Ghana’s Oil-Peddling Poll Pitch
Ghana’s share index was up 15 percent through November on the MSCI in dollar terms on the eve of presidential elections pitting the incumbent who has held the post several months since John Atta Mills’ death against the same opposition candidate faced in 2008, a well-known lawyer whose family was prominent in the independence movement. The close race has not upset net foreign inflows to stocks and bonds this year, according to data collectors, as a 3-year IMF program was completed and initial offshore oil production has struggled below targets. Since liberalization investors have poured into the 5-year local bond, helping to lift the currency 5 percent since mid-year. However international reserves at $4 billion are down to just over 2 months’ imports on a 10 percent of GDP current account deficit. Traditional gold and cocoa exports have not kept pace with energy and capital and consumer good appetite, and economic growth is projected at 9 percent on inflation touching double-digits. Public spending ballooned before the typical election giveaway period on wages, subsidies and interest payments with the budget gap running at 9 percent of GDP. In its final review the Fund urged better tax performance among other steps under a clear debt management strategy in view of external commercial borrowing though Chinese banks and sovereign bonds. S&P reaffirmed a “B” rating contingent on windfall oil revenue due to be partially saved in a dedicated stabilization fund, and continued history of peaceful political transition.
In Kenya the opposite trend loomed with sporadic repeat of tribal attacks heading into next March’s poll as equities are up 45 percent on 700 basis points in interest rate cuts since August. The International Criminal Court has opened cases against top official implicated in the previous ethnic bloodshed including former Finance Minister Kenyatta, who championed a still-postponed inaugural sovereign bond issue. It may come in 2013 to refinance a 2-year syndicated loan taken out bringing the debt-GDP ratio to 50 percent. With good rains growth could reach 5 percent on inflation around the same number. Tourism has been hit by the Eurozone crisis with arrivals off 3 percent on an annual basis but balance of payments weakness which warranted IMF aid lingers with the current account hole at 10 percent of output. In Zambia the state electricity company is gauging potential demand for a second debt placement after the maiden one was 15 times oversubscribed, despite bans on opposition party activity and foreign currency use under the new government. Chinese-run copper projects have also been charged with labor abuses, a pattern also seen in neighboring oil-rich Angola which recently launched its own bond debut alongside a $5 billion sovereign wealth fund. The petroleum monopoly cannot account for over $30 billion in revenue from 2007-10 according to the IMF which just finished its program as the offering sheen may soon wear.
