Home' Trinidad and Tobago Guardian : August 7th 2014 Contents BG6 | NEWS
BUSINESS GUARDIAN www.guardian.co.tt AUGUST 2014 • WEEK ONE
Republic Bank says that it sup-
ports the decision by the Ghana
government to initiate discus-
sions with the IMF, as the West
African nation grapples with a
double-digit fiscal deficit, a depreciating cur-
rent and rising inflation.
Republic, T&T's largest bank, owns a 40
per cent stake in Ghana's HFC Bank and is
facing a legal challenge to its attempt to increase
its stake in the bank to a 51 per cent majority.
On Friday, Ghana's President John Mahama
directed the government there to start dis-
cussions with the IMF on a programme to
help stabilise the economy and halt a slide in
the cedi currency, officials said on Saturday.
Mahama told a meeting of his economic
advisors that urgent measures should be taken
to prop up the cedi, which has fallen by around
40 percent against the US dollar this year,
placing it among the world's worst performing
currencies, according to a Reuters report.
In an e-mail Wednesday from Accra, the
capital of Ghana, Republic Bank's executive
director, Nigel Baptiste said: "We are in support
of any measures aimed at fostering the long
term stability of the countries in which we
operate. Stabilization of the cedi and fiscal
reform are surely two priority matters for
them. IMF support usually also helps in facil-
itating foreign direct investment which is also
Baptiste, along with Republic managing
director David Dulal-Whiteway were in Ghana
this week holding talks with officials there.
Asked for an update on the lawsuit brought
by shareholders of HFC Bank Ghana bank,
Baptiste said that there was no update as
"matters adjourned for written submissions."
Questioned on how the depreciating cur-
rency and high inflation have impacted on the
bank's Ghanaian bank's business, Baptiste said:
"HFC Bank's half year results will be out
shortly so I can't comment on its performance
"The president has directed that we open
negotiations with the IMF," Finance Minister
Seth Terkper told Reuters, adding the talks
with the IMF would be focused on resolving
specific problems rather than a general assess-
ment of the economy. "This programme is
not going to be like any other programme that
countries have with the IMF."
"Ghana is currently in a transition as a
lower-middle income country. It's in that con-
text that we will be negotiating with the IMF,"
Terkper said by telephone on route to Wash-
ington for the three-day summit US-Africa
summit this week that Mahama attended.
Reuters reported that Ghana posted a current
account deficit of 12 per cent of GDP last year
as demand for imports boomed amid economic
growth of 7 percent. Ghana is also grappling
with a wide budget deficit, which stood at 10
per cent of GDP last year, undermining its
reputation for fiscal responsibility.
Moody's cut its debt rating in June to B2
from B1 and kept the rating on negative out-
look, citing Ghana's deteriorating fiscal position
and rising debt levels.
Razia Khan, head of Africa research at Stan-
dard Chartered bank, said she expected the
news of talks with the IMF to be positively
received by financial markets.
"An IMF programme would likely give to
investors that additional level of confidence
that fiscal consolidation might be pursued
more seriously," she said.
She told Reuters that Zambia, Africa's sec-
ond-largest copper producer, had seen its
Eurobond prices rise as investors welcomed
the government's decision in June to approach
the IMF for help in stabilising its currency
Bloomberg, in a report on Monday, said
Ghana's currency had plunged against the dol-
lar this year as investors lost faith in the gov-
ernment's ability to curb spending and rein
in a current-account deficit that's set to exceed
10 per cent of gross domestic product this
year. Since having most of its debt cleared in
2005 as part of a global relief campaign for
poor nations, Ghana has racked up borrowing,
while failing to keep government spending
under control, according to Bloomberg.
"If only the government can be disciplined
to take the prescription, at least it will help
the decay," Anthony Kofi Asare, head of treas-
ury at Ghana Commercial Bank Ltd., the
nation's biggest lender by branches, told
Bloomberg. "Where we've reached now there's
a need for them to do that. We need discipline
in the economy."
Ghana is planning to issue a US$1.5 billion
eurobond by the end of this month, but
Philippe de Pontet, Africa director at New
York-based Eurasia Group, told Bloomberg
that the sale may be delayed if it's allowed by
the IMF or the amount may be smaller than
that sought by the government. "An IMF loan
facility will reassure investors and donors that
the Mahama administration is serious about
tackling Ghana's economic crisis," he said.
"The decision to turn to the IMF is one
which Mahama tried to put off for as long as
he could and is still reluctant to take," Nicholas
Spiro, managing director of Spiro Sovereign
Strategy in London, said in e-mailed com-
ments. "One senses that the government has
yet to come to terms with the gravity of its
Mahama's comments, made in an e-mailed
statement released by the Ministry of Com-
munications on Aug. 1, came days before he
participated in the first US-Africa Summit
this week, an initiative from President Barack
Obama that will draw more than 40 African
heads of state to Washington to hold talks
with American investors seeking opportunities
on the continent. The US administration said
it expected to sign more than US$900 million
in deals during the three-day meeting.
Mahama on Friday also instructed his eco-
nomic team to increase domestic gas supplies
to the market to provide cheaper fuel for power
generation and minimise the burden of oil
imports on the currency, the communications
ministry statement said.
The IMF "stands ready to engage with the
Ghanaian authorities and develop with them
a fund-supported program to tackle Ghana's
fiscal and external imbalances as soon as a
formal request is received," spokesman Ismaila
Dieng said in an e-mailed statement yester-
Ghana's government is struggling to narrow
the budget deficit as wages for state workers
ballooned to almost 70 per cent of tax income.
Ghana's Finance Minister Seth Terkper last
month revised the 2014 fiscal-gap target to
8.8 per cent of GDP from 8.5 per cent. The
shortfall will probably exceed 10 pe rcent of
GDP for a third consecutive year, according
to Fitch Ratings, which downgraded Ghana
last year to B, five levels below investment
grade, with a negative outlook.
Ghana move to IMF
Aug 5 (Reuters) - The United States will
invest nearly $500 million to modernize
Ghana's power sector in a bid to help it attract
private sector investment and double energy
access on the African continent, the State
Department announced on Tuesday.
Secretary of State John Kerry and Ghanian
President John Dramani Mahama signed the
Ghana Power Compact, the largest U.S. gov-
ernment-funded transaction of the Obama
administration's Power Africa program.
Heads of state of most African countries
are in Washington this week for the U.S.-
Africa Leaders Summit, which aims to show-
case U.S. interest in the continent through a
series of government-private partnership deals
to boost trade and investment.
The Millennium Challenge Corporation
(MCC), the U.S. government's independent
foreign aid agency, will provide the funding
to create a "self-sustaining energy sector in
Ghana by reforming laws and regulations
needed to transform the country's power sec-
tor," according to the State Department.
"This new compact with the MCC demon-
strates the growing cooperation between Ghana
and the United States. It will benefit millions
of our people and contribute immensely to
the achievement of my 'Energy For All' objec-
tive," said Mahama, referring to Ghana's
national energy plan.
According to the US Agency for International
Development, Ghana has 2,719 megawatts
(MW) of installed generation capacity, an inad-
equate amount to serve a population of about
25 million and a major constraint to economic
The new pact is expected to draw more
than $4 billion in private energy investment
from US and global energy firms, improving
management of Ghana's power system and
making the power procurement process more
Ghana will invest US$37.4 million of its
own money into the initiative.
With compacts the United States is also
developing with Liberia and Tanzania, the
MCC will have invested $1 billion in support
of the Power Africa initiative, which has com-
mitted $7 billion in investments until 2018.
President of Ghana John
US signs US$500m pact to
boost Ghana's energy sector
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