Ghana’s Grating Imbalance Impertinence
Ghana sold a third long delayed $1 billion Eurobond at an 8.25 percent yield in contrast with Kenya’s and Cote D’Ivoire’s below 6 percent issues, although oversubscription was just double as Sub-Sahara Africa broke 2013’s $7 billion record. Investors were ambivalent about the commitment and outcome for IMF negotiations, as officials initially denied program interest and since have postponed the agreement timetable into November. Both the budget and current account deficits are stuck at 10 percent of GDP on 5 percent growth and double-digit inflation and the cedi was down 40 percent against the dollar before the transaction inflow. Foreign exchange curbs introduced earlier this year were diluted but multiple rates are in force and the domestic debt market has also been upset by the central bank’s large buying. The traditional cocoa board syndicated loan accompanied the global bond but reserve import cover is precarious at around one month as the IMF classifies debt vulnerability above 50 percent of output as “moderate.” Fuel subsidies and public sector wages are big spending chunks that the government pledged to rationalize before the Fund move, and it claims gas production coming on line will offer an additional revenue cushion. The next election is in 2016 and President Mahama has evoked a “transformation agenda” to diversify the commodity economy alongside austerity steps. The stock market remaining at the bottom of the MSCI frontier group however seems unconvinced of short-term turnaround as many listings struggle with heavy funding needs and lackluster consumer sentiment. The sovereign reputation meanwhile was further dented following a rating downgrade as Uganda pointed to its post-HIPC commercial borrowing frenzy in refusing to inaugurate such a potentially dangerous path, although President Museveni faces international outcry for anti-gay legislation and violence. In West Africa the Ebola spread specter also looms with no cases so far reported unlike in Nigeria, where business and personal travel fallout coupled with Boko Haram fears could prove costly. The disease has appeared in Lagos and Port Harcourt while Moslem towns in the north have fallen to the terror group replicating the ISIS march in the Mideast.
Growth is forecast at 6 percent going into 2015 elections with President Jonathan favored for another term after opposition party defections. The central bank has paused with single digit inflation and the currency has been steady around the 155/dollar corridor under tighter supervision of bank and exchange house foreign exchange positions. The excess crude account is back to $4 billion but will likely be tapped again during the poll period as domestic debt rose 5 percent in the first half and is five times the foreign load at over $50 billion. Public debt is under 15 percent of GDP following the economy’s rebasing but tax collection is also weak and lower portfolio inflows have contributed to a 10 percent reserve drop to under $40 billion according to officials otherwise boasting of the new South African counterbalance.
