Ghana’s Finance Ministry will start talks with the International Monetary Fund as early as next week with support from the lender aimed at stemming a slide in Africa’s worst-performing currency this year.
A deal on technical support and possible financial aid may be reached by November, Deputy Finance Minister Mona Quartey said in an interview in London today. The world’s second-biggest cocoa producer may consider moving short-term debt to issuances with longer maturities to bring down borrowing costs, she said.
“The IMF’s view and focus will be on the balance of payments,” Quartey said. “That will help stabilize the currency further and once the currency is stabilized a lot of the other issues start to fall away.”
Government spending including civil-servant pay increases and lower revenue from key exports such as gold and tax earnings weighed on Ghana’s fiscal deficit, which was forecast in July to reach 8.8 percent of gross domestic product this year from an earlier target of 8.5 percent. The cedi has slumped 37 percent this year, pushing inflation to 15.3 percent in July. Investors are demanding yields near a five-year high to hold the country’s benchmark Treasury bills.
IMF discussions will be based on Ghana’s medium-term growth plans and the nation will look for guidance on the country’s balance of payments deficit as well as “credibility support for the things we are doing,” Quartey said. The country wants to reduce its wage bill to 35 percent of domestic revenue within two to three years from 57 percent currently, she said.
Better Rates
Yields on Ghana’s key 91-day Treasury bills rose to 25.1 percent at the Aug. 29 auction. Another sale is set for today in Accra, the capital.
“We are looking at moving a lot of our short-term debt which is the bulk of it, into longer term at better rates,” Quartey said.
The cedi was little changed at 3.7902 per dollar by 2:35 p.m. in Accra, heading for a decline this week of 0.4 percent. Ghana is seeking to raise $1 billion in Eurobonds this month, James Klutse Avedzi, chair of Parliament’s finance committtee, said Aug. 29. Officials are meeting investors today in London and Quartey declined to comment on the issuance.
Source: Bloomberg
