News Guide Africa

Tag: International Monetary Fund

  • Spending beyond the budget worsening Cedi woes and likely to derail IMF Program – Minority .

     

    Adnan Adams Mohammed

    The Minority Caucus in Ghana’s Parliament has raised concerns over the government’s recent borrowing of GH¢7 billion from the treasury bills market to cover expenses outside its budgetary allocations.

    According to the Minority, this practice of extending expenditure beyond the budget for political purposes is exacerbating the depreciation of the cedi against the dollar.

    Cedi depreciation

    They abhor the government’s management of the Ghanaian cedi, warning that it could jeopardise the International Monetary Fund (IMF) programme by year-end.

    “This [IMF] programme is likely to derail by the end of this year, and recovery could take a significant amount of time”, Dr Ato Forson, Minority Leader in Parliament noted in an interview last week. Adding that, “I have strong convictions” that the programme will not stay the course.

    “Let’s observe how it unfolds,” he emphasised, putting it all down to fiscal policies.

    He said the government was “on course” but pointed out: “As you know, the review dates back”.

    “So, the next review is going to use the data as of December last year. So, the programme indicators to check whether the programme is performing or not is going to use data six months before the time of review. So, obviously, six months before, it was good. But I can tell you that based on the data and the way they are conducting the affairs of the policy going forward, there is going to be a complete commotion,” he said.

    Dr. Forson, criticised the government’s fiscal strategies, indicating that efforts to stabilise the national currency are inadequate and may pose risks to the economy.
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  • IMF approves SDRs for Hybrid Capital Instruments.

    International Monetary Fund

     

    Adnan Adams Mohammed

    International Monetary Fund’s Executive Board has approved a hybrid capital as an eligible instrument for channeling of Special Drawing Rights (SDRs).

    This has received commendation from the African Development Bank Group (AfDB) and the Inter-American Development Bank (IDB).

    The SDR-hybrid-capital based solution proposed by the African Development Bank and the Inter-American Development Bank meets the IMF’s statistical criteria for international reserve-asset status. As such, according to IMF rules, countries that lend their SDRs through this pioneering approach can continue to account for them as reserves.

    This innovative SDR-based hybrid capital channeling solution will help unlock new lending by Multilateral Development Banks to address rising global challenges, including climate and food security. The new instrument offers the opportunity to lend at least US$4 for every US$1 equivalent of SDRs, through the African Development Bank and, the Inter-American Development Bank, and other Multilateral Development Banks, to finance development projects.

    At a time of multiple crises and scarce resources for development, this is a unique value proposition for governments everywhere. The next step is to secure at least five investors to channel their SDRs through Multilateral Development Banks. The African Development Bank and Inter-American Development Bank will continue their dialogue with SDR holders to drive forward this innovative financial solution.

    “The International community now has at its disposal an innovative approach through which development financing can be mobilized with a multiplier effect and at no cost to taxpayers. These are the types of solutions we need to help us tackle Africa’s growing development challenges,” said African Development Bank President Dr Akinwumi Adesina.

    “We very much welcome the IMF Executive Board’s decision,” said InterAmerican Development Bank President Dr Ilan Goldfajn. “With the new SDR-based hybrid-capital instrument, we have a cost-efficient way to finance much-needed sustainable development projects to boost climate resilience, reduce poverty and inequality, and lay the foundation for more inclusive growth in many of our countries.”

    The G20 has recommended that Multilateral Development Banks optimize the use of their balance sheets through financial innovation to create additional lending capacity to help countries tackle urgent development challenges.

    In April, the leaders of 10 Multilateral Development Banks published aViewpoint Note(link is external)and announced joint steps to work more effectively as a system and increase the impact and scale of their work.

    The SDR(link is external)is an international reserve asset created by the IMF to supplement the official reserves of its member countries. Its value is based on a basket of world currencies (US dollar, Euro, Chinese Yuan, Japanese Yen and British Pound).

    The IMF’s most recent general allocation of SDRs to its members was in 2021, when the equivalent of $650 billion was issued to help countries respond to the COVID-19 pandemic.

    Source: afdb

  • Economy to be among 12 best economies in  Sub-Saharan Africa in 2022

    Economy to be among 12 best economies in  Sub-Saharan Africa in 2022

    Adnan Adams Mohammed

    The International Monetary Fund (IMF) has projected that Ghana’s economy is likely to rank 12th among 49 Sub-Saharan African nations in 2022 with an expected growth rate of 5.2%.

    Ghana is expected to jointly rank 12th position with Cape Verde among league of Sub-Saharan African economies. In West Africa, the nation will place 6th again with Cape Verde.

    Although the expected growth of 5.2% is the lowest among other economic researchers, the World Bank has projected a growth of 5.5% for 2022. Also, the parent company of Stanbic Bank, Standard Bank has predicted an economic growth rate of about 6.2% in 2022 and 6.8% in 2023 amidst tough times for the Ghanaian economy.

    The Word Bank in its latest report said the government’s significant progress in vaccinations and the further easing of COVID-19 restrictions will stimulate demand and supply within the economy. But, it pointed out that the country’s ability to tap the Eurobond market may further diminish, whilst the foreign exchange reserves could remain under pressure unless the government acquires alternative sources of external financing.

    “As global risk may worsen further in the first-half of 2022, and Ghana’s ability to tap the Eurobond market may further wane. Foreign exchange reserves could remain under pressure in 2022 — unless the government acquires alternative sources of external bilateral and multilateral funding.”

    The 5.2% expected expansion in the economy in 2022 will be slightly lower than the Gross Domestic Product (GDP) growth rate recorded in 2021.

    In 2021, the IMF projected a growth rate of 4.2%, but the economy expanded by 5.4%, according to provisional estimates from the Ghana Statistical Service.

    This was as a result of strong growth in the Services sector (9.4%), particularly Information, Communication and Technology (33.1%) and Agriculture (8.4%), particularly the Fisheries (13.4%) sub sector.

    In 2023, the Fund forecasts a growth rate of 5.1%, which will place the country in the 21st position in the league of African economies.

    This is due to the expected strong growth rate by most African economies.

    In 2022, Niger will become the fastest growing economy in Sub Saharan Africa with a growth rate of 6.9%, whilst Senegal will lead the league of African economies in 2023 with 9.2% in the economy.

    Meanwhile, Sub-Saharan Africa is expected to grow at a rate of 3.8% in 2022 and subsequently 4% in 2023.

    COUNTRY GDP RANKING

    Niger                 6.9% 1st

    South Sudan 6.5% 2nd

    DR Congo 6.4% 3rd

    Rwanda                6.4% 3rd

    Mauritius 6.1% 5th

    Equat. Guinea 6.1% 5th

    Coted’lvoire 6.0% 7th

    Benin                 5.9% 8th

    Kenya                 5.7% 9th

    The Gambia 5.6% 10th

    Togo                5.6           10th

    Ghana                 5.2% 12th

    Cape Verde 5.2% 12th