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Ghana’s debt hits distress levels – 3 years in a row

Ghana has maintained its status as a high-risk, debt-distress country after first making it onto the infamous list of countries whose debt burdens had reached alarming levels in 2015.

In separate reports released in March and April, the World Bank and the International Monetary Fund (IMF) confirmed that the country was in a high risk of debt distress and now required aggressive strategies to slow down the debt growth and ease repayment constraints before they combine with other ailing fiscal indices to cripple the economy further.

By remaining on the list of high-risk distress countries, Ghana is now part of 18 other low-income countries (LICs) in Africa, where debt sustainability analyses (DSAs) by the IMF and the World Bank show protracted breach of debt or debt service thresholds.

This means that the country is now one step short of slipping into the danger zone — debt distress, which comprises countries already experiencing difficulties in servicing their debt and whose debt service indicators are in significant or sustained breach of thresholds.

It also means that the country’s risk of default is now high, a Professor of Economics and Head of the Economics Department at the University of Ghana, Legon, Prof. Peter Quartey, said in an interview.

“We should be concerned because when you have that risk, the interest you pay when you want to raise additional funding increases.

“It means we are a risky borrower and investors will factor in this risk element in determining our interest rates,” he added.

Soaring debt service cost

The DSA is based on a framework that was co-developed by the Bretton Wood institutions about a decade ago to serve as a guide in assessing the debt of LICs worldwide.

As of March this year, the results of the analyses showed that six countries were in debt distress, 25 were at high risk of debt distress, 27 were at moderate risk and 13 were at low risk of debt distress.

While admitting that various factors could push a country into the high risk debt distress category, an Economist and Senior Research Fellow at the Institute for Fiscal Policy (IFS), Dr Said Boakye, said in a separate interview that the amount of a country’s total revenues and grants used to service its debt was a key indicator.

“What the results of the DSA means is that the country is in danger of debt distress in spite of the assurances and if you look at how much of our revenue goes into debt service expenditures, you will realise it is very huge,” he pointed out.

After ending 2000 at 72 per cent, the ratio of debt service cost to total revenue and grants declined drastically to 17.9 per cent in 2006, thanks to landmark debt forgiveness programme under the IMF and the World Bank’s HIPC and MDRI programmes, which helped to stabilise.

Since then, it has remained on the upward trajectory, peaking at 23 per cent in 2010 before easing to 17.9 per cent in 2011 when commercial oil production spiked national revenue to record levels.

In 2016, the ratio was 45.7 per cent but declined modestly to 44.5 per cent last year. This meant that of every GHȻ1 collected in revenues and grants, more than 44 pesewas was used to service debt.

Both Prof. Quartey and Dr Boakye described this as alarming and explained why the country continued to remain on the high-risk, debt-distress category.

“It means that we use more of our revenue to service debt and that leaves little room for investments. So generally, we should be very much concerned about that tag of a high-risk, debt-distress country,” Prof. Quartey added.

Debt journey

Since 2015, when the country first migrated from the status of a moderate-risk, debt-distress country to the high-risk category, soaring debt levels, strong debt-servicing costs and weak institutional response to revenue generations and debt have ensured that the country remains in that category.

From a debt stock of GHȻ76.1 billion, equivalent to 67.1 per cent of gross domestic product (GDP) in 2014, the national debt burden rose to GHȻ100.2 billion (71.6 per cent of GDP) in 2015 before settling at GHȻ122.6 billion (73.3 per cent of GDP) in 2016.

Although the debt-to-GDP ratio declined to 69.8 per cent in 2017, the debt stock firmed up to GHȻ142.5 billion.

Notwithstanding the strong growth over the years, recent developments have revealed a modest decline in the pace of the growth.

In presenting the 2018 budget to Parliament in November last year, the Finance Minister, Mr Ken Ofori-Atta, said the annual average rate of debt accumulation “of 36 per cent over the last four years has declined over the last nine months to about 13.58 per cent”.

“While the government is actively managing the public debt to ensure sustainability through its liability management programme, which among others is aimed at reducing the refinancing risk and cost of borrowing, we do not expect this initiative to add to the public debt stock beyond the net financing requirement for the year,” he added.


