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Ghana’s cedi, the world’s worst-performing currency this year, weakened as the government ruled out an International Monetary Fund bailout, stoking concern it will miss targets to narrow a budget deficit.

The currency retreated for the first time in five days against the dollar, dropping as much as 6.4 percent, after Deputy Finance Minister Mona Quartey said the government of the world’s second-biggest cocoa producer plans to sell a third Eurobond next month rather than take IMF aid. Returns on Ghana’s dollar debt are the lowest in Africa this year, according to Bloomberg indexes.

Some investors “don’t have the full confidence in the government’s home-grown policy because steps that have already been implemented have not yielded expected results,” Elvis Darku, head of fixed-income trading at Access Bank Ghana Ltd., said by phone today. “Those traders disappointed that the government was no longer looking at an IMF bailout probably started bidding the cedi lower.”

Finance Minister Seth Terkper opened the door to IMF support earlier this year as slumping earnings from gold, cocoa and oil, the country’s biggest exports, curbed revenue, according to the Bank of Ghana. Terkper revised the 2014 fiscal deficit target to 8.8 percent of gross domestic product from 8.5 percent and increased spending by 3.2 billion cedis ($873 million) on July 16, while saying power cuts, inflation and the weak cedi are curbing growth. The gap was 10.1 percent in 2013.

“We’re not considering an IMF loan at this time,” Quartey said by phone yesterday. Plans to sell $1.5 billion in Eurobonds are “part of a home-grown strategy to stabilize the cedi,” she said.
Inflation Threat

The cedi weakened 6.2 percent to 3.6651 per dollar as of 1:47 p.m. in Accra, the capital, extending losses this year to 33 percent. Yields on the nation’s Eurobonds due August 2023 rose two basis points, or 0.02 percentage point, to 8.23 percent. Ghanaian dollar debt returned 5.3 percent this year, less than the 9.3 percent emerging-market average, according to Bloomberg indexes. Ghana will start marketing its next issuance by the end of August, Quartey said.

“If they could get IMF support that would be a much more sustainable solution” in helping to stem a drop in the cedi, Melissa Verreynne, an analyst at NKC Independent Economists in Paarl, South Africa, said by phone today. The proceeds from a Eurobond sale would provide only temporary support to the currency, she said.

Traders who sold the cedi today “would have preferred an IMF financing since that was going to come with fiscal discipline,” Darku said. In 2009, when Ghana entered a three-year IMF program that included about $600 million of loans, the Washington-based lender included targets to reform taxes and revenue collection and reduce subsidies on power and gasoline.
Delayed Goals

In July 2012, the IMF said Ghana missed targets on the budget deficit and reserves and delayed meeting goals on auditing the payroll and integrating tax offices.

Companies in Ghana are battling because of the weakening currency that pushed the inflation rate to 15 percent in June, a 10th straight month of increases. Produce Buying Co., the country’s largest purchaser of cocoa from farmers, said last week it delayed plans to borrow $30 million from France’s development agency as the cedi’s slide threatened to boost repayment costs.

To contact the reporters on this story: Moses Mozart Dzawu in Accra at [email protected]; Robert Brand in Cape Town at [email protected]


Didn't know it was this bad for Ghana that they are talking about bailouts
 

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Hmmm the news is very frustrating. How can they have budget deficits during the supposed oil boom? It looks to me that Ghana won the oil lottery and then decided to spend money like there was no tomorrow created greater inflationary pressure. The NDC seems like a very useless political party.
 

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This government is terrible. Worse than the previous.

Fiscally indisciplined and lots of cronyism.

Agric growth has collapsed to nothing under them after Ghana was ranked below just Brazil and Vietnam as countries which have cut hunger the most.
 

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Fine economic analysis. Tell me more.
the refusal to take the IMF bailout, coupled with the seemingly slow results from internal remedy measures have caused investors to sell the cedi and Ghan's prospects short. if the new bond sales show promise as an alternative source of funds, ghana should be back up. that would help in future also because investors will feel more confident about the country's ability to handle its affairs before running to the IMF
 

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Mutu ya Chuma.
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Do you know what IMF has done to African countries and Tanzania especially?
I used to hate imf, but its not IMF's fault. it does not force Africans to come to them to apply for loans.

If you spend indiscrminately, have innefficient policies/system, you're chronically corrupt, etc...you'll bankrupt your country like Mobutu did Zaire and that is when hell starts to get loose. you'll need money to keep your head above the water and then get out.


