Associate Professor of Finance at Andrews University in Michigan, USA, Dr. Willaims Preprah has urged government to expedite action for an economic programme with the International Monetary Fund to boost confidence in the economy, since any delays will spell doom for the country.
This is coming days after ratings agency, S&P and Fitch downgraded Ghana’s credit rating to junk status.
Dr. Peprah believes an economic programme should bring in some inflows to shore up the country’s balance of payment and help stabilise the cedi and slow down inflation.
According to him, waiting until the second quarter of next year before securing the programme will not be good for the economy
“The second quarter of next year probably will be a little bit too late for Ghana, because if we look at the data that was issued by Bank of Ghana, already balance of payments is about -$2.4 billion, which is about 3.5% of our GDP. Our revenue generation internally is not picking up as expected because the E-levy has failed. So if the fund delays the impact will be very dire for us as a country”.
“I notice also that based on the report the government is also a little bit slow in submitting this whole programme to the Fund. And this probably may be the reason why the fund will delay because initially it was anticipated that any amount that will be approved for Ghana should come in within the first quarter [2022]; because if you don’t get the funds coming in the first quarter trouble”, he pointed out.
He also expressed worry about the liquidation of some government bonds by foreign investors, a reason why he wants the government to get an economic programme with the IMF programme urgently.
“Already, there’re lot of claim payments by companies within the country; and then also government’s own commitment in terms of paying off [principal amount] some of the Eurobonds which will be due is a challenge”.
Again, he said “though government is expecting about first the $750 million to hit the Bank of Ghana’s account and then also the cocoa syndication loan of about $1.5 billion; and putting this together gives about roughly say $2.25 billion. It will not be enough because currently, we are already in a negative balance of $2.4 billion”.
So, therefore, Dr Peprah, said if the programme is pushed to the second quarter of 2022, the cedi will depreciate further.
“Probably, I’m expecting that maybe the Central Bank will come out with some measures to compel most of the companies that are involved in exports to bring in some of the monies that they keep outside the country. And you know in our laws, we allow free-zone companies and these multinationals who are involved in exporting products from Ghana to keep some of the funds here.”