Source: Graphic Business

IMF to release $236m to Ghana in May

The IMF should be releasing about two hundred and thirty-six million dollars ($236,000,000) to Ghana under the agreement with the Fund, by the first week of May this year.

This will be the total of the fifth and sixth disbursements under the economic support program.

These among others were the highlights at this year’s spring meetings of the IMF/World Bank in Washington, DC.

The release of the figure means the Fund is at least satisfied with Ghana’s performance so far under the agreement.

This also comes on the back of the IMF mission’s review of Ghana’s performance, last month (March).

A Deputy Information Minister, Kojo Oppong Nkrumah who joined the team to Washington, tells Citi Business News the disbursements should help in financing essential government needs.

“The disbursement generally will go towards budgetary support broadly and at this stage that is how some of these things have been structured. It is rather some of the other items that we are looking at which will go into some of the specific development items that we mentioned before Parliament rose,” he explained.

Aside impressing the Fund with efforts to sustain or surpass the 8.5 percent growth recorded for the first year in office, the government is also pitching for an acceptance of its ‘Ghana Beyond Aid’ agenda.

Some government officials have embarked on non deal road shows both in Asia and in the US.

The exercise is expected to culminate in the issuing of bonds as part of restructuring the country’s debt.

But Kojo Oppong Nkrumah tells Citi Business News they should be in the good books of the Fund once the debts are at sustainable levels.

“If you have a prudent budget program which says that no matter what you do, your finances should not go beyond the 4.5 to 5 percent target, then the  bond issues that do not exceed the target,  nobody has a problem with you. So to the extent that we are staying within our prudent budget program, nobody has a problem with us as everybody encourages us to do well to stay within the budget and not to overrun the deficit,” he argued.

Ghana entered into the IMF agreement in 2015 for a credit support of 918 million dollars.

Originally, the IMF program was scheduled to end in April 2018, but it has since been extended to April 2019 after the NPP government agreed to an extension of the program.

By: Pius Amihere Eduku/citibusinessnews.com/Ghana

Africa: Why kids should be taught how to start a business at school

The African continent is home to a large number of young people – and it simply doesn’t have jobs for them all. Youth unemployment is high across the continent.

Some countries, like Nigeria and Kenya have tried to tackle this problem by equipping children with entrepreneurial skills while they’re still at school.

This equips children with essential foundational knowledge and skills such as emotional intelligence and risk taking; it also develops their appreciation for self-employment opportunities. This means that when such children find themselves in a situation where they are unemployed, they don’t give up and succumb to self-pity. Instead, they are able to use their skills to create new opportunities as entrepreneurs.

Both have long made entrepreneurship training part of their schools’ vocational subjects and technology classes. For some years, teachers in these subjects have been trained in entrepreneurship education.

Of course, inculcating a culture of entrepreneurship can’t entirely eradicate the problem of youth unemployment. But it can reduce unemployment by giving young people the skills they need to create their own businesses and generate work for themselves or others outside the formal job market.

And a large body of research from around the world has shown that entrepreneurship education should start from an early age.

We set out to see whether Botswana and South Africa could make some inroads into their youth unemployment problems by introducing entrepreneurship into their schools’ curriculum. South Africa’s youth unemployment rate stands at about 55%. Botswana’s is around 34%.

Botswana offers an optional subject called Design and Technology from junior high school level (pupils in these grades are aged between 12 and 15). In South Africa, Technology is offered as a compulsory subject at various phases of the school curriculum.

We found that the current curricula in both countries do not include explicit entrepreneurship content.

On top of this, teachers in these subjects aren’t trained to pass on knowledge or information about entrepreneurship. This is a real missed opportunity given that in Nigeria and Kenya the subject of technology is a good vehicle for supporting and developing pupils’ entrepreneurial skills.

Entrepreneurship in schools makes sense

In Botswana and South Africa, entrepreneurship-related programmes are offered to people who have already left school. Botswana’s government has introduced initiatives like the Youth Empowerment Scheme and the Youth Development Fund to encourage and empower young people with entrepreneurial and survival skills such as interpersonal, risk-taking, emotional intelligence, as well as being able to identify opportunities, and financial skills in general.