Greece and Spain are learning the hardway.

Africans on the other hand, don't learn.
 

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Mutu ya Chuma.
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When i called this Ghana president uneducated (after the comment he made about Nigeria's refusal to sign the EU deal), some people thought i was just being silly.
 

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I'll Fly Away/Blue skies.
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I used to hate imf, but its not IMF's fault. it does not force Africans to come to them to apply for loans.

If you spend indiscrminately, have innefficient policies/system, you're chronically corrupt, etc...you'll bankrupt your country like Mobutu did Zaire and that is when hell starts to get loose. you'll need money to keep your head above the water and then get out.


Greece and Spain are learning the hardway.

Africans on the other hand, don't learn.
What country on earth doesn't depend on loans, doesn't have public debts, may be Norway? The conditions for the loans from IMF and WB is what kills African economies, not the loan itself and back then, Africans didn't have a choice but to accept these loans.
 

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Mutu ya Chuma.
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What country on earth doesn't depend on loans, doesn't have public debts, may be Norway? The conditions for the loans from IMF and WB is what kills African economies, not the loan itself and back then, Africans didn't have a choice but to accept these loans.
No its not IMF-WB, its Africans themselves, their own stupidity, chronic corruption and super incompetence, lack of vision and ambitions etc...

Let me give you some examples. Kenyan MP salaries. is this IMF, WB conditions for loans?

Nigeria's elephant sized govt, where out of 36 States, less than 6 are the only ones able to care for themselves, the other +30 completely depend on Federal govt handouts/wellfare...Look at their Fed Senators how much they get paid, USD $1.2 million/year? Is this IMF Fault?

Look at DRC, 108 Senators when we only have 11 Provinces and we don't even know their salaries, nor that of Governors, we have Provincial Parliaments when we're not even a Federal or Decentralized system and each Regional MP gets a salary of $5,000/moth for being useless or unneded.

I can go on all day long without even mentioning the money that ends in Swiss, and other overseas accounts by the very same African leaders. not to mention wastfull economic policies.

Is that IMF, WB faults?
 

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I'll Fly Away/Blue skies.
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No its not IMF-WB, its Africans themselves, their own stupidity, chronic corruption and super incompetence, lack of vision and ambitions etc...

Let me give you some examples. Kenyan MP salaries. is this IMF, WB conditions for loans?

Nigeria's elephant sized govt, where out of 36 States, less than 6 are the only ones able to care for themselves, the other +30 completely depend on Federal govt handouts/wellfare...Look at their Fed Senators how much they get paid, USD $1.2 million/year? Is this IMF Fault?

Look at DRC, 108 Senators when we only have 11 Provinces and we don't even know their salaries, nor that of Governors, we have Provincial Parliaments when we're not even a Federal or Decentralized system and each Regional MP gets a salary of $5,000/moth for being useless or unneded.

I can go on all day long without even mentioning the money that ends in Swiss, and other overseas accounts by the very same African leaders. not to mention wastfull economic policies.

Is that IMF, WB faults?
You clearly have no idea. Those salaries you have mentioned doesn't come close to the problem of what IMF has done to Africa. You should read about the conditions for the loans, example the conditions for the loans granted to Zambia and Tanzania in early 1990s in relation to the mining sector and see how well that worked out for their western multinationals companies and for the two African countries.

You can change those salaries to 5 pounds per month but that wont change the imposition of those IMF and WB policies in Africa.
 

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No its not IMF-WB, its Africans themselves, their own stupidity, chronic corruption and super incompetence, lack of vision and ambitions etc...

Let me give you some examples. Kenyan MP salaries. is this IMF, WB conditions for loans?

Nigeria's elephant sized govt, where out of 36 States, less than 6 are the only ones able to care for themselves, the other +30 completely depend on Federal govt handouts/wellfare...Look at their Fed Senators how much they get paid, USD $1.2 million/year? Is this IMF Fault?

Look at DRC, 108 Senators when we only have 11 Provinces and we don't even know their salaries, nor that of Governors, we have Provincial Parliaments when we're not even a Federal or Decentralized system and each Regional MP gets a salary of $5,000/moth for being useless or unneded.

I can go on all day long without even mentioning the money that ends in Swiss, and other overseas accounts by the very same African leaders. not to mention wastfull economic policies.

