Ghana at high risk of debt distress, finance minister says

ACCRA, Nov 24 (Reuters) – Ghana will freeze the hiring of public and civil servants and lengthen a moratorium on authorities automotive purchases and non-essential journey in an effort to sort out a spiralling debt disaster, finance minister Ken Ofori-Atta stated on Thursday.

Presenting the West African nation’s 2023 funds in parliament, Ofori-Atta stated Ghana was at excessive threat of debt misery and has agreed on a debt administration technique with the Worldwide Financial Fund (IMF).

Ofori-Atta didn’t provide any cuts to spending on flagship programmes, nevertheless, and detailed a variety of wider infrastructure and social funding.

The minister is negotiating a reduction package deal with the IMF because the cocoa, gold, and oil-producing nation faces its worst financial disaster in a technology.

Funding financial institution Morgan Stanley stated on Thursday that it anticipated Ghana to restructure each its home and exterior debt.

“The present debt sustainability evaluation performed reveals that Ghana is now thought of to be in excessive threat of debt misery,” Ofori-Atta instructed lawmakers.

“The federal government and the IMF have agreed on programme targets, a preliminary fiscal adjustment path, debt technique and financing required for the programme,” he stated, including he hopes to succeed in a deal “very quickly”.

He stated the depreciation of the cedi was “significantly affecting” Ghana’s potential to handle its public debt, which has elevated to $48.9 billion this yr.

Ghana will implement a debt change programme to deal with the challenges, he added.

“The excellent news is that every one income measures are consistent with what the IMF would have needed,” stated Razia Khan, chief economist for Africa and the Center East at Commonplace Chartered.

“Now we await particulars of the debt change plan. To date – as beneficial as may need been hoped.”

BAN USE OF GAS-GUZZLERS

Ofori-Atta outlined various measures that may allow the federal government to chop expenditure and enhance income together with a 2.5 share level enhance in worth added tax to fifteen%, a freeze on new tax waivers for international corporations and a overview of tax exemptions without spending a dime zone, mining, oil and gasoline corporations.

Regardless of the projected enhance in income, Ofori-Atta stated the fiscal funds would enhance to 7.7% of GDP from 6.6% over the approaching yr.

The federal government may even ban the usage of V8 and V6 engine autos and lengthen a 50% discount on gasoline allocations and a ban on non-essential journey.

“It has turn out to be much more pressing to mobilise home income particularly in instances like this when our entry to the worldwide capital market is basically closed,” he stated.

Ghana’s financial progress is predicted to sluggish to three.7% in 2022 from 6.7% final yr, and to 2.8% in 2023, he stated.

Ofori-Atta has confronted requires his dismissal from each the ruling occasion and opposition who accuse him of financial mismanagement. Final week he apologised for the nation’s financial hardship however defended himself towards their claims.

Ghana will impose a debt restrict on non-concessional financing amongst different reforms, and can deal with utilizing financial coverage to regulate inflation, which has exceeded 40%, the minister stated.

($1 = 14.0000 Ghanian cedi)

Reporting by Cooper Inveen and Christian Akorlie in Accra; Writing by Nellie Peyton and Bate Felix;
Modifying by James Macharia Chege, Kirsten Donovan

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