Ghana budget review comes amid ailing economy

Embattled Finance Minister Seth Terkper is expected to outline new measures to address Ghana’s economy when he presents a mid-year review of the 2014 budget.

The review, which is likely to take place before the end of this month, could see the ministry modify its macroeconomic targets for the 2014 budget, which are widely seen as being unrealistic, as well as present new policies to stabilise the economy.

As reports emerged this week that the cedi could fall even further to between GH¢3.50 and GH¢4 per dollar, there is mounting pressure on President Mahama and his Finance Minister to deal with the country’s ailing economy.

Last week the Trades Union Congress released a statement reprimanding the government for an economic situation which is “getting worse every day” and a country in which “nothing is working”. It pointed to the continuous slide in the cedi, unpaid salaries, job losses, failing businesses, rising inflation, energy shortfalls, rising utility tariffs and high taxes as factors which continue to harm hardworking Ghanaians.

The Private Enterprise Foundation (PEF), an umbrella organisation for private businesses, also said last week that the government’s “misguided” policies mean that business confidence is at its lowest in four years. This echoed the sentiment of the Association of Ghana Industries which in May called for drastic measures to improve the dwindling fortunes of Ghanaian businesspeople, as well the concerns of the Monetary Policy Committee which, in its April report, spoke of a depressed business environment. There is also considerable anger that the government is not grasping the severity of the situation. The PEF’s CEO, Nana Osei-Bonsu, said, “Government comments like ‘we are going through short-term challenges and difficulties, and this is like a hiccup’ are not helping. These are hurricanes! This is not a hiccup.”

International ratings agencies have meanwhile delivered a damning report on Ghana’s economic management. Following Fitch’s downgrade of its outlook from stable to negative, Moody’s lowered Ghana’s rating to B2 from B1, and maintained a negative outlook on the rating to signal the likelihood of a further downgrade in future; it then downgraded the ratings for the GCB.

Despite increasing pressures, the government is sticking to “home-grown” solutions for now rather than seeking financial assistance from the International Monetary Fund to help solve its problems.

For more news and expert analysis about Ghana, please see Ghana Politics & Security.

© 2014 Menas Associates

Ghana: PPP anti-corruption march finally goes ahead

Following approval by Ghana's police forces the much awaited Progressive People's Party (PPP) protest against corruption finally did go ahead last week. There was an interesting tagline from a PPP national youth coordinator "Divine Nkrumah" that corruption under the Mahama government was like a "General Mosquito" causing infection that should be eliminated immediately.

The term "General Mosquito" has often been used to refer to NDC General Secretary, Johnson Asiedu Nketia , who is currently arguing for the abandonment of the party's internal Electoral College system in favour of a less secure voting system.

 

PPP protesters, carrying a range of attention-grabbing banners, relayed accusations of misappropriation of government funds and controversial "judgement debt" cases. They also echoed suggestions from PPP communications director, William Doworkpor, including the reduction of executive power, separating the Attorney General's office from the Ministry of Justice to prevent partisan interference, and setting up a new, impartial "national commission" to investigate judgement debt cases.

 

Despite the PPP's anti-corruption calls some observers have questioned the party's own claims to be above the fray on probity matters. For example the local Research and Advocacy Platform (RAP) group has accused PPP flagbearer - and former 2008 Convention People's Party (CPP) presidential candidate - Dr. Paa Kwesi Nduom (above) of being involved in corruption at the State Enterprises Commission (SEC) while working on an SEC contract in the late 1980s. The group said that Nduom fraudulently claimed to be a representative of a noted US accounting firm. Previous accusations against Nduom have claimed that he was paid a significant sum in US Dollars for his services and that he was eventually appointed to the SEC while still a contractor which is a significant conflict of interest that he has yet to explain.

 

It has been alleged that Nduom was saved from further investigation by the intervention of the US Embassy and that the matter was never resolved. RAP is now calling for the Economic and Organized Crime Office (EOCO) to reopen investigations. No political party in Ghana, no matter how small, seems safe from corruption allegations against its senior members.

 

For more news and expert analysis about Ghana, please see Ghana Politics & Security.

 

© 2013 Menas Associates

Ghana: Markets react positively to verdict

As one might expect the Supreme Court verdict in favour of the NDC and Mahama was positively received by the financial markets, which had been perturbed by the uncertainty created by the impending decision, the risk of unrest, the impact of a full or partial election re-run, and the partial paralysis of Ghana's political system due to this uncertainty.

In financial terms as the confidence of investors in Ghana increases, yields - or the implied market-demanded effective interest rates on outstanding bonds, given bonds' market price - on Ghana's cedi denominated bonds have indeed been falling. Rates on the planned September auctions of around 600 million cedis worth of bonds have perhaps fallen by between 2%-4% to as low as 17% - a rate not to be confused with the much lower rates and yields on the dollar denominated Ghana Eurobond.

 

Cedi depreciation may well also be slowed as investors stop the shift to dollar-denominated assets due to electoral uncertainty - with Elvis Darku of Nigeria's Access Bank projecting a slight cedi appreciation versus the dollar by the end of the year. This is even if other analysts remain pessimistic and unlikely to shift from predictions of further cedi decline, even with the recent influx of Eurobond dollars and expected receipt of Cocobod financing dollars through the agreed US$1.2 billion syndicated financing facility which should both increase dollar supply and thus reduce its relative price compared to the cedi.

 

On the inflation front, despite double-digit inflation and the impact of cedi depreciation on inflation due to relatively more expensive (in cedis) imports, the most recent release from the state Ghana Statistical Service (GSS) indicates that July producer price inflation has fallen by 0.5% in month-on-month terms and by 2% points on a year on year basis, to 5% for July 2013 compared to July 2012 (whereas the June producer price level was 7% higher than that in June 2012).

 

Although this may seem like positive news, further detail revealed by GSS statistician Dr Philomena Nyarko indicates that while manufacturing inflation rose from 10.6% to 10.9% (year-on-year), mining and quarrying inflation fell significantly into the sub-zero zone partly due to lower gold prices - a factor which (broader implications for Ghana's economy aside) is unlikely to cause sustained inflation relief.

 

For more news and expert analysis about Ghana, please see Ghana Politics & Security.

© 2013 Menas Associates