News Guide Africa

Tag: Seth Terkper

  • Gov’t to receive $370million from IMF  … optimistic of Board approval

    Adnan Adams Mohammed

    The Government of Ghana is awaiting disbursement of US$370 million in the coming days, this being the fourth tranche of the ongoing three year International Monetary Fund External Credit Facility programme.

    The government has expressed optimism of the IMF Board’s approval, based on a successful staff level agreement last month and the current state of the Ghanaian economy which has been touted as an unprecedented recovery with almost all macroeconomic indicators showing positive results.

    This is crucial money which the government eagerly awaits as it paid almost the same amount to service its restructured Eurobond debt last week. Upon the Board’s approval for the disbursement of approximately US$370 million, total disbursement under the ECF will be around US$2.4 billion from the start of the Programme in May 2023.

    “The review is pivotal for the country”, Presidential Advisor on the economy, Seth Terkper said in an interview. “We came in as a new government with some experience to complete the fourth review of the IMF programme. It will be going to the board this July. All indications including the staff who came into the country are saying that we think things have gone well and various structural measures and benchmarks and things have been met which means you can be cautiously optimistic that the IMF board will pass the programme and get some injection into the economy.”

    The optimism follows the IMF’s confirmation that a staff-level agreement was reached with Ghanaian authorities on April 15 after the fourth programme review. IMF Communications Director Julie Kozack at an earlier press briefing stated that upon approval by its executive board, Ghana will be scheduled to receive about US$370 million, bringing total support under the ECF to US$2.4 billion since May 2023.

    Market watchers say the anticipated approval is a vote of confidence in Ghana’s fiscal reforms and structural adjustment efforts, which include domestic revenue mobilization, expenditure rationalization, and debt restructuring.

    Analysts add that a positive review would likely bolster investor confidence, stabilize the cedi, and further ease inflationary pressures.

     

     

     

     

     

     

     

     

     

     

     

     

     

  • Gov’t to receive $370million from IMF

    Gov’t to receive $370million from IMF

    The Government of Ghana is awaiting disbursement of US$370 million in the coming days, this being the fourth tranche of the ongoing three-year International Monetary Fund External Credit Facility program.

    The government has expressed optimism of the IMF Board’s approval, based on a successful staff level agreement last month and the current state of the Ghanaian economy which has been touted as an unprecedented recovery with almost all macroeconomic indicators showing positive results.

    This is crucial money which the government eagerly awaits as it paid almost the same amount to service its restructured Eurobond debt last week. Upon the Board’s approval for the disbursement of approximately US$370 million, total disbursement under the ECF will be around US$2.4 billion from the start of the Program in May 2023.

    “The review is pivotal for the country”, Presidential Advisor on the economy, Seth Terkper said in an interview. “We came in as a new government with some experience to complete the fourth review of the IMF program. It will be going to the board this July. All indications including the staff who came into the country are saying that we think things have gone well and various structural measures and benchmarks and things have been met which means you can be cautiously optimistic that the IMF board will pass the program and get some injection into the economy.”

    The optimism follows the IMF’s confirmation that a staff-level agreement was reached with Ghanaian authorities on April 15 after the fourth programe review. IMF Communications Director Julie Kozack at an earlier press briefing stated that upon approval by its executive board, Ghana will be scheduled to receive about US$370 million, bringing total support under the ECF to US$2.4 billion since May 2023.

    Market watchers say the anticipated approval is a vote of confidence in Ghana’s fiscal reforms and structural adjustment efforts, which include domestic revenue mobilization, expenditure rationalization, and debt restructuring.

    Analysts add that a positive review would likely bolster investor confidence, stabilize the cedi, and further ease inflationary pressures.

     

    By Adnan Adams Mohammed

     

  • Six months in: Economy shows progress under mahama’s Leadership- Seth Terkper

    Six months in: Economy shows progress under mahama’s Leadership- Seth Terkper

    Story by Phalonzy

    Economic Policy Advisor Seth Terkper has expressed satisfaction with the progress made by the Ghanaian economy under President John Dramani Mahama’s administration in its first six months.

    Speaking on The Point of View with Bernard Avle on Channel One TV, Terkper highlighted the relative stability of the local currency and ongoing fiscal reforms as tangible evidence of improvement.