In South Africa, the National Youth Development Agency includes an entrepreneurship development programme. This aims to help young entrepreneurs access the relevant skills, knowledge, values and attitudes needed to develop and create their own businesses. But entrepreneurship programmes are not coordinated and often not managed well in South Africa. So very few young people actually benefit from them.

In principle, the programmes are good. But they haven’t worked because the people they’re meant to benefit don’t have the right skills to take advantage of what’s being offered. This could be addressed if entrepreneurial skills were being instilled at an early age – in the school curriculum.

Use existing resources

So why don’t schools in Botswana and South Africa simply introduce an entirely new subject that’s devoted to entrepreneurship?

The reason, as we point out in our research, is that the school curriculum is a hugely contested space in any country. Many subjects are competing for space and recognition, and it’s a long, complex process to introduce an entirely new subject.

That’s why we suggest that the southern African neighbours could learn from Kenya and Nigeria by merging entrepreneurship education with an existing subject. Technology, or Design and Technology, is the ideal home for this since these subjects already incorporate a number of skills any good entrepreneur needs. These include problem-solving, critical thinking, teamwork and production or making skills, which learners develop in Technology when they design and physically make a product.

When learners can see the results of applying their knowledge and skills into actual products – which could be sold or somehow used to create an income – their learning immediately becomes more valuable.

Technology teachers will need to be trained in entrepreneurship education. But this is a worthwhile investment both for the individual teachers and their own skills and the value they’ll be able to add for their pupils.


Source: myjoyonline

Failed Chinese bidder for ECG deal suspects foul play

Contrary to claims by the Millennium Development Authority’s (MIDA) that the two companies which bid for the ECG concession were both evaluated on their merits, it has emerged that one of the finalists – BXC Ghana – was disqualified and thus was not evaluated.

The disqualification of BXC Ghana paved the way for Meralco, the only other company in the race, to be declared winner.

A letter written by MiDA and addressed to BXC Company on April 12, 2018 said the company has been disqualified for failing to make its existing contractual relationship with ECG known in its initial proposals.

The letter, sighted by B&FT, accused BXC Ghana of conflict of interest on the basis of its relationship with ECG – as a result, the company’s financial proposal was not opened for evaluation and was returned to the company.

Although MiDA, in its release that announced the Filipino-registered Meralco as winner of the ECG concession, said it is committed to transparency and assured the integrity of the process, it did not respond to questions about BXC’s disqualification prior to announcement of the winner and even in the aftermath.

Director, Communication and Outreach at MiDA, Pamela Djamson-Tettey who spoke to B&FT days before the winner was announced, denied that BXC had been disqualified – insisting that the “process was ongoing”.

After a winner was announced she insisted the two companies were both evaluated, when in reality only one company went through the final evaluation.

Some officials of Meralco told the B&FT that, indeed, the bid-boxes were supposed to have been opened in the presence of the two bidders – but the disqualification of BXC after the evaluation of its Technical Proposal left the Financial Proposal of BXC unopened and it was returned to BXC.

Breach of trust

BXC’s disqualification was premised on a number of contracts it signed with ECG to help the power distribution company reduce its losses in a number of operational areas.

While this relationship has been in the public and a number of documents submitted to MiDA by BXC confirmed this relationship, MiDA in its April 12 letter said: “Ghana is in possession of information concerning prior or existing contracts with ECG, including without limitation the Distribution Losses and Associated Network Improvement contract between ECG and BXC dated September 2011, as amended on 24 March 2017 and 11 August 2017; and has determined on the basis of this information that:

– One or more conflicts of interest or potential conflicts of interest exist

– That the foregoing statement by the BXC Consortium is false and/or misleading; and

– That such false and/or misleading statement is material in nature

BXC’s ‘sin’

In spite of the company admitting that its existing relationship with ECG puts it in better stead to manage the ECG on a full-scale, the company in its Technical Proposal stated: “We are not aware of any actual or potential conflict of interest arising from a prior or existing contract or relationship with Ghana, ECG, their affiliates, representatives, advisors or consultants”.

