yawa nkoaa ... By Javier Blas in London ©Bloomberg Ghana will turn to theInternational Monetary Fund for help after the west African country’s currency plunged roughly 40 per cent this year against the dollar, making the cedi the worst performing currency in the world in 2014. The opening of conversations with the IMF about a rescue is a volte-face for John Mahama, Ghana’s president, who has long insisted his country would resolve the economic crisis using homegrown solutions. Ghana is the second sub-Saharan African country to turn to the IMF for help so far this year, afterZambia announced in June it was seeking talks with the Washington-based multilateral body. Seth Terkper, Ghana’s finance minister, said Mr Mahama had “directed to open discussion with the IMF” to support Ghana’s growth programme. Speaking to the FT, Mr Terkper said the most immediate concern was to “to stabilise the cedi and reduce the [fiscal] deficit”. The Ghanian currency has plunged to 3.7 cedi per US dollar, down from 1.9 in January 2013, beating even the war-ravaged Ukrainian hryvnia and the Syrian pound. Nearly three years after the start of oil production, which was meant to further strengthen the country’s fiscal position, the public purse is looking empty. Ghana is battling a double-digit fiscal deficit after a 75 per cent increase in public salaries over two years. Inflation is rising rapidly as the cedi plunges. Ghana ran a fiscal deficit equal to 10.1 per cent of gross domestic product in 2013. The government has promised to lower the deficit to 8.5 per cent this year, but observers believe it would struggled to reduce it below 10 per cent. In its annual review of the Ghanaian economy, the IMF in May warned that under current policies, the fiscal deficit would stay at about 10.2 per cent this year and 9.3 per cent in 2015, far below the official target. “We would like to have a complementary plan with the World Bank and the African Development Bank [on top of the IMF programme] to achieve our objective to become an upper middle-income economy,” Mr Terkper said. The Ghanaian request of a bail out is likely to shake some investors, as Ghana was seen as a model of economic and political development in the continent. In 2007, Ghana become the first country in sub Saharan Africa – with the exception of South Africa – to tap the sovereign bond market, raising $750m through a 10-year bond. The country has this year repeatedly postponed a return to the hard currency sovereign bond market. But Mr Terkper said that Ghana was still planning to issue a $1bn, 10-year bond in the next few weeks. “The market will take a better view of our policies when we are talking with IMF. Hopefully, the market and development partners will have more confidence,” he said. The financial concerns have put pressure on the government of President Mahama, which stands accused by the opposition of mishandling the economy. Mahama’s party, the National Democratic Congress, introduced a new public sector salary structure in 2010 designed to motivate workers and improve service delivery. The government’s wage bill consumes roughly 70 per cent of the country’s tax revenue.
Posted on: Sat, 02 Aug 2014 23:39:18 +0000
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