    “We are consciously optimistic, and I’d say satisfactorily, because there are measures that you have to use to say I’m happy,” Terkper stated.

    He attributed the progress to the government’s experience and ability to push key reforms forward, despite being relatively new. The successful completion of the fourth review of Ghana’s IMF programme is a notable achievement, with the review expected to go before the IMF Board in July.

    Terkper noted that the government is making strides in clearing outstanding liabilities, including pension payments.

    “We know that we have a lot of liabilities to be paid, and we know one or two of them that were paid, like the pensions,” he said. The IMF staff visiting the country have also provided encouraging feedback, indicating that the programme is on track.

    “The staff who came into the country are saying that things are going well. The various structures, measures, benchmarks, and things have been met. You can be cautiously optimistic that the IMF board will pass your programme, and you will get some injections into the economy, which is the essence of an austerity programme,” Terkper added.

    Ultimately, with these developments, the government is set to receive vital financial support, underscoring its commitment to fiscal consolidation and economic stability.

  • Ghana’s tax system needs reform 

    Seth Terkper and Dr Mahmud Bawumia

     

    Adnan Adams Mohammed 

     

    A former Finance Minister is advocating for a holistic tax system reforms to reflect transparency, efficiency, and the long-term financial health of Ghana.

     

    The former minister believes that, an improved tax collection mechanism; such as, automation and integration of income tax and VAT files, could result in an increased in revenue.

     

    Speaking in an interview after a presentation on Ghana’s International Monetary Fund in Accra last week, he questioned the delay in implementing the tax system digitisation, stressing the need for an efficient domestic Information Technology (IT) system for the Ghana Revenue Authority (GRA).

     

    Seth Terkper, further revealed the complexities of Ghana’s tax system and proposed reforms for a more efficient and transparent structure. According to him, Ghana has four tax regimes namely: Income Tax, Excise Duty, Petroleum Tax and Import Duties.

     

    He emphasised the importance of focusing on the four core taxes – income tax include: personal income tax, corporate income tax, and VAT, adding these are the pillars of the country’s revenue regime due to their broad tax base.

     

    Petroleum taxes are the levies put on products, adding that excise duties are punitive and usually put on products such alcohol and cigarettes, among others.

     

    On the concerns of increasing number of levies, he asserted that they contribute less than 6% to overall revenue and distort the primary tax system.

     

    He thereby called for transparency in the introduction of new taxes and urged a return to the core pillars for the tax regime indicating that, certain levies are distorting the tax regime and encouraging tax evasion and avoidance.

     

    Mr Terkper recommended clearing unnecessary levies and focusing on the fundamental tax pillars for sustainable revenue generation

  • Bawumia admits Ghana’s tax regime is ‘most punitive’ … as he promises reforms

    Seth Terkper and Dr Mahmud Bawumia

     

     

     

    Adnan Adams Mohammed

     

    Dr Mahmud Bawumia has admitted the claims by former Finance Minister, Seth Terkper, that Ghana is witnessing “the worst” tax system ever.

     

    Mr Terkper described the current tax regime under the Akuffo Addo/Dr Bawumia government as the ‘most punitive’ and ‘worst tax structure’ that the country has ever had.

     

    Further indicating that, such punitive tax regime ends deprive the nation of the needed revenue as taxpayers find ways and means of evading and avoiding the tax. However, Dr Mahamudu Bawumia has prmised a new, “friendly” flat tax regime when he is elected President.

     

    “So, if you have a simplified tax regime it is better and compliance increases”, Terkper said in an interview last week. “And the evidence is that if you look at our tax-to-GDP ratio, well, until recently as GRA is claiming — the highest point at which revenue was collected was 2015 per the percentage of GDP, not nominal terms.”

     

    Consequently, in admittance to Terkper’s argument, the Vice President and Flagbearer of the NPP in his national address to outline his vision and priorities for Ghana, last week, there is the need to reform the tax system to the advantage of businesses, especially small and medium enterprises, (SMEs), which constitute the majority of the Ghanaian business community, while also encouraging the payment of the new friendly taxes,.

     

    “My administration will introduce a very simple, citizen and business-friendly flat tax regime. A flat tax of a percentage of income for individuals and SMEs, which constitute 98% of all businesses in Ghana, with appropriate exemption thresholds set to protect the poor,” Dr Bawumia declared.

