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Business News of Friday, 21 January 2022

Source: 3news.com

1,000 MoMo transactions per second in Ghana at the moment – Adu Boahen

Charles Adu Boahen, Minister of State at the Ministry of Finance Charles Adu Boahen, Minister of State at the Ministry of Finance

Available data show that in every second, one thousand Mobile Mobile (MoMo) transactions take place in Ghana, Minister of State at the Finance Ministry, Charles Adu Boahen, has said.

He said this while giving a breakdown of the value of Mobile Money transactions since 2016 till date.

“So Mobile Money in 2016, the total value of the transaction is about US$20 billion dollars which was about GH¢79 billion cedis. In 2020, when we have the latest data it had skyrocketed to US$99 billion.

“In 2017, it went to US$35 billion about GH¢156 billion cedis, then it went to US48 billion dollars in 2018 of about GH¢223 billion cedis."

“In fact, in 2020 the number was 99bn dollars. A thousand transactions per second. All government is asking for is a small share,” he said on the Good Evening Ghana show on Thursday, January 20.

Meanwhile, the Ministry of Finance (MoF) had said regarding the E-levy proposal that a healthy debate in a vibrant Parliament is a critical part of Ghana’s growing democratic credentials and by no means should it be deemed to be a fiscal risk.

The Ministry said the government was confident that when Parliament resumes sitting on January 25, the E-Levy Bill, which had already been discussed and approved by the Finance Committee of Parliament, will be passed.

“It is most unfortunate to note that foreign investors and market participants are on edge following the impasse in Parliament, in relation to the passage of the E-levy Bill. The market seems to now be pricing into our bonds the perceived risks of having a slim majority in Parliament and the consequences thereof.

“The markets also seem to be concerned that this might impact the Government’s ability to successfully pass and implement some of its major revenue policy measures as presented in the 2022 Budget.

“The Ministry would like to state that a healthy debate in a vibrant Parliament is a critical part of Ghana’s growing democratic credentials and by no means should it be deemed to be a fiscal risk. Government is confident that when Parliament resumes sitting this month, the E-Levy Bill, which has already been discussed and approved by the Finance Committee of Parliament, will be passed,” the Ministry said in a statement reacting to an article on Ghana’s debt situation by Bloomberg.

In the said article, Bloomberg said as the era of cheap money draws to an end, bondholders are no longer prepared to cut Ghana any slack.

The West African nation’s dollar bonds have slumped 10% in 10 days, moving deeper into distressed territory as investors judge that re-financing debt in the Eurobond market won’t be an option when the Federal Reserve hikes rates and budget targets remain elusive.

The extra premium demanded on Ghana’s sovereign dollar debt jumped on Wednesday to an average 1,105 basis points, from 683 basis points in September. Its $27 billion of foreign debt had the worst start to the year among emerging markets, extending last year’s 14% loss, according to a Bloomberg index.

Investors are questioning whether Ghana, the region’s second-biggest economy can sustain its debt levels if a surge in borrowing costs shuts it out of international markets. Government debt climbed to 81.5% of gross domestic product at the end of last year, from 31.4% a decade ago, according to data compiled by Bloomberg.

That places Ghana among the most vulnerable credits to tighter U.S. monetary policy, despite strong economic growth.

“The market has woken up to the fact that this is a country with a lot of outstanding bonds,” said Kevin Daly, investment director at Aberdeen Standard Investments in London. “A lot of people went into last year with overweight positions and a lot of them have started to throw in the towel.”

The West African nation’s US$750 million bonds due in March 2027 fell 10 cents this month to 79.4 cents on the dollar on Thursday, sending the yield to nearly 14%. Of 14 Ghanaian dollar bonds, 13 are trading with an extra premium of at least 1,000 basis points, a level considered distressed, a Bloomberg index tracking sovereign debt showed.

“I don’t expect them to default in 2022, as they have enough foreign-exchange reserves, but medium to longer-term, it becomes an issue as Ghana has lost access to the Eurobond market for rolling over debt,” said Joe Delvaux, a portfolio manager at Amundi in London. “They have too much debt for the size of the economy and investors have lost conviction in the government’s willingness to consolidate spending and take necessary measures.”

The government’s failure to pass a new levy on electronic money transfers through parliament in November also made investors doubt whether it has the political capital to pass revenue-raising measures in parliament or reign in spending to reduce borrowing needs.

The opposition to the tax reform and plans to end a subsidy on pharmaceutical and vehicle imports will make it hard for the government to meet this year’s budget deficit target of 7.4%, down from 12.1% last year.

“There’s no appetite for a new Ghana issuance at this stage and probably won’t be until the government has consolidated its public finances more meaningfully,” said Carlos de Sousa, who helps oversee a $3.8 billion developing nation bond fund at Vontobel Asset Management in Zurich.

But in a response, the Ministry of Finance said “There are some serious factual errors in the article, which may give investors some cause for concern, if not corrected. For example, Bloomberg stated 81.5% as end of year debt to GDP ratio. This is incorrect. Our provisional nominal debt to GDP, as at the end of November 2021 was 78.4%, which is the latest data available. December revenue collections are seasonally the largest for any year, it is unlikely that our financing requirements in December will result in us exceeding 80% debt to GDP by December 2021."

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