MiDA proceeded to evaluate BXC’s technical proposal despite the fact that the decision to disqualify the Chinese-based company was premised on the undertaking made in the Technical Proposal.

But for the disqualification, the process to find a private sector partner in the management of ECG’s operations would have been competitive to the very end and would have made the country the ultimate winner – but the disqualification of one of the only two parties to reach this far made it easier for Meralco to be adjudged winner.


Ghana signed the Power Compact with the United States of America, acting through the Millennium Challenge Corporation (MCC) – an independent United States government agency, on the side-lines of the US Africa Leaders’ Summit in Washington DC on August 5, 2014.

The Ghana Power Compact will provide Ghana with a grant sum US$498,200,000 to improve the performance of Ghana’s power sector, unlock the country’s economic potential, create jobs and reduce poverty.

About US$350million of the grant is to be invested in ECG to make the country’s power distributor operationally and financially more efficient.

A first bidders’ conference was held in September last year, when a shortlist was announced and further trimmed to two – BXC Ghana and Meralco.

Source: myjoyonline

Agric Ministry, Statistical Service prepare trainers for agricultural census

The Ministry of Food and Agriculture and the Ghana Statistical Service have begun a workshop to equip participants with requisite knowledge that will enable them to effectively train field personnel for a data collection exercise.

Speaking on behalf of the Minister of Agric in Cape Coast, Papa Kow Bartels, explained the exercise is expected to provide current information on the structure of agriculture in the country.

The data collection exercise is seen as vital to the rebasing of Ghana’s Gross Domestic Product given that the last census of agriculture was conducted in 1985.

Papa Kow Bartels further explains that the statistics on agriculture will enable policymakers to allocate public resources effectively and to better identify, prepare, implement and evaluate developmental projects aimed at promoting the sector in the rural areas.

“We need to address environmental issues at the community level and provide relevant information for use by stakeholders including farmers themselves, researchers, students, international organizations and other organizations,” he said.

The data collection for the census is expected to be preceded by a listing exercise during which trained field personnel would visit all households and institutions to assign numbers to all structures and identify all households for the actual data exercise.

The Minister appealed to chiefs, religious and other opinion leaders, to assist in the publicity campaign for the census.

The Census of Agriculture is supported by the Food and Agriculture Organization (FAO) of the United Nations.


Source: myjoyonline


Simon Dornoo leads team to revive uniBank

A former Managing Director of the GCB Bank, Mr Simon Dornoo, is to lead a team of experts from accounting and auditing firm, KPMG to revive and stabilise uniBank Ghana Limited.

The revival is to help bring the bank, which was declared insolvent by the Bank of Ghana on March 20, “back to regulatory compliance.”

KPM, the official administrator of the troubled uniBank, said in a press statement that Mr Dornoo had been engaged as an executive representative to lead “the management team to stabilise and bring the bank back to regulatory compliance.”

He will act in that capacity over the next six months, within which he and the team will be expected to audit the operations of the bank and recommend a way forward for the central bank.

Mr Dornoo, an experienced banker with 25 years in service, resigned from GCB Bank in March 2016.

He then returned to KPMG, where he started his professional career in 1985, as a consultant to the Ghana unit of the multinational firm.

In his current position, he is expected to bring to bear his decades of professional expertise in banking and accounting to help establish the root cause of the bank’s predicaments and initiate measures to reverse its fortunes.

Beyond GCB, where he was MD for six years, Mr Dornoo has also worked with Barclays Bank Ghana and CAL Bank Limited.

uniBank, a wholly indigenous lender, was put under administration on March 20 with KPMG as the official administrators.

It was the anticlimax of two years of difficulties, culminating in capital adequacy ratio of negative 24.92 per cent compared to eh regulatory requirement of not less than 10 per cent, a reserve ratio of one per cent and a heavy exposure to BoG to the tune of GH¢2.2 billion.

In spite of being under administration, the bank’s branches are opened for business but under the guidance and management of the Simon Dornoo-led team from KPMG.


Source: myjoyonline

GNPC to borrow over $500m to finance controversial 2018 budget

The Ghana National Petroleum Corporation (GNPC) has indicated it will take a loan of more than $564.81 million to implement its activities for 2018.