     

    “With the new tax regime, the tax return should be completed in minutes! We will also simplify our complicated corporate tax system and VAT regime.”

     

    Dr Bawumia also stated that, to start the new tax system on a clean slate, “My government will provide a tax amnesty, i.e. a complete exemption from the payment of taxes for a specified period and the waiving of interest and penalties, up to a certain year to individuals and businesses for failures to file taxes in previous years so that everyone will start afresh.”

     

    “Tax digitalisation will be implemented across all aspects of tax administration. Everyone will be required to file a very simple tax return electronically through their mobile phone or computer. There will be no manual or paper filing of taxes from 2025. Faceless assessments will provide transparency and accountability,” he added.

     

    In the past two months, the government has tried to implement two new taxes, thus, a 15 percent VAT on electricity and and emission tax. Although, it has suspended implemetation of the VAT on electricity tax after organised Labour threatened a nationwide demonstration.

     

    Apparently, during the debate of the 2024 Budget Statement, the minority caucus, accused the Akufo-Addo government of having introduced some 50 new taxes since 2017.

     

    “Mr. Speaker, you recall in 2017 this same Finance Minister told this House that they were removing so-called ‘nuisance taxes.’ That was a hoax! Today, we are witnessing an epidemic of nuisance taxes, taxes, and more taxes”, Minority Leader Cassiel Ato Forson told parliament in his concluding remarks on the 2024 budget debate on the floor of Parliament on Wednesday, 29 November 2023.

     

    “This government has burdened Ghanaians with over 50 taxes despite their promise ‘to shift the economy from taxation to production.’ Mr. Speaker, notwithstanding the over 50 taxes imposed by this government since 2017, this 2024 budget is introducing additional taxes worth GH¢11 billion,” Dr Forson added.

     

    “Mr. Speaker, any additional tax will worsen the extreme poverty in our dear country. We cannot support these new taxes because they will put an extra burden on businesses. Already, businesses are collapsing because of the high cost of doing business in Ghana.”

     

    “We cannot support these new taxes because currently, tax exemptions pending before the Finance Committee amounts to GH¢5.5 billion, equivalent to USD449 million”, Dr Forson emphasised.

     

     

  • Ghana’s Deficit: Enforcing strict adherence to PFMA is the way forward

     

    Adnan Adams Mohammed

     

    Public concerns heightened on how Ghana government could prudently manage its high budget and fiscal deficit.

     

    Ghana’s budget deficit has been consistently high, ending 2022 with a gap of about 9.0% of Gross Domestic Product.

     

    To this, a former Finance Minister has advised the government to tighten the rules of the Public Financial Management Act to cut the country’s budget deficit significantly. The finance expert wants the government to adopt a comprehensive approach to managing the country’s finances to reduce the high fiscal deficit.

     

    “Enforcing the Public Financial Management Law is key to addressing all these financial infractions”,  Seth Terkper posited in an interview last week.

     

    Although, the government is taking some extra measures to limit the amount of debt that can be incurred by any administration, it has proposed a debt target as part of fiscal reforms under the IMF programme.

     

    But Mr. Terkper believes that enforcement of the PMF Law will be the game changer.

     

    “As we continue, I would like to know from government documents if it is a memorandum of economic or financial policy. I’m saying that we do have the provisions; they’re already in the Public Financial Management Act which was passed in 2016 (Act 921) and the budget responsibility Act which you mentioned is an extract from the PFMA”.

     

    “So there’s the need for tightening the rules”, he added.

     

    He further stated the Public Financial Management Law is to regulate the financial management of the public sector by vigorously ensuring that all rules and regulations are adhered to.

     

    “The debt is from borrowing and the borrowing is from your deficit and the deficit is from revenue minus expenditure and this is the purpose of the Public Financial Management Act; to cover this in one loop which you know amended the financial administration act.

     

    Already, as part of measures to meet the dictates of the International Monetary Fund vis-a-vis the recently-approved US$3 billion bailout, government is expected to prioritize fiscal adjustments to ensure it meets the performance criteria for the disbursement of the other loan tranches.

     

    In this regard, President Nana Akufo-Addo has admitted that Ghana’s fiscal deficit is “way above” the five per cent ceiling set by the fiscal responsibility law, indicating that there was a need to bring it down, as he pledges his government’s commitment to cutting expenditure.

