Ghanaian President John Dramani Mahama said his government is open to receiving loans from the International Monetary Fund as it turns to the lender for help in rescuing a currency in crisis.
“We are not looking for a bailout,” Mahama, 55, said in an interview with Bloomberg TVAfrica in Washington, where he attended the three-day U.S.-Africa Leaders Summit. “It is more along a discussion and a program that we are looking at. If it comes with money, that is fine.”
The West African nation is seeking assistance from the IMF less than a decade after it had most of its debt written off as part of a campaign to help poor nations. With the government failing to adhere to spending controls and debt rising, investors have lost faith in the economy. The currency has slumped 36 percent against the dollar this year, the worst performer in the world, boosting inflation to 15 percent.
“We want to see Ghana transition from a lower middle-income to a middle-income country,” Mahama said. “If having a closer relationship with the IMF will give that confidence in our partners to be able to work together to achieve that, we are happy to do that.”
Finance Minister Seth Terkper said on Aug. 4 the government is seeking a two- to three-year program with the IMF in order to stabilize the currency. The announcement ended four months of contradictory statements from the government about whether it needs emergency aid.
The IMF assistance may help to bolster investor confidence as the government prepares to sell as much as $1.5 billion in Eurobonds by the end of August. Mahama said the government is preparing for the roadshows, declining to comment any further.
Ghana’s debt problems lie with its domestic liabilities, not foreign, and an IMF program may help to alleviate that pressure, he said.
Yields on the international bond due in 2023 rose 2 basis point, or 0.02 percentage point, to 8.3 percent as of 2:13 p.m. in Accra, after climbing 11 basis points yesterday. The cedi fell 1.8 percent to 3.7752 against the dollar.
A two- to three-year IMF program is “somewhat disappointing,” Michael Kafe, an economist at Morgan Stanley in Johannesburg, said in a note to clients yesterday. “This likely points to greater focus on short-to-medium-term solutions for the country’s foreign-exchange issues and not what we see as necessary medium-to-long-term solutions required to deal with chronic balance of payments imbalances that have historically stoked cedi weakness.”
Ghana last month revised its 2014 fiscal-gap target to 8.8 percent of GDP from 8.5 percent. The shortfall will probably reach 10.2 percent of GDP, Moody’s Investors Service said in a statement today. Ghana missed its goal of narrowing the gap to 9 percent last year, reporting a deficit of 10.8 percent.
The government is struggling to narrow its fiscal deficit as tax income remained below target and earnings from cocoa and gold fell. The liquidity crunch is so severe that the central bank financed the entire budget gap in the first quarter.
Mahama came to office in 2012 following the death of John Atta Mills and won a presidential election later that year. During his campaign, he pledged to reduce the budget gap to 5 percent of gross domestic product and achieve average annual growth of at least 8 percent. The former communications minister lured voters by saying he would more than double electricity output and use oil to expand manufacturing industries.
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