The budget won’t raise government expenditure. Ofori Atta

Despite the fact that 2024 will be an election year, the administration has pledged to stick to its spending plan. budget

The assurance was provided by Finance Minister Ken Ofori-Atta, who met with holders of Ghana’s international bonds in London yesterday. He stated that even though 2024 is an election year, the government would stick to the budget that is supported by the International Monetary Fund (IMF) and will be submitted to Parliament later that month.

Ghana’s economy is starting to show signs of stability four months after executing the Post-COVID-19 Programme for Economic Growth (PC-PEG), an IMF-backed initiative. The country’s GDP grew by 3.1% on average in the first half of the year. v

Inflation has also decreased, hitting a 12-month low of 38.1% in September after hitting a 22-year high of 54.1% in December 2022. In terms of the budget, the primary balance on a commitment basis for the first half of the year was a surplus of roughly GH¢2 billion as opposed to a target of a deficit of GH¢4 billion.

Together with the cedi stabilizing, Gross International Reserves (GIR) were also recorded at $2.1 billion, or 1.0-month import cover, as of the end of December 2022, down from US$1.5 billion, or 0.6 months of import cover, at that time. budget

The investor community has been concerned about how to maintain this development path as the nation enters yet another election year because of the overspending that typically occurs during election years and results in significant budget deficits.

Many of them are concerned that in an election year, the progress made thus far under the three-year Extended Credit Facility with the IMF could be undone.

Nonetheless, Mr. Ofori-Atta pledged that the administration would adhere to the plan and the 2024 budget.

He said, “Let me assure you that we are committed to implementing the PC-PEG as planned, and this is what our constituents expect from us ahead of the 2024 election year.”

The Finance Minister continued, “This will help us further support the strong economic recovery.”

He claimed that because of the previous year’s crisis, Ghanaians now expected the government to provide macroeconomic stability, a quick return to low inflation, and a long-term stabilization of the cedi’s value—not more public spending. budget

Mr. Ofori-Atta said, “This is entirely consistent with the successful implementation of our IMF program.”

Comprehensive policies

The minister declared that the administration, with IMF help, was determined to carry out a broad range of policy reforms.

He added that by modifying the Fiscal Responsibility Act, 2018 (Act 982) and expediting the purchase of the Integrated Tax Administration System, the organization’s first aim was to ensure fiscal and debt sustainability.

According to Mr. Ofori-Atta, the administration is also concentrating on financial sector reforms with the goal of restoring commercial banks’ capital buffers, improving the Bank of Ghana’s (BoG) framework for targeting inflation and restoring international reserve buffers. budget

In addition, we are focusing on structural changes and social protection, such as extending the reach and improving the actual benefits of Livelihood Empowerment

the National Health Insurance Program, the School Feeding Program, and the Against Poverty Program,” he said.

Mr. Ofori-Atta was optimistic that the audacious measures would contribute to ensuring the nation’s stability and prosperity in the future. budget

DDEP, a thing of the past

In addition, the Finance Minister announced that the DDEP would not be reopened and that all scheduled swaps of domestic marketable debt had been completed.

According to Mr. Ofori-Atta, the BoG and other domestic holders of public debt had made a substantial effort, but that was now in the past.

He declared, “The government’s newly issued debt instruments on the domestic market are safe and secure.”

During the first phase of the DDEP, the government exchanged 12 new bonds with longer tenors and lower coupon rates for old ones worth GH¢82 billion.

The exchange of dollar-denominated local bonds of about $742 million also saw a participation ratio of 91.7 percent; the exchange of cocoa bills worth GH¢ 7.7 billion also saw a participation ratio of 97.4 percent; and the exchange of pension fund holdings of treasury bonds of about GH¢ 29.6 billion also saw a participation ratio of 95.3 percent. Mr. Ofori Atta told the bondholders that the reduced coupon rates and lengthened maturities achieved through the DDEP were expected to provide the government with much-needed breathing space and to set its domestic debt to GDP on a clear downward trend. He added that considering the new structure of domestic debt resulting from the exchanges, current domestic market interest rates were expected to remain fully consistent with a sustainable public debt path.

The nation’s debt-to-GDP ratio is anticipated to drop to 55% under the terms of the IMF program in three years.

External Debt Settlement

Regarding the external front, Mr. Ofori-Atta said that the nation’s success in the external debt restructuring process was critical.

He noted that a formal commitment to provide a debt treatment that would restore Ghana’s debt sustainability and guarantee full financing of the IMF program had been made by the bilateral Official Creditor Committee (OCC), which is co-chaired by China and France.

He said that the government was working with the OCC to negotiate the finer points of a deal to restructure its $5.4 billion debt due to bilateral creditors and that technical talks had advanced significantly.

Regarding the commercial side, the minister of finance announced the formation of two bondholder groups consisting of both international and domestic bondholders, with the aim of restructuring debts totaling approximately $14 billion.

“We presented hypothetical debt restructuring scenarios in May and had good-faith discussions with both of them.”

“Now that we have debt treatment scenarios from both bondholder groups, we anticipate stepping up our positive communication in the coming weeks,” he stated.

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