     

     

    The Fund has already indicated that, Ghana government will be under pressure to cut down its expenditure following the approval of the country’s US$3 billion deal.

     

    “Rationalisation of our expenditure is something that we have given the assurance [about],” President Akufo-Addo said while speaking at the Qatar-Africa Economic Forum in Doha. “Domestic revenue mobilisation is absolutely critical for us, and, already, we are seeing signs.”

     

    Also, he said: “We have a fiscal responsibility law in Ghana that has pegged our fiscal deficit at five per cent but, already, we are way above that,” noting, “and the sooner we can bring that to more acceptable levels, the better for us.”

     

    In an interview last week, the IMF Representative in Ghana, Dr. Leandro Medina posited that; “On the fiscals there is quite a sizeable adjustment in the 2023 budget and what we expect in the duration of the program, on the structural transformation, it has to do with the reforms and measures that improve the business climate and the growth of private sector”,

     

    “So, there are a lot of reforms within the context of the program that look at what you can do within these three years to ensure that there is a strong foundation in growth and that is the effect of that structural transformation”, he added.

     

    The Fund has also justified the adoption of three mobilization measures as well as the increase in utility costs as Ghana attempts to fix its balance of payment problems.

     

    Despite criticisms, the Excise Duty, Growth and Sustainability, and Income Tax Amendment laws aim to generate GHS4 billion for the country each year have been passed.

     

    These, along with the expected tariff increases in June, are deemed crucial components of the country’s US$ 3 billion, three-year Extended Credit Facility with the IMF.

     

    Dr. Leandro Medina, argued in favour of adjustments in the face other tough economic conditions.

     

    “The revenue measures that have been passed between December and April are part of the prior actions. It’s very important to mobilize revenue. Revenue to GDP in Ghana is very low as compared to other countries. Ghana is making a huge effort to increase revenue, and this will be done mainly by increasing the tax base. What is important to say is that this is a large and front load fiscal consolidation”, he added.

  • Gov’t cautioned against ‘fiscal offset’ in 2023 Budget

    Adnan Adams Mohammed

     

    A former finance minister has called on the government to be honest to Ghanaians on the true picture of total debt, as he believes the government has offset almost about GH¢22 billion from the 2023 budget.

     

    This reduces the fiscal deficit from about GH¢60 billion to approximately GH¢38 billion. This was discovered after critical analysis of the budget, Seth Terkper said.

     

    The former Minister is worried that such practice by government creates a false impression of fiscal prudence, which is unsustainable in the long term. His concerns reflect a broader need for transparency and accountability in government finances in Ghana.

     

    “The government must address these concerns to build trust with its citizens, investors, and international partners. Failure to do so could lead to further economic instability and harm the country’s long-term economic prospects”, Mr Terkper, former finance minister under John Mahama’s administration, said in an interview last week.

     

    This will be the second time the former minister is advising the government not to engage in ‘fiscal offset’ as it happened in the 2017 budget and therefore calling on the government to disclose its plan for dealing with a large GH¢77 billion pipeline of arrears and contracts in the 2021 Budget Performance Report.

     

    He noted that a similar plan was used to deal with the “single spine” wage arrears in 2020.

     

    He argued that given the budget overruns are at the core of most debt challenges, transparency and accountability in government finances are crucial for securing an IMF programme. Moreover, they are also needed for sustainable economic growth and development.

     

    Mr. Terkper also contended that the treatment of the banking and energy sector bailout costs as memoranda items, rather than adding them to the country’s deficit and public debt stock, creates a false impression of fiscal consolidation.

     

    The former Finance Minister again pointed out that this practice by government resulted in the rapid rating downgrades of the country’s sovereign bonds and eventual debt default, with the deficit revised upwards to 7% and 7.2% for 2018 and 2019 respectively, when the IMF and ratings agencies adjusted Ghana’s fiscal deficit and public debt figures.

     

    He recalled that in 2017, the incoming Akufo-Addo administration accused the John Mahama administration of overlooking arrears of about GH¢7 billion. However, only about GH¢2bn was carried forward to the 2017 fiscal year after an apparent offset of GH¢5billon against total expenditures. At the time, Mr. Terkper opposed the move in various articles and interviews.

