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Reference – Reflex Eco Group news desk


  1. To response to critics, the Minister of Finance and Economic Planning, Mr. Seth Terkper, said Ghana is not broke, but the economy is facing some challenges. He admitted that there were some slippages in the economy in respect of the wage bill and corporate income tax, particularly in the petroleum sector, and the government had discussed that.

The wage bill was a major source of the fiscal slippage of 5.1 per cent of Gross Domestic Product (GDP) in 2012, as it constituted 2.7 percentage points of the slippage and the increasing of that could be eroding the gains of the economy, which grew by 6.7 per cent in the first quarter of last year.

To arrest the situation the government had made some significant interventions, such as the adjustment of the subsidy on petroleum or the re-introduction of the five per cent national fiscal stabilization levy on the profit before tax of selected companies, such as banks, insurance companies, non-bank financial institutions, breweries, mining, tobacco and communication companies.

Furthermore the government had placed a moratorium on the award of contracts and tasked the Ghana Revenue Authority (GRA) to take administrative measures that would help shore up its revenue collection.

Moreover the $1 billion Eurobond came in handy as a critical resource to undertake development projects; the government would not use the entire money for public debt financing, but also a part of the funds would be used to finance the amortization of domestic bonds, pay for counterpart funding for some identified projects and meet capital commitments in the budget.

  1. Mining companies in the country will begin a massive downsizing of their operations from next month as renewed pressure to cut down on cost heightens with falling gold prices; more than 3,500 permanent jobs will be lost.

Gold prices, which at the beginning of April, was hovering around US$1,600 an ounce has now crashed to low record price of below US$1,200 and if gold remains at current price levels it will be imminent job losses.

Moreover several big companies have canceled or delayed projects, closed mines, and put assets up for sale and fired several workers as the outlook for major commodities worsened.

  1. The United Kingdom’s Minister for Africa, Mark Simmonds has completed a successful two-day visit to Ghana. Discussions focused on building mutual prosperity and boosting trade, investment, growth and jobs through a new high-level UK-Ghana partnership.

Mr Simmonds said that Ghana is an ideal partner for the UK not just because of the strength of our existing relationship and the ties between our people but because of Ghana’s impressive economic success and stability.

During his visit to Ghana, Mr Simmonds met Vice President Paa Kwesi Amissah-Arthur, Ministers for Foreign Affairs and Regional Integration and Trade & Industry; he also visited the UK agri-business, Blue Skies, where he set out how £10 million of DFID funding for agricultural investment in northern Ghana would be channeled through the Agricultural Development Company. The funding will help boost investment to boost production and economic growth in some of the country’s poorest areas.

  1. Nigeria, Africa’s most populous country and the continent’s largest frontier market on July 2, raised $1billion from the global capital markets in two Eurobond issues – a $500 million 5-year bond at a yield of 5.375 per cent and a $500 million 10-year bond with a yield of 6.625 per cent. The offering was four-times oversubscribed due to Nigeria’s strong fiscal position, structurally sound macroeconomic fundamentals and low debt-to-GDP ratios.

Despite Nigeria’s success, Ghana who is looking to tap the increasingly volatile international debt markets for cash in coming months may be in for a rougher and more costly ride. Ghana has a budget deficit of almost 12 per cent and its current president has a legal cloud hanging over him. Moreover complicating Ghana’s scheduled July Euro-bond issue is the changing outlook for the government’s near-term revenues, GDP growth and forex reserves.

The gold mining sector, the country’s second largest export earner, is facing imminent contraction due to falling gold prices. In 2012, Ghana’s mining sector contributed 42 per cent of total merchandise exports and it was the leading contributor to domestic tax collections in 2012, with a total approximate revenue of GH¢1.5 billion ($737million).

With gold prices plunging towards $1,000/ ounce, FDI inflows into Ghana’s gold mining sector and new investments by gold companies will be likely significantly cut back to 2008/2009 levels by about $600million as all global gold companies re-align country units, shut down costly mines, lay off staff and cut back on rising production costs. Total gold mining sector revenues in Ghana in 2012 was over $5.3billion, it is now expected to plunge towards $3billion – a difference of almost $2.3billion.

If the Eurobond scheduled for issuance in July is delayed for whatever reason, the Cedi will plunge and a supplementary budget may have to be laid before parliament to raise extra revenues from energy telecommunications and banks companies and importers.

However in recent years the country’s debt-to-GDP load has risen again and is nearing 60 per cent of GDP. By contrast, Nigeria’s debt-to-GDP ratio is 17 per cent and its budget deficits are around two-three per cent In 2017 Ghana will also have to rollover its $750million 2007 Eurobond issue.

With US monetary authorities in disarray and the squabbling on the FOMC likely to increase rather than abate ahead of Chairman Ben Bernanke’s 2014 exit, Ghana may yet still plunge ahead with a July Eurobond issue even if it means that it pays eight per cent and subscription for the issue is somewhat tepid.

  1. According Yaw Osafo Maafo, the former Finance minister, under the Kufuor-led NPP administration, Ghana’s economy under the John Mahama-led National Democratic Congress government is facing a myriad of problems including the huge public debt, the lamentable fiscal deficit, the humongous arrears, unbridled overspending, worsening unemployment, deteriorating utility services, and failing social services.

He explained further that the problems confounding the economy were expressly stated in the Bank of Ghana’s Monetary Policy Committee (MPC) report of 22nd May 2013, where the governor of the Bank of Ghana admitted that “Economic activities have slowed down, and both business and consumer confidence have weakened”; moreover on the report it explicitly clear that lending rates are hovering around 30 percent because of excessive domestic borrowing by government; there is rising cost of business as a result of erratic electricity and water supply; and the inability of business to borrow and grow their activities due to the drying up of credit.

Moreover to alarm the country’s economic situation is that public debt, that under the Mills-Mahama administration it was grown, within 4 years and a half, from GH¢9.5billion at the beginning of 2009 to GH¢38.5billion, meaning that under the NDC, Ghana is adding GH¢6.4billion every year to its public debt.

  1. Investors on the Ghana Stock Exchange are expected to adopt a ‘wait and see’ attitude in the next couple of weeks before buying or selling shares on the capital market; the investors are curious about the half year results of the listed companies, that are expected to be released from now till the end of July.

The market had looked good this year, recording an annual return of 57 percent for investors so far.

Meanwhile, the oil and gas sector ended the first half of the year as the worst performing sector on the Ghana Stock Exchange; the major cause of this performance is caused by the poor performance of Tullow Oil, which its annual return was negative 15.9 percent, whereas there was a good performance by Total and GOIL.

However, the insurance sector accrued a 77 percent return for investors to become the best sector followed by the Fast Moving and Consumer Goods Sector.