Adnan Adams Mohammed

    The Economic Management Team and the finance ministry have been advised to ensure efficiency in spending amidst the current crisis that the country faces.

    A multilateral institution, the World Bank, has urged the government to restore fiscal sustainability going forward in order to facilitate debt reduction to a sustainable level.

    It also wants the country to pursue structural reforms, particularly in the energy sector, address economic imbalance and the financial issues that are putting lots of stress on the fiscal framework. Speaking at the 6th Ghana Economic Update, World Bank Country Director said, addressing these sectoral reforms is critical for Ghana, adding, managers of the economy must pursue efficiency in spending.

    “So addressing these sectoral reforms will be critical and at the same time expenditure side should be measured – that is pursuing efficiency in spending”, Pierre Laporte said.

    “Ghana also needs to pursue structural reforms particularly in the energy sector, the imbalance and the financial issues that are putting lots of stress on the fiscal framework.

    “But focusing on fiscal sustainability alone and too much of drastic adjustments may be harmful to Ghana. That is why the country needs to focus on other areas and in this case we have selected youth employment as a special theme”, Mr. Laporte pointed out.

    Today, Ghana’s youth population is estimated at 36%.

    Mr. Larpote said “over the last 30 years or so despite several policies introduced to address the youth employment issues, the challenges remain. What should be done is that policies should be introduced to provide opportunities for the youth through several means.”

    “One to increase access to financing which is a major constraint to development. Another one is to provide opportunities for SMEs to grow, for instance, the African Continental Free Trade Agreement is a better platform that will not only enable Ghanaians, but Africa youth, in general, to take advantage of the opportunities this initiative will bring.”

    Besides that, Mr. Laporte urged government to continue to look at other aspects of support for the youth including digitalisation.

  • BoG likely to hike policy rate further

    BoG likely to hike policy rate further

    By Elorm Desewu

    With the recent price hike in the petroleum products couple with the rise in year on year inflation, the Bank of Ghana is likely to raise the policy rate further by 150 basis points to settle at 20.5 percent from the current 19 percent.

    Recent price developments indicate elevated pressures arising from the sharp increase in global energy and commodity prices, and the consequential effects on rising domestic ex-pump petroleum prices and transportation costs, food prices, as well as the pass-through effects of the recent exchange rate depreciation in the second quarter of 2022.

    The Monetary Policy Committee, (MPC) will from this week begin to review the health of the economy and also announce a new policy rate for the next couple of months. But there strong indication that the BoG would hike the policy rate further in attempt to anchor inflation.

    The policy rate is the rate at which universal banks borrow from the Bank of Ghana as their last resort and also serves as a benchmark in setting the Ghana Reference Rate.

    Figures released by the Ghana Statistical Service, (GSS), indicate that, year on year inflation measured by the Consumer Price Index, (CPI), has inched up to 29.8 percent for the 12 months period ended June 2022, from 27.6 percent recorded in May 2022.

    This represents a two percentage point increase in the inflation rate compared to the 27.6 percent recorded in May 2022.

    The trends suggest that price pressures were increasingly becoming broad-based, reflected in almost all components of the consumer basket, from both domestic and imported sources.

    Non-food inflation went up significantly from 25.7 percent in May to 29.1percent in June 2022, while food inflation also rose from 30.1 percent to 30.7 percent over the same comparative period.

    The upward adjustments in petroleum products and transport fares with attendant second-round effects on goods and services, have pushed up inflation and inflation expectations.

    The heightened uncertainty in energy prices, prolonged global supply chain holdups, the passthrough of the recent exchange rate depreciation, and upward adjustments in ex-pump petroleum prices and transportation costs, present significant upside risks and are expected to exert pressures on domestic prices in the near term.

    The continued uncertainties surrounding food prices is also likely to add to the upside risks to the inflation outlook. On the downside, it is expected that monetary policy tightening, in tandem with the announced fiscal consolidation efforts, would help moderate inflationary pressures in the outlook.

    The risks in the outlook for inflation emanating from both external and domestic sources, as well as triggered by both supply-side and demand-side shocks are clearly on the upside.

    At the May 2022 meeting, therefore, the MPC hiked the policy rate by 200 basis points to 19 percent with the view that it needed to decisively address the current inflationary pressures to re-anchor expectations and help foster macroeconomic stability.

  • Rising inflation: BoG calls for resilient and thriving agric sector

    Rising inflation: BoG calls for resilient and thriving agric sector

    Adnan Adams Mohammed

    The Bank of Ghana is calling for promotion of a resilient and thriving agricultural and agribusiness sector.

    According to the Central Bank agriculture has broader implications on the economy, including price stability, exchange rate stability and generation export revenues from the sector.

    The Bank indicates that, inability to address food supply conditions could in the long run threaten price stability in the country. Since May 2021, the inflation data have pointed to gradual increase in food prices, and this trend has intensified in recent months on the back of the recent Russian-Ukraine crises. Food inflation hit 30.1% in May 2022, significantly up from 5.4% in May 2021.

    “Recognizing the important role of this sector to the economy therefore, the Bank of Ghana was instrumental in the initiation, design, and establishment of the Ghana Incentive-Based Risk Sharing System for Agricultural Lending (GIRSAL) and continues to support the scheme in various ways”, Second Deputy Governor, Elsie Addo Awadzi said when speaking at an Agriculture Stakeholder Convening and Advocacy Platform Launch, last week.

    GIRSAL was designed to be a holistic and integrated system of instruments designed to de-risk the agricultural sector and incentivize banks to lend to the sector to drive agribusiness development, and reduce capital constraints that limit competitiveness.

    At the onset, BoG provided ¢200 million seed capital and ¢10 million for the set-up and operational expenses to GIRSAL. However, in June 2018, BoG transferred its equity interest in GIRSAL Limited to the government (Ministry of Finance), but continued to support the initiative in a number of ways.

    These include the approval of a zero-risk weighting of credit exposures covered by GIRSAL’s Credit Guarantee Scheme, which demonstrates the confidence the central bank assigns to GIRSAL’s CRG scheme, and thus, improving its credibility and attractiveness to financial institutions.

    “Indeed, BoG is an invaluable partner to GIRSAL and looks forward to support its activities, including todays’ launch of an Agribusiness Public-Private Partnership Platform”, she further explained.

    “Indeed, BoG is an invaluable partner to GIRSAL and looks forward to support its activities, including todays’ launch of an Agribusiness Public-Private Partnership Platform. This newly created AG Platform should provide stakeholders the avenue to identify key bottlenecks in the agriculture and agribusiness value chain, stimulate discussions, and identify possible solutions to unlock the true potential of this industry”, she added.