     

    “The 2023 budget showed another apparent offset of GH¢22 billion that also appears to reduce the deficit from about GH¢60 billion to approximately ¢38 billion”, adding that, “as with the 2.3% reduction in the budget or fiscal deficit in 2017, the repetition of the fiscal move results in a “paper” reduction by 3.7% of Gross Domestic Product”.

     

    He cautioned that, “this practice by government creates a false impression of fiscal prudence, which is unsustainable in the long term.

  • Ghana to get IMF Board approval by May-ending – Terkper

    Adnan Adams Mohammed

     

    As government intensify its effort to get the Board approval from the International Monetary Fund (IMF) soonest after missing the March-ending target, a former finance says, the government may get approval by May-ending.

     

    Seth Terkper reacting to dire economic situation of the country indicated that, the month of May 2023 is practically feasible for Ghana to get a Fund-support programme.

     

    Fitch Solutions last week also projected that Ghana’s staff-level agreement with the Fund will receive an executive board approval in the second quarter of 2023. Assuring that a Fund support programme will unlock critical financial assistance, shore up the country’s foreign exchange reserves and improve investor confidence. Despite, the difficulties in reaching an agreement with external debtors for a relief, Terkper still hopes may May-ending should be a realistic target.

     

    “So if April [2023] is out then we are in May [2023], and there may be a rush of countries that will be pushing [for a Fund-support programme] – that may have concluded already – and may have had drafts being finalised for the board [IMF]. We haven’t had drafts yet as far as I know because we are still in the external debt restructuring”.

     

    “There are fiscal economists [at IMF} dedicated in their mission whose focus is to look at fiscal developments and trends, published and unpublished about the countries. I didn’t see this in the budget [2023], but there were many prior actions. So that may come up maybe as additional prior actions or in terms of performance review there may be a discussion on it”, Mr. Terkper said.

     

    He pointed out that even if the prior actions are completed and Ghana has agreement especially the external debt restructuring, “the entire document would have to be agreed by government as it goes through the Africa Department which is our regional department”.

     

    “Then it may come back with questions which will be reviewed at which point the Memorandum of Economic Policy and the Letter of Intent will be signed by the Minister of Finance [Ken Ofor-Atta] and the Governor [Dr. Ernest Addison].

     

    He therefore concluded the document would be ready to go to the board at that stage “and I think this are some of the considerations which may push us into optimistic May [2023]. Fitch Solutions may also have some intelligence suggesting so”.

     

    Consequently, the World Bank’s April 2023 Africa Pulse Report has disclosed that, Ghana is yet to make progress with the G20 Common Framework Debt Treatment with its bilateral creditors.

     

    This is contrary to government sources that it has reached an agreement with its bilateral creditors, particularly the Paris Club to pave way for an International Monetary Fund-support programme.

     

    “Ghana requested a Common Framework debt treatment in early 2023; hence, progress has yet to be made. In conjunction with the Common Framework engagement, Ghana conducted a voluntary domestic debt exchange programme. Other countries engaged with private creditors and bilateral donors engaged in external restructuring efforts through bilateral engagements (Malawi)”.

     

    ”Yet, these efforts cannot replace a comprehensive and well-coordinated solution for countries in debt distress. High liquidity and solvency pressures may push more countries into an unsustainable situation that requires a comprehensive restructuring of their obligations”, it added.

     

    Meanwhile, the International Monetary Fund (IMF) Chief, Kristalina Georgieva, last week noted that, she told China’s new top economic official, Li Qiang, they must accelerate work to reach debt restructuring agreements for countries like Zambia, Ghana and Ethiopia.

     

    Georgieva, who met with Li and other top Chinese officials during a visit to China last month, said on Thursday she found Li very approachable and pragmatic.

     

    She said he assured her that he wants China to play a constructive role in resolving debt relief cases.

     

    “The truth is, and I was … very straightforward on that, it takes far too long for that (debt) resolution,” she told an event hosted by Meridian House and Politico.

     

    “Yes, China has multiple institutions that deal with that, that makes it complicated domestically, but they have to speed up their participation.”

     

    The United States and other Western countries have faulted China for causing delays in setting up restructuring agreements for heavily indebted countries that have asked for help under the Common Framework set up by the Group of 20 major economies.

