"Gov’t urged not to ignore concerns of Blomberg and Fitch regarding Ghana’s economy"

" \n Government urged not to ignore concerns of Blomberg and Fitch regarding Ghana's economy \n \n\n \n Financial Analyst Joe Jackson, is urging government not to ignore issues raised by Bloomberg and Fitch Ratings regarding the Ghanaian economy. \n \n\n \n Mr Jackson is of the view that these international independent bodies are telling the government the real issues that the locals may not be able to tell the administration. \n \n\n \n Speaking in an interview, Mr Jackson said, \u201cThe Finance Ministry, we can't fault them for trying to put their best foot forward and for pointing out some discrepancies in their opinion in the Bloomberg report. That is fine but at the same time, you can\u2019t ignore all the different independent institutions that are telling you that things are tough. \n \n\n \n \u201cThe Finance Ministry is the Finance Ministry, they have to do what they want to do but things are tough. What I have to say is that, if you listen to our Finance Ministry they are our people, but at the same time independent people from outside come to say they don\u2019t like what you are doing, the way you are going when you come and try and borrow from us it is not likely people will give you money because we don\u2019t like this, you should listen to them.\u201d \n \n\n \n The Ministry of Finance has said that the Bloomberg article on Ghana\u2019s debt to Gross Domestic Product (GDP) figures, gave wrong historical debt. \n \n\n \n In the said article, Bloomberg said as the era of cheap money draws to an end, bondholders are no longer prepared to cut Ghana any slack. \n \n\n \n The West African nation\u2019s dollar bonds have slumped 10% in 10 days, moving deeper into distressed territory as investors judge that re-financing debt in the Eurobond market won\u2019t be an option when the Federal Reserve hikes rates and budget targets remain elusive. \n \n\n \n The extra premium demanded on Ghana\u2019s sovereign dollar debt jumped on Wednesday to an average 1,105 basis points, from 683 basis points in September. Its $27 billion of foreign debt had the worst start to the year among emerging markets, extending last year\u2019s 14% loss, according to a Bloomberg index. \n \n\n \n Investors are questioning whether Ghana \u2014 the region\u2019s second-biggest economy \u2014 can sustain its debt levels if a surge in borrowing costs shuts it out of international markets. Government debt climbed to 81.5% of gross domestic product at the end of last year, from 31.4% a decade ago, according to data compiled by Bloomberg. \n \n\n \n That places Ghana among the most vulnerable credits to tighter U.S. monetary policy, despite strong economic growth. \n \n\n \n \u201cThe market has woken up to the fact that this is a country with a lot of outstanding bonds,\u201d said Kevin Daly, investment director at Aberdeen Standard Investments in London. \u201cA lot of people went into last year with overweight positions and a lot of them have started to throw in the towel.\u201d \n \n\n \n Read: UNWTO records 4% rise in international tourist arrivals in 2021 \n \n\n \n The West African nation\u2019s $750 million bonds due in March 2027 fell 10 cents this month to 79.4 cents on the dollar on Thursday, sending the yield to nearly 14%. Of 14 Ghanaian dollar bonds, 13 are trading with an extra premium of at least 1,000 basis points, a level considered distressed, a Bloomberg index tracking sovereign debt showed. \n \n\n \n \u201cI don\u2019t expect them to default in 2022, as they have enough foreign-exchange reserves, but medium to longer term, it becomes an issue as Ghana has lost access to the Eurobond market for rolling over debt,\u201d said Joe Delvaux, a portfolio manager at Amundi in London . \u201cThey have too much debt for the size of the economy and investors have lost conviction in the government\u2019s willingness to consolidate spending and take necessary measures.\u201d \n \n\n \n The government\u2019s failure to pass a new levy on electronic money transfers through parliament in November also made investors doubt whether it has the political capital to pass revenue-raising measures in parliament or reign in spending to reduce borrowing needs. \n \n\n \n The opposition to the tax reform and plans to end a subsidy on pharmaceutical and vehicle imports will make it hard for the government to meet this year\u2019s budget deficit target of 7.4%, down from 12.1% last year. \n \n\n \n \u201cThere\u2019s no appetite for a new Ghana issuance at this stage and probably won\u2019t be until the government has consolidated is public finances more meaningfully,\u201d said Carlos de Sousa, who helps oversee a $3.8 billion developing-nation bond fund at Vontobel Asset Management in Zurich. \n \n\n \n But in a response, the Ministry of Finance said, \u201cThere are some serious factual errors in the article, which may give investors some cause for concern, if not corrected. For example, Bloomberg stated 81.5% as end of year debt to GDP ratio. This is incorrect. Our provisional nominal debt to GDP, as at the end of November 2021 was 78.4%, which is the latest data available. December revenue collections are seasonally the largest for any year, it is unlikely that our financing requirements in December will result in us exceeding 80% debt to GDP by December 2021. \u201c \n \n\n \n Meanwhile, credit rating agency, Fitch, has also downgraded Ghana to \u2018B-\u2018 from \u2018B. \n \n\n \n The downgrade of Ghana\u2019s IDRs and Negative Outlook reflect the sovereign\u2019s loss of access to international capital markets in 2H21, following a pandemic-related surge in government debt. \n \n\n \n This comes in the context of uncertainty about the government\u2019s ability to stabilise debt and against a backdrop of tightening global financing conditions. In our view, Ghana\u2019s ability to deliver on planned fiscal consolidation efforts could be hindered by the heavier reliance on domestic debt issuance with higher interest costs, in the context of an already exceptionally high interest expenditure to revenue ratio. \n \n\n \n Ghana\u2019s effective loss of market access to international bond markets increases risks to its ability to meet medium-term financing needs. In our view, Ghana has sufficient liquidity and other available external financing options to cover near-term debt servicing without Eurobond issuance. \n \n\n \n However, there is a risk that non-resident investors in the local bond market could sell their holdings, particularly if confidence in the government\u2019s fiscal consolidation strategy further weakens, placing downward pressure on its reserves. \n "

"Gov’t urged not to ignore concerns of Blomberg and Fitch regarding Ghana’s economy"

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