In an initial step, the government seeks to extend its IMF programme, but more extensive negotiations on fiscal consolidation targets and additional aid lie ahead, while the Fund becomes increasingly critical of Ghana’s unsustainable debt burden.
A planned local currency bond sale to clear massive power sector debts and previously undisclosed spending is likely to frustrate simultaneous negotiations with the IMF to extend Ghana’s current programme.
The new government pushes ahead with its ambitious social spending agenda, despite harsh financial realities. In order to balance an economic recovery and spending pledges, the government will seek to renegotiate its IMF programme, yet a weakening banking sector and unsustainable debt may still scupper such plans.
Ghana’s new government is likely to be torn between accepting the IMF’s insistence on fiscal prudence and implementing fresh spending pledges that were made during last year’s election campaign, thus putting pressure on the economy’s tentative recovery and imperilling relations with creditors.
Ghana’s new government is likely to benefit from a tentative economic recovery in 2017 as more oil production comes on stream, yet the unsustainability of the country’s debt situation and high contract alteration risks will continue to pose serious threats to investors in key sectors.
While it is still too early to assess the longer term implications of a Trump presidency on Africa, trade agreements such as AGOA and security cooperation are unlikely to be significantly affected, yet various indicators point to risk of even slower African economic growth due to a stronger dollar and pledges to cut US foreign aid commitments.
As the election campaign enters its final stretch, the government fails to control inflation, while the main opposition runs out of cash, indicating that a closely fought outcome is most likely, thus marginally raising unrest risks.
The main opposition focusses its electoral manifesto on criticism of the government’s economic record, raising contract revision risks for power contracts, banking, telecoms, and oil services in case of an opposition win.
The favourable yield on the latest Eurobond does not reflect investors’ positive outlook on Ghana’s economy and instead is more a reflection on greater appetite for emerging market risk. Ghana’s debt burden has grown unsustainable and has become politically fraught ahead of December’s elections.
The start of production from Ghana’s second oil field is unlikely to alleviate Ghana’s economic slump or debt sustainability crisis, although the governing party will be boosted ahead of the November elections.
- EXX Africa director Robert Besseling moderated a panel on Africa’s commodity rollercoaster at GTR Commodities in Geneva hosted by Global Trade Review (GTR)
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