     

    Georgieva noted China had been helpful in reaching a debt relief deal for Chad, and also Sri Lanka, a middle-income country that was not eligible for help under the G20 framework, and she encouraged China to show progress on other cases.

     

    About 60% of low-income countries are already in or at risk of debt distress, and about 25% of emerging economies are at high risk and facing “default-like” borrowing spreads, Georgieva said.

     

  • Ghana’s ‘junk’ economy…Ftich, Terkper express worry

    Ghana’s ‘junk’ economy…Ftich, Terkper express worry

    Adnan Adams Mohammed

     

    A former Finance Minister has diffused government’s incessant blame of Ghana’s economic woe on effects of the Covid-19 pandemic and the Russia–Ukraine war.

     

    The former minister, instead, blamed government’s inability to pay for its debt on the decision by the Finance Ministry to stop allocating monies into the Sinking Fund set aside to pay for Ghana’s Eurobonds.

     

    Reacting to the current finance minister’s, Ken Ofori-Atta, comment that, the current state of Ghana’s debt is due to the lingering effects of the Covid-19 pandemic and the Russia–Ukraine war. Alluding that, those effects contributd to the high macroeconomic instability experienced in 2022, and worsened by downgrades by rating agencies as well as the consequential pressures on government finances due to the actions of non-resident investors and the delayed passage of our revenue bills. However, the former finance minister took a swap against government’s excuses.

     

    “We have to behave like a middle income country and put this buffers in place. We saw what the Sinking Fund did for us. We were able to take $250 million to tackle Covid first, right before we even went to the bank for Covid loan and the World Bank for support”, Seth Terkper noted in his reaction, last week.

     

    He argued that it was an unwise decision for government to abandon a laudable policy such as the establishment of a Sinking Fund which provided space for government to pay the country’s Eurobonds.

     

    He stated that Ghana should not have been in the current situation it finds itself with the discovery of three new oil blocks inherited by the government.

     

    “We started operations from the three oil blocks. We got about $3 billion from the IMF, and the World Bank. We also got Covid funds from the World Bank”.

     

    Recounting how government misused all the funds at its disposal, Mr. Terkper pointed out that the government stubbornly refused to put a cap on the Stabilisation Fund, drawing monies from the funds with no accountability.

     

    “After all the monies that came in we kept depleting the Stabilisation Fund. The government refused to put a cap on how much can be withdrawn. It makes you ask the question, how were all those resources used”, he added.

     

    Since discussion for the International Monetary Fund support started, Mr. Ofori-Atta, has agreed that Ghana would have to address its economic challenges on three fronts – embark on fiscal consolidation, undertake debt operations and secure financing assurances from development partners.

     

    While addressing Parliament on the Domestic Debt Exchange Program, last week, expatiated that “as I have indicated earlier, the domestic debt exchange programme was to alleviate the debt burden while minimising its impact on investors and the financial sector. Participation in the programme has always been “Voluntary”. The details of the domestic debt exchange are outlined in the Exchange Memorandum, and the subsequent amendments have been publicly available”.

     

    The coverage of the Exchange includes all locally issued bonds and notes of government as well as ESLA Plc and Daakye Plc bonds. Based on the results of the audit of the public debt, government excluded Treasury-bills and Pension Funds from the exchange.

     

    Out of the total ¢97,749,624,691 eligible bonds were tendered, ¢82,994,510,128 was successfully tendered.

     

    This accounted for about 85% of outstanding eligible amounts and met the target of 80% as expressed in the Memorandum of Exchange.

     

    “Government is however mindful that the Gh¢82,994,510,128 bonds that were successfully tendered represents 64% of the outstanding debt stock of Gh¢130billion at the end of December, 2022”, Mr. Ofori-Atta.

     

    As government jubilate, Fitch, an international rating agency, is skeptical about the deal’s efficiency, as it has described Ghana’s debt exchange programme as a distressed one. This is  under its criteria, given this material reduction in terms vis-à-vis the original contractual terms, and given that the exchange is needed to avoid a traditional payment default. But, the Minister of Finance is confident that the DDEP will build momentum for the country’s external debt restructuring programme.