In total, the Corporation requires $986.13 million for implementation of its programmes for the year.

The Corporation’s budget for 2018 was contained in a report by Parliament’s Mines and Energy Committee.

According to the report, GNPC expects $356.43 million revenue from the country’s oil fields – Jubilee, TEN, Sankofa-Gye-Nyame Fields – other sources such as Training and Technology as well as investments.

The funding gap will also be financed by $64.89 million brought forward from 2017.

The Corporation which is mandated to undertake the exploration, development, production and disposal of petroleum as part of its programs wants to revive the Prestea Sankofa Gold Limited as part of its activities this year.

According to the Corporation, it seeks to pump $24.78 million into the gold mining company to enable it to meet certain liabilities.

GNPC would in 2018 continue its effort at securing a permanent office and will be budgeting some $20 million towards that project. Also, it made a provision of $10 million to move its operational office to Sekondi-Takoradi.

For research and technology, the Corporation allocated $15 million for the RAT project to secure an electronic storage centre for its operations.

Further, GNPC has allocated $1.89 million to redevelop its Beach Road property into a facility to house staff who are on working visit to Takoradi to serve as transit quarters for staff on transfer.

To cater for both new and existing commitments, the Corporation has budgeted $28.95 million for the year.

Although GNPC has been told by parliament to focus on its core mandate and stop its support of some activities, their 2018 budget shows $2.5 million for sports and $1.5 million for Sports Legacy projects.

Reacting to the news, Co-chair of the Ghana Extractive Transparency Initiative, Dr Steve Manteaw, told Joy News’ Evans Mensah on Joy FM’s Newsnight programme that the budget is “pretty surprising”.

He said the governing New Patriotic Party (NPP) had concerns about GNPC’s expenditure while in opposition and it is time to walk the talk.

“In the 2016 NPP manifesto, it indicated clearly that one of the things it wants to do with GNPC is to restructure it to focus on its core mandate.

“I don’t think some of the huge monies that have been approved for construction of offices and other investments the Corporation is mentioning is one of the ways to restructure GNPC,” he added his disappointment.

To remedy the situation, he said, the over politicisation of GNPC which is a problem must cease.

Questioning some of those selected to head the company, he added, “I would want us to insulate the Corporation from political interferences in terms of its management team.”

“They will then get to a point where decisions will be taken on the basis of sound business practices.”

However, he said he is all for GNPC investing in ventures that its deems profitable and viable, to make money from it to fund some of its other projects.


Source: myjoyonline

Ghana’s debt hits GH¢142.5bn, reaches 69.8% of GDP

New figures released by the Bank of Ghana (BoG) after its Monetary Policy Committee (MPC) meeting show that Ghana’s public debt reached 142.5 billion cedis as at December 2017, representing 69.8 percent of GDP.

This is a reduction from the 73.3 percent recorded in December 2016.

The total debt stock in 2016 was at 122.6 billion cedis.

This means that the debt stock has almost hit the dreaded 70 percent of GDP, a point the International Monetary Fund (IMF) has constantly cautioned against.

The data shows that in September 2017, Ghana’s debt stood at 138.9 billion cedis representing 68.1%; the figure dropped to 137.6 billion cedis in October representing 67.4%.

But in November 2017, it went up to 139 billion cedis representing 68.1 percent.

The domestic component of debt as at December 2017 stood at 66.7 billion cedis, while the foreign debt stock was at 75.8 billion cedis.

Export Earnings

In the first two months of the year, export earnings by February 2018, reached 2.8 billion dollars.

Gold raked in a little over 1 billion dollars, while cocoa fetched cocoa 650 million dollars. Earnings from oil export also reached 664 million dollars.

On the import side, Ghana spent 2.2 billion on imports.

Banking Sector 

In the banking sector, Total Advances of banks saw a drop this year from 38.5 billion cedis in January to 35.8 billion cedis in February. Also, Banks Total Asset stood at 95.1 billion cedis, same as January this year.

By: Lawrence Segbefia/citibusinessnews.com/Ghana

US$2.5b earned from cocoa is abysmally low – Dr. Akoto

The Minister of Food and Agriculture, Dr. Owusu Afriyie Akoto, has said, Ghana’s US$2.5billion annual earnings from cocoa commodity is abysmally low, even though the global market worth over US$100billion.

