Business in Ghana

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Posts Tagged ‘Zambia’

Zambia’s lesson for Ghana: call the IMF

Posted by Business in Ghana on June 10, 2014

by Javier Blas, Reuters

When Zambia last week approached the International Monetary Fund for financial help, another cash-strapped African country was surely watching: Ghana.

Lusaka and Accra face similar problems: runaway fiscal deficits – the result of electorally-driven increases in public sector salaries – and a swelling current account deficit that is pressuring the exchange rate.

The market response to Zambia’s request should convince Ghana to seek help, too.

By all accounts, the fiscal problem is more severe in Ghana than in Zambia. The ruling National Democratic Congress introduced in Ghana a new public sector salary structure in 2010. After a wave of salary hikes, the government’s wage bill now consumes roughly 70 per cent of the country’s tax revenue.

The market was expecting that Ghana would first approach the IMF. Instead, Zambia last week asked the IMF to discuss “an economic programme that could be supported by a fund arrangement.” The market reaction has been very positive, officials say.

The Zambian currency, the kwacha, has appreciated sharply against the dollar. At one point this year, it was down 27.5 per cent against the US dollar since January, making it the worst performing currency in Africa. But after rallying strongly over the last week as rumours of the IMF plan surfaced, it has cut its losses to 16 per cent. Read the rest of this entry »

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Decade after debt relief, Africa’s rush to borrow stirs concern

Posted by Business in Ghana on March 22, 2014

BY TOSIN SULAIMAN, JOHANNESBURG

(Reuters) – Nearly a decade after Nelson Mandela and anti-poverty activists Bono and Bob Geldof persuaded the rich world to forgive Africa’s crushing debts, many countries’ debt levels are creeping up again, which could undermine the region’s growth boom.  As African states line up to join the growing club of dollar bond issuers, economists and analysts warn of a slide back into indebtedness that could undo recent economic gains and create a “Eurobond curse” to match the distorting “resource curse”.  “Eurobonds have become like stock exchanges, private jets and presidential palaces.  Every African leader wants to have one,” said one investor, asking not to be named.

In 2007, Ghana became the first African beneficiary of debt relief to tap international capital markets, issuing a $750 million 10-year Eurobond.  Since then, previously debt-burdened countries, such as Senegal, Nigeria, Zambia and Rwanda, have also put their names on the list of bond issuers.  Governments seeking to replace declining foreign aid and pay for infrastructure are also taking concessional funds from multilateral institutions, more expensive commercial bank loans and bilateral financing from lenders like China and Brazil. Read the rest of this entry »

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