     

    “The DDEP, part of the government’s broader fiscal policy to address the country’s current macroeconomic challenges, restore macroeconomic stability and put Ghana on a sustainable path to growth and development, has ended with 85% participation”, Ken Ofori-Atta said when addressing Parliament, last week.

     

    “This success, will also build momentum for the external restructuring programme, which has also commenced.”

     

    He said as part of this process, Ghana has officially asked its bilateral creditors for a Debt Treatment initiative under the G-20 Common framework.

     

    Mr. Ofori-Atta also stated that negotiations had already begun with commercial creditors, with the establishment of a Creditor Committee to assess Ghana’s request for debt treatment under the Common Framework expected by the end of February.

     

    He acknowledged the importance of the DDEP in helping the government meet its debt sustainability target of 55% of debt-to-GDP in present value terms by 2028.

     

    “The Government recognises the continued importance of the DDEP in closing the financing gap and enabling the government to meet the debt sustainability target,” said Ofori-Atta.

     

    With the successful completion of the DDEP, Ghana is hoping to make headway in restructuring its external debt and reducing its debt burden in the long term.

     

     

    Apparently, according Fitch’s sovereign rating criteria, a ‘Rating Default’ rating is consequently assigned to the Long-Term Local Currency Issuer Default Rating.

     

    Among the 67 eligible bonds that could be tendered, six are rated by Fitch. A ‘D’ rating has been assigned to these six bonds.

     

    A GH¢4.2 billion principal payment was due on February 6, 2023.

     

    But in the second amended and restated exchange memorandum released on Feb. 7, authorities announced that eligible holders holding this bond would not receive a final interest payment and a final principal payment, regardless of whether an eligible holder has tendered or not.

     

    But in a press release issued by the Finance Ministry on February 14, 2023, the authorities announced that coupon payments and maturing principals would be honoured “in line with government fiscal commitments.”

     

    This announcement, Fitch, said does not clarify yet when the payment will be made to holders who opted out of the domestic debt exchange. In particular, it does not clarify whether a principal payment will be made before the expiration of the grace period for this specific issue. This security is one of the six issues that have been downgraded to ‘D’.

  • Going to IMF or not will depend on our domestic ability to repay our debt – Fmr. Fin Minister

    Going to IMF or not will depend on our domestic ability to repay our debt – Fmr. Fin Minister

    Adnan Adams Mohammed

    A Former Finance Minister has indicated his upbeat about unlikely situation where government could default in settling its maturing debts.

    The finance and economic expert warned that the worst thing that could happen to Ghana at this point as the economy strives to rebound will be to default on debt repayments and therefore admonishing the government to take drastic measures to help tame any unlikely situation of such.

    Bank of Ghana at the May MPC press briefing announced that, Ghana’s total public debt stock as of March 2022, was US$ 55.1 billion or GH¢391.9 billion. In Dollar terms, the debt dropped by over $3 billion in the first 3 months of the year, from $58.4 billion in January to $55.1 billion in March.

     But, responding to a question on whether Ghana needs to go to the International Monetary Fund (IMF), the minister noted that the priority of government should be on ensuring that it doesn’t default on its debt repayment.

    “I would sound a note of caution and it’s that the worst thing that could happen to us is to default. Given the fact that our turning to the domestic market to finance the budget is not working out as planned because of the auction shortfalls and the rest”, Seth Terkper, said during a dialogue session on the state of the Ghanaian economy hosted by the former Finance Minister, on the theme “Inflation, Exchange rate and budget challenge: which way out ?”.

    Mr. Terpker posited that, government now needs to take drastic measures if it doesn’t want to return to the Bretton Woods institution.

    “They need to come out with a homegrown policy. My only worry is that despite the mention of a homegrown policy by government agents I have not seen it. It may exist internally. If it exists in the budget then the markets don’t have any confidence in it. We, therefore, need to do something very drastic on our own, which will be laudable.”

    The total debt stock within the first 3 months of this year increased by about GH¢40 billion, from GH¢351.7 billion in January 2022, to GH¢391.9 billion in March 2022 mainly due to the depreciation of the Cedi against the US Dollar.

    The high debt levels, and high-interest payment realities of the country, coupled with other issues such as downgrades by rating agencies, have seen the country locked out of the Eurobond market. Some have charged government to go to the International Monetary Fund (IMF) to pave the way for Ghana to return to the markets.