Skip to main content

Ghana seeks to ride out challenges

Having been among the continent’s fastest-growing economies on the back of an oil-fuelled boom, Ghana has cut its growth target for this year and revised its forecast for inflation and budget deficit upwards as a result of slowing commodity revenues and high current spending.

Ghana’s forecasts for 2014 are by any comparison still robust, but they have highlighted some cyclical hurdles ahead. In an economic update released in July, Finance Minister Seth Terkper said GDP growth for 2014 was now estimated at 7.1% instead of 8% previously.

He added that the budget deficit for the full year would climb to 8.8% instead of the initially targeted 8.5%, well below the double-digit rates of a few years ago but still higher than expected. The minister has requested parliamentary approval for an additional GHS3.1bn ($837m) in spending on top of the original 2014 budget of GHS34.9bn ($9.43bn).

More worryingly, the updated outlook also included a higher forecast for inflation, at about13% instead of the earlier estimateof 9.5%.
With gold, cocoa, and oil accounting for about four-fifths of Ghana's total export revenues according to 2013 figures, the finance minister cited lower external receipts as a major cause of the fiscal problems, although high levels of spending have also been a factor. Electricity subsidies, a large wage bill and expensive repayments on public debt all weigh heavily on the exchequer.
The change in circumstances has prompted the government to consider all options, and in August, Ghana officially approached the IMF for assistance. Earlier in the year, the IMF, which has estimated Ghana’s growth at 4.8% in 2014, had called for a “more ambitious adjustment scenario” and suggested raising interest rates to limit inflation. Ghana is the second high-growth African market to turn to the IMF for aid, after Zambia said in June it would begin discussions with the fund.
Ghana has also announced plansto tap international debt markets later this month with a eurobond sale of as much as $1bn. The bond would be the country’s second, after a previous sale in July 2013 of $750m. Ghana’s political stability and maturing democratic institutions had previously made it a favourite among investors hungry for high-yield sovereign debt, and recent issuances by Kenya and Cote d’Ivoire have indicated continuing high demand for African paper.
Export-led growth to stall
Ghana’s long-term strategy has been to use export receipts to speed up domestic infrastructure building,with economic growth and diversification plans following in tandem withthe increased government spending.
However a dramatic slowdown in the third quarter of 2013 – as growth eased to 0.3% compared with 6.1% in the previous quarter – due to lower revenues in the extractive sectorshas since precipitated more muted performance overall. The drop in revenues was partlyattributed to a drop in gold prices, as well as lower-than-expected oil production.

Long-term outlook brighter
There are signs theoutlook may improve in the long term. Ghana, the world’s second-largest producer of cocoa,is hoping that increasing wealth and spending power in Asian countries will translate to higher consumption of chocolate in the longer term, raising global price levels. Plans to reinforce output through the distribution of new hybrid seedlings and improved logistics chains should also help to strengthen production.
The country is also expected to finally see long-awaited gas infrastructure – a pipeline for associated deposits from the Jubilee oil field and a processing plant – come online later this year, which should widen the scope for higher crude output as well as boost domestic power production.
And despite the deterioration in public sector finances, the IMF considered the risk of debt distress to be moderate in Ghana. It also noted that Ghana aims to lower wage costs to 8.7% in 2014, with possible options including temporary hiring freezes and a halt to regular wage increases.
The wage costs, which represent one of the country’s largest current expenditures, have come on the back of a rollout of the single-spine salary structure (SSSS) that improves transparency and harmonises payscales across all public sector agencies. The SSSS is intended to slow wage spending in the future but has resulted in a short-term jump.
With the long-term picture brightening as a result of potentially higher cocoa prices and expanded oil production, the final bill for Ghana may be nothing more than a delay in infrastructure investment plans. When this resumes in earnest – particularly the plan to improveaccess to electricity –diversification can pick up, strengthening industries that can provide a buffer when commodity prices take a downward turn.

Comments

Popular posts from this blog

MTN Ghana & MTN MoMo CEOs win laurels at Ghana CEO Awards

  The Chief Executive Officer of MTN Ghana, Selorm Adadevoh ,   has been adjudged  CEO of the Year  –  Telecom  at the  2 nd  edition of the  Ghana CEO  Vision  and  Awards   held  in Accra. At the same event, the CEO of Mobile Money Limited (MTN MoMo), Shaibu Haruna was also adjudged CEO of the Year – FinTech Service Provider. Selorm  Adadevoh’s award  is in recognition  of  his   achievements   in the areas of   sustainability, leadership excellence, innovation and others  in the telecoms space  which  has contributed to  job creation to support the  growth of Ghana’s economy. Patrick Afari (r), General Manager, Supply Chain Management and General Services receiving CEO of the Year – Telecom Award on behalf of Selorm Adadevoh Receiving the award on behalf of Selorm, Patrick Afari, General Manager, Supply Chain Management and General Services ,  expressed appreciation to the organizers for the award. He  noted that  th e  award will go a long way to inspire MTN to do more for Ghanaian

EB-ACCION DISBURSES US$15 MILLION

By Fred SARPONG Ecobank-Accion (EB-Accion), a partnership between Ecobank Ghana Limited and Accion International has disbursed amount to the tune of $15 million to over 36,000 borrowers in Micro, Small and Medium Enterprises (MSMEs) sector in the country, since the institution was set up barely six months ago. Frances Adu-Mantey, the Managing Director of EB-Accion disclosed this to Business Week in Accra last week during the official opening of Accion Hub headquarters in Africa. The institution’s current portfolio stands at GH¢4 million. She stated that currently, EB-Accion have over 6100 customers who save with them throughout the four branches of the institution. According to her, in order to improve the services of the institution, Ecobank Share Services center will facilitate the technology aspect of the bank by networking all the branches of EB-Accion. Maria Otero, President and Chief Executive Officer of Accion International said that the center’s staff in Accra will provide supp

Amantin & Kasei Community Bank posts impressive growth, with over GH¢1m profit

 Amantin and Kasei Community Bank, at Amantin in the Bono East Region has posted impressive growth in all the performance indicators during 2022 financial year under review. The bank recorded profit after tax of GH¢1,055,662, representing 35.66% more over the 2021 figure of GH¢778.151. This achievement stemmed out of 49.24% gross income growth from GH¢8,143,526 to GH¢12,153,537. Total deposits of the bank went up by 36.20%, changing from GH¢50,959,848 in 2021 to GH¢69,405,591 in 2022. The bank increased loans and advances by 22.15% from GH¢14,128,017 to GH¢17,257,614. Total assets showed an appreciation of 29.32%, amounting to GH¢77,918,288 as against GH¢60,250,693 in the previous year. On the other hand, the bank posted a marginal increase in short term investments portfolio from GH¢24,439,761 to GH¢26,585,698, indicating 8.78% change. The Chairman of Board of Directors, Amantin and Kasei Community Bank, Dr. John Oduro-Boateng, disclosed this during the 18th annual general meeting of