Ghana is on target to halve its fiscal deficit this year after its $918-million aid deal with the International Monetary Fund (IMF), Finance Minister Seth Terkper has said.
According a Reuters report, his comments appeared designed to allay uncertainty over the deal that emerged this month when parliament rejected a key component that was designed to promote fiscal discipline. The following day the government suspended a planned Eurobond issue.
The government issued a bill to eliminate central bank financing of the budget deficit in line with the requirements of the deal but on August 2 parliament passed the bill with an amendment, allowing financing of up to five per cent.
Ghana’s public debt eased to 63 per cent of GDP in May from 72 per cent at the end of 2015, while consumer inflation dropped to 16.7 per cent in July from 19 per cent in January, Terkper said, citing the impact of the deal that began in April 2015.
The central bank expects inflation to slow to eight per cent, plus or minus two, by September 2017.
“We are set to halve the deficit from 12 per cent in 2012, and we have also started stemming the rate of growth of the public debt,” he said at a meeting of private businesses in Accra.
Ghana, which exports cocoa, gold and oil, signed the assistance programme to bring down inflation and the budget deficit and stabilise the currency.
Mr. Terkper said the debt stock could rise marginally to 65-66 per cent of GDP on planned disbursements towards the end of the year but will remain below 70 per cent.
Ghana pulled out of a planned five-year $500 million amortising Eurobond this month because investors demanded a yield higher than the single digits the government had expected.
Mr. Terkper led the government finance team on the deal and said his team only suspended pricing of bids.
“We did not call off the 2016 bond …. What we did was to suspend pricing …. We must sometimes hold our nerves when we’re in the capital market to look for the right window before we strike in order to get the best results,” he said.