-As Akufo Addo Collapses Economy.
International award-winning analysts at the Bank of America Global Research have confirmed the dreaded reality that Ghana has no choice but to go to the IMF for a bailout, a situation that will further drive the country into the Bretton Woods servitude.
This confirms an earlier hint given by the Deputy Minister of Finance, John Kumah, who confirmed a potential IMF move by Ghana, despite his government’s swearing that it will be financially responsible enough not to ever saddle Ghana with IMF programmes again.
In a research, it says that the country’s fiscals and financials may support a muddling through in only 2022 but that by 2023, Ghana would have no choice but to run to the IMF.
“Muddling through is likely in 2022. But not in 2023. In just the first four months of 2022, without external financing and deteriorating global financing conditions, the Ghanaian cedi depreciated 20% vs the USD,” the research group warned.
“Meanwhile, FX reserves are down by $1.4 billion since December 2021 and now cover 3.7 months of imports from 4.3 months. If loan syndications fail, we see Ghana FX reserves dipping below three months’ cover sometime next year, creating the need to approach the IMF,” it said in a report focusing on Ghana.
Ghana, at the moment, is trying to secure syndicated loans of up to US$ 2 billion after a debt conundrum dipped lenders’ confidence and resulted in a closure of the main international money market in its face
However, according to the analysis, more downside to Eurobond securities can be seen if the government does not re-engage the IMF and a failure to acquire the syndicated loans that would help Ghana to muddle through.
It said that if the IMF is approached late, i.e. in 2024 instead of the latest by 2023, then a debt re-profiling for Ghana would be inevitable.
“If the IMF is approached later in 2024 or after elections, any arrangement would likely involve debt re-profiling and a likely sovereign default.”
Also, the analysis said it expects Ghana to default on its debt repayment from next year if it does not go for an IMF program early.
And under circumstances like this, sovereign ratings will dip even further.
The Ghanaian cedi has depreciated by over 20%, and inflation has risen (23.6% in April 2022), followed by policy rate hikes (cumulative 450 basis points in March and May 2022).
However, domestic bond yields have not risen as fast, resulting in negative real yields and under-subscriptions in some auctions. The central bank stepped in to provide temporary financing in the first quarter.
Ghana remains shut from international capital markets until fiscal consolidation is delivered or the country eventually approaches the IMF. Ghana has substantial upcoming bonds.
Cost is a hurdle Ghana is negotiating loan syndications with international and multilateral banks. It is seeking a total of $1.5-2 billion in two tranches over the coming months.
Meanwhile, Professor Steve Hanke of the Johns Hopkins University has posted a tracking of inflation for June and reveals his measurements indicate the price change rate has increased to a whopping 48% in June.
Tweeting the results, Prof. Hanke showed that Ghana was 7th on his inflation compilation called ‘Hanke’s Inflation Dashboard,’ with a compilation date of 6 June 2022.
“In this week’s inflation table, Ghana takes the 7th place. On June 9, I measured Ghana’s inflation at a stunning 48%/yr (which is) two times the inflation rate for 24/yr,” he tweeted.
Prof. Hanke’s measurement again dangles question marks on the quotation from Ghana’s Statistical Service which claimed in April that the inflation rate was some 23.6%.
An earlier measurement by Prof. Hanke had shown that contrary to the Akufo-Addo government’s claim that inflation was 23.6% it was actually 45.63%.