This, he said, calls for the need to increase domestic value-addition to enable the country, which is the second-largest global producer of cocoa, to maximise its gains from world cocoa trade.

Dr. Akoto told this to leaders in the cocoa industry from Ghana and its neighbour Cote d’Ivoire during a one-day Cocoa Investor Forum that brought together key players in the industry from both countries as well as some key global institutions.

Ghana and Cote d’Ivoire produce more than 60 percent of total global output of cocoa annually, with Ghana receiving at least US$2.5billion into its economy from the industry every year.

The cocoa industry provides about 1.6 million jobs across the value chain, but global price fluctuations create difficult situations for the two countries which have remained raw-beans exporters.

Ghana and Cote d’Ivoire, last year, established joint cooperation on cocoa with the aim of seeking to influence the direction of global stakeholders’ decisions on the commodity; especially those which affect its pricing, as the two countries account for more than 60 percent of total global output annually.

Dr. Akoto explained that increased domestic consumption would spur increased cocoa processing locally and provide the opportunity to industrialise and diversify their economies, create jobs and generate revenues for social and economic development.

“The enhancement of cocoa farmers’ welfare requires an improvement in farm productivity, sustainable domestic and international prices, and a stronger producer organisation to ensure that the interest of farmers and producer countries are catered for while fostering a competitive domestic downstream sector,” he stated.

Dr. Akoto said increasing domestic value addition is long overdue, adding that expanding the downstream sector and increasing consumption of cocoa domestically are among the urgent steps that need to be taken.

He explained that improvements in the welfare of farmers across both countries will require improvement in farm produce, sustainable domestic and global prices, among others.

Senior Minister, Yaw Osafo-Maafo urged the governments of Ghana and Cote d’ Ivoire to take steps to influence world cocoa prices – just like members of the Organisation of Petroleum Exporting Countries (OPEC) do regularly in the oil industry.

He said: “The two countries should certainly have influence on cocoa prices globally; we should have an OPEC-type set up in the cocoa industry”.

There should be a strategy that can control quantities on the market at a given time – because for every commodity in the world, when there is too much of the product on the market, the price falls; when there is scarcity, the price goes up,” he said.

“So, between Ghana and Cote d’ Ivoire, we should strategise such that even the flow in the market is somehow controlled by us in some way. It is very difficult because of the economy. You need the money. So, we are always in a hurry to put the beans on the market; but sometimes by doing so we are hurting ourselves.

“Now, we are all talking about improving production. But the flipside is when cocoa production goes up the price falls, but you need to also improve the production. So, it is now up to us to strategise the release of this commodity on the market; we are in this boat together. We either float or sink,” he stated.


Source: myjoyonline

Unibank: BoG stepped in at the right time – Finance Minister

Finance Minister Ken Ofori-Atta says he fully supports Bank of Ghana’s (BoG) decision to take over the management of the indigenous private bank, Unibank.

The Central Bank last week appointed accounting firm KPMG to manage Unibank after it emerged that the bank was on the verge of collapsing and has breached many regulatory requirements.

The Finance Minister tells Joy Business any action that is aimed at strengthening the banking sector should be welcomed.

“The Bank of Ghana has stepped in at the right time to make sure that depositors’ monies are safe. And that is fundamental to any economy to strengthen it,” he said.

Unibank becomes the third indigenous bank to face the wrath of the regulator after Capital Bank and UT Bank went under in a shocking takeover announced by the BoG late last year.

The state-owned bank, Ghana Commercial Bank was announced as the new owners of UT and Capital Banks, a measure the central bank believed will save the banking industry from collapse.

Speaking to Joy Business, Ken Ofori-Atta said: “the Bank of Ghana will continue to show prudence and make sure that the banking system is strengthened.”

He adds, “for us as a government there is also the need to ensure that we have a strong indigenous banking sector and so we are thinking through ways to ensure that the representation in the banking landscape has strong Ghanaian representation.”

The Finance Minister also added that he supports moves to go after the directors of the defunct banks UT and Capital.


Source: myjoyonline

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