With elections in December 2016, Ghana’s finance minister is raising new funds to fix the power crisis and bail out his cash-strapped government, which was hit by falling prices of oil and other commodities.
Minister Seth Terkper was in London briefing a phalanx of bond traders nervously monitoring commodity-price cycles. Those bond traders are Terkper’s primary audience as his task is to convince them to invest in a $1.5bn Eurobond in the midst of a deluge of bad economic news at home and abroad.
This year, Ghana’s economic growth has slumped to 3.5%, half the rate of three years ago, due to a combination of crashing oil prices, delays on a $700m gas processing plant, swingeing power cuts that paralysed industry and a poor cocoa harvest. Ghana’s cedi lost almost half its value against the US dollar in the past 18 months, and the country’s debt burden is more than 70% of its gross domestic product.
Bad as the backdrop is, Terkper has to sell Ghana’s bond now if the budget is to add up. However, the yield is likely to be higher than hoped. Ghana will probably pay 9-10% interest on the bond instead of the 8% it paid when it floated a $1bn bond last year.
Fending off pressure from the streets hit by Ghana’s economic downturn and by the fickle financial markets, Terkper emanates a scholarly calm. “You need to understand the context,” he stated. “That is, the pressure on revenues, on power and on our investment programme. We launched reforms and we are implementing them satisfactorily – look at the latest international Monetary Fund [IMF] report.”
He goes through the numbers about how Ghana’s economic travails have been reported. “We’re getting back on a growth path. It’s not just our figures, it’s what the IMF estimate. Ghana will be growing 5.7% next year, and we’re bringing down the [budget] deficit.”
A chartered accountant, a former senior economist at the IMF and the author of a book on value-added tax, Terkper is an improbable politician and at odds with some activists in the ruling National Democratic Congress (NDC), who fear his policies could lose them votes.
To help turn the economy around, Terkper opened negotiations with his old employer, the IMF, and the World Bank. He is imposing some harsh measures in exchange for about $1.7bn in loans and guarantees. The measures include dramatic cuts in the government’s wage bill and rises in the cost of fuel, electricity and water.