Minister of State at the Ministry of Finance, Hon. Charles Adu Boahen, has stated that the recent engagement with investors has impacted the bond market positively.

According to him, Ghana’s Eurobond spreads have begun to tighten across the curve, indicating that the Ministry’s engagement with investors had been beneficial as concerns over the economy, particularly, on the 2022 Budget has been adequately addressed.

“As a government, we felt it necessary to speak directly with our investor base and assure them of the steady progress being made towards economic rebound anchored on fiscal consolidation and debt sustainability, as we have done in the past.

“All in all, I must say that the engagements have been largely successful, and the feedback received so far from the market has been encouraging… It is important, I reiterate that these engagements over the past 3-days have impacted the market positively and concerns of investors over the economy in particular, on the 2022 budget have been addressed”.
Adu Boahen

The three-day investor roadshow enabled government to engage with both offshore investors (Banks and Fund Managers) and onshore investors to update them on Ghana’s recent economic performance and outlook. The engagements also provided the opportunity for Government to respond to concerns of investors.

Throughout the engagements, pressing investor concerns raised included clarity on the policy to cut 2022 expenditure by 20% across board; 2021 Economic performance and outlook; Ghana’s relationship with the IMF and whether Government intends to undertake any programme with the Fund; the status of the E-Levy Bill before Parliament; the 2022 revenue target and Government’s ability to meet this target; as well as the Non-accessibility of ICM and its implication on Ghana’s reserve position.

Economic performance

On the economy, Mr. Adu Boahen stated that the GDP growth continued to be robust, despite challenging global economic environment adding that for Q3-2021, GDP growth stood at 6.6% compared to -3.2% for the same period in the previous year. The average growth rate of 5.2% for the first three quarters of 2021 had already exceeded the budgeted growth rate of 4.4% for the full year of 2021. The projected sectorial GDP growth outcomes for the medium term (i.e., 2022 – 2025), are expected to strongly rebound for all sectors.

On Ghana’s relationship with the IMF, he said the IMF remained a trusted advisor to Government and continued to engage government through multilateral surveillance, technical assistance provision and capacity building.

Mr. Adu Boahen revealed that in July 2021, the IMF successfully conducted an Article IV Consultation with the Government and engaged authorities during staff visits. The Government would continue to share regular updates on the economy with the IMF and remain optimistic for an Article IV Consultation in the first half of 2022, he assured.

Status of the E-Levy

Touching on the E-levy and its status, the Minister of State at the Ministry noted that the E-levy was a necessary policy aimed to increase the tax to GDP from 13% to 16% and above. The E-Levy, he continued, would not only ensure that the country moves toward a more sustainable debt level but would also ensure that it has the revenues to sustainably invest in entrepreneurship, youth employment, cyber security, digital and road infrastructure.

“We look forward to joining hands with our Honorable Members of Parliament to approve the E-Levy Bill, in line with the 2022 appropriation”.
Adu Boahen

Another concern addressed was Government’s revenue targets. He said, the 2021 revenue and grants performance were on track to meet the target of 12% of GDP and was projected to increase to 15.4% of GDP in 2022 on the back of new tax policy measures.

On expenditure-led fiscal consolidation, he iterated the Minister for Finance’s statement during the press conference last week, that all expenditure commitments in 2022 would be adjusted downward by 20% regardless of revenue performance.

“Therefore, in accordance with Section 25 of the PFMA, the quarterly expenditure ceilings of the approved budget will include up to a 20% downward adjustment, beginning in the first quarter of 2022, in commitments across board for all covered entities benefiting from the 2022 Budget”.
Adu Boahen

Public Debt Concerns

He also addressed public debt developments and said that the provisional nominal debt figures had increased from GHS 299.1 billion at end 2020 to GHS 344.5 billion as at end November 2021.

The nominal increase, he said, was because of the financing of the 2021 budget deficit, exchange rate depreciation and its effect on the stock of external debt and disbursements of already existing loans. As a percentage of GDP, the figure for November 2021 was 78.4% as compared to 76.1% as at end 2020. Ghana, he assured, was on track to achieve an end 2021 figure which was equal to or less than 80% of GDP.

He finally touched on financing and noted that, Government already had US750m SDR out of the budgeted external financing of US$1.5 billion for 2022. The rest would be financed from multilateral and bilateral sources and other instruments. In addition, the depth of the domestic market had improved in recent times and could meet the needs of government, he stated.