• About Us
  • Contact Us
Account
GTB
  • Home
  • News
  • Premium
  • Business
  • Personal Finance
  • Lifestyle
    • Travel
    • Health
    • Retail/Fashion
  • Podcast
    • Business Chat
    • Retiring Richly
    • Sika Nkommo
  • Videos
  • Analysis/Features
No Result
View All Result
  • Home
  • News
  • Premium
  • Business
  • Personal Finance
  • Lifestyle
    • Travel
    • Health
    • Retail/Fashion
  • Podcast
    • Business Chat
    • Retiring Richly
    • Sika Nkommo
  • Videos
  • Analysis/Features
No Result
View All Result
Account
Ghana Talks Business
No Result
View All Result

Ghana IMF Deal No Guarantee of Fiscal Sustainability — Fitch

28/02/2015
Reading Time: 2 mins read
405
SHARES
Share on FacebookShare on TwitterShare on WhatsApp

The announcement of a staff level agreement on an IMF deal for Ghana should ease short-term government and external financing pressures, but sticking to the programme, which includes ambitious fiscal consolidation targets, will be challenging ahead of elections in 2016, Fitch Ratings says.

The three-year programme is expected to be worth USD940m. It will provide an impetus for donors to re-engage with Ghana, providing much needed foreign currency. The programme will focus on three areas: “restraining and prioritising public expenditure, increasing tax collection and strengthening the effectiveness of the central bank’s monetary policy”.

This policy agenda identifies Ghana’s key sovereign credit weaknesses; successful implementation would improve fiscal discipline, help to restore macroeconomic stability and support the currency. Demonstrable commitment to implementing the programme over its life could therefore be positive for Ghana’s sovereign rating.

However, the programme contains ambitious targets, in particular for fiscal consolidation. The IMF envisages the budget deficit narrowing to 7.5% of GDP in 2015 from 9.5% in 2014. This is higher than the deficit target of 6.5% announced in the 2015 budget in December and reflects the impact of lower oil prices and weaker growth. The government has agreed to cut expenditure in response to lower oil prices, as part of its deal with the IMF. Fitch forecasts a deficit of 8% of GDP in 2015.

The Fund then projects that the deficit will narrow to 3.5% of GDP by 2017. We think this is too optimistic given the deepening electricity crisis, which could drag growth lower, and the likely pressure that the upcoming elections will exert on spending.

The announcement follows renewed pressure on the Ghanaian cedi, with the currency falling by 8% since the beginning of January partly reflecting seasonal pressures, and reserves falling by USD600m to USD4.9bn over the same period. Treasury bill yields have remained above 26%, meaning that Ghana faces the highest funding cost among Fitch-rated sovereigns in Sub-Saharan Africa.

An IMF programme should reduce external vulnerability and support reserve accumulation, helped by a narrowing of the current account deficit due to import compression. Donors who withheld around USD200m in grants in 2014 will likely re-engage and the presence of the IMF will unlock access to cheaper concessional financing. This should reduce finance costs and bring in dollars.

A recent three-year bond auction saw 70% foreign participation and may herald renewed foreign interest in Ghanaian debt. The Negative Outlook on Ghana’s ‘B’ sovereign rating reflects the risks to external financing capacity and the challenge and cost of financing the deficit. Easing pressure on external finances and reserves following the IMF announcement would contain near-term downward pressure on the rating.

However, signs of fiscal slippage ahead of the election or increased external financing pressures would put further downward pressure on the rating.

(The above statement was released by the rating agency) LONDON, February 27 (Fitch)

Previous Post

Supreme Court orders EC to stop running ads on District Assembly Elections

Next Post

Election 2016 won’t disrupt IMF programme – Terkper assures

Related Posts

Employers and employees

The silent war between employers and employees will have no winner 

27/01/2023
Electric cars in Africa, ghanatalksbusiness.com

Africa’s push for electric vehicles

24/01/2023
Functioning dddress system, ghanatalksbusiness.com

The next “AMAZON” in Africa will need a Functioning Address System

23/01/2023
Catalyst fund, ghanatalksbusiness.com

Catalyst Fund announces $2 million investment into 10 startups accelerating Africa’s adaptation and resilience to climate change

20/01/2023
shifts in globalisation

Globalisation Redefined as Manufacturing Moves Closer to Home

20/01/2023
Christmas sale in Ghana

Fun facts about Christmas in Ghana

22/12/2022
Next Post

Election 2016 won’t disrupt IMF programme – Terkper assures

Electoral Commission prepares new legislation on district polls

  • About Us
  • Disclaimer
  • Privacy Policy
  • Advertising
  • Contact Us

© 2021 Ghana Talks Business

No Result
View All Result
  • Home
  • News
  • Premium
  • Business
  • Personal Finance
  • Lifestyle
    • Travel
    • Health
    • Retail/Fashion
  • Podcast
    • Business Chat
    • Retiring Richly
    • Sika Nkommo
  • Videos
  • Analysis/Features
  • Login

© 2021 Ghana Talks Business

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In