Is that IMF, WB faults?
those monies dont make much of a difference. IMF has made big structural changes to these economies that seriously harmed them.

so many states being dependent on the FG in nigeria is from years of oil dependency. as the non-oil economy grows it should end
 

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Mutu ya Chuma.
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You clearly have no idea. Those salaries you have mentioned doesn't come close to the problem of what IMF has done to Africa. You should read about the conditions for the loans, example the conditions for the loans granted to Zambia and Tanzania in early 1990s in relation to the mining sector and see how well that worked out for their western multinationals companies and for the two African countries.

You can change those salaries to 5 pounds per month but that wont change the imposition of those IMF and WB policies in Africa.
What? those salaries , spending mean nothing? I don't know how to continue from here.

Tanzania and Zambia were both Marxist economic systems before the 1990, the Soviet Union died and all the Socialist countries went broke. Vietnamese were very smart to switch to an effiecient economic system of market economic system very fast as they saw there is no more dough from the Soviets.

DRC is a mining dependent country, so i know exactly what went wront with us.

Mobutu built some elephant projects that ended up costing the country very dearly while at the same time he was shipping 10s of billions abroad.

When i mean costing the country dearly i mean Bankrupting the country completely with zero dollar in the bank.

That was not IMF, WB fault, that was our own fault.
 

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Mutu ya Chuma.
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those monies dont make much of a difference. IMF has made big structural changes to these economies that seriously harmed them.
What exactly are those structural changes ?
so many states being dependent on the FG in nigeria is from years of oil dependency. as the non-oil economy grows it should end
You mean the billions FG sents to the states who cannot stand on theiir own feet don't make much difference?

How much MW of electricity would this money generate if the FG decided to build power plants?

Why can't Nigeria reduce the number of States to like 6 regions or States where each region/State will care or be able to stand on it own feet without skimming FG funds that otherwise are needed for things like Rail, Electricity which Nigeria greatly suffers from? In facts these regions/States would be able to build their own Powerplants with minimal help or loans from Feds.
 

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I'll Fly Away/Blue skies.
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What? those salaries , spending mean nothing? I don't know how to continue from here.

Tanzania and Zambia were both Marxist economic systems before the 1990, the Soviet Union died and all the Socialist countries went broke. Vietnamese were very smart to switch to an effiecient economic system of market economic system very fast as they saw there is no more dough from the Soviets.

DRC is a mining dependent country, so i know exactly what went wront with us.

Mobutu built some elephant projects that ended up costing the country very dearly while at the same time he was shipping 10s of billions abroad.

When i mean costing the country dearly i mean Bankrupting the country completely with zero dollar in the bank.

That was not IMF, WB fault, that was our own fault.
You should learn the differences between socialist economies and communist economies. These two arent the same...same as libertarian and neo-conservativism.

Secondly, the Tanzanian economy did not go down the drain because of USSR collapse...conversely, Tanzania was one of the most strict Non-aligned movement countries. Tanzania didn't not receive any grants from USSR so I don't know how you can relate Tanzania's economy woes to that of USSR collapse. We weren't like Cuba.

Thirdly, spending means something...but having options on the table is what Tanzania lacked when we indirectly forced to sign those IMF and WB policies in early 1990s. We simply had no option. We had the raw materials, the mines, the agricultural produce and we were denied market and forced to sign those unfair policies.

Fourthly, just so we are clear, the socialism in Tanzania worked well and it was the right policy to adopt at that time. Nyerere himself said," If we hadn't adopted socialism at the time, the country would have collapsed." This statement has been echoed by many other politicians and in deed economists in Tanzania...so for us it wasn't the policy that was the problem. The problems were external, chiefly, the IMF.
 

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What exactly are those structural changes ?

You mean the billions FG sents to the states who cannot stand on theiir own feet don't make much difference?

How much MW of electricity would this money generate if the FG decided to build power plants?

Why can't Nigeria reduce the number of States to like 6 regions or States where each region/State will care or be able to stand on it own feet without skimming FG funds that otherwise are needed for things like Rail, Electricity which Nigeria greatly suffers from? In facts these regions/States would be able to build their own Powerplants with minimal help or loans from Feds.
no. The money paid to the politicians isn't crippling the economy. Nigeria reducing the number of states isn't the issue. The problem is there was no incentive for each state to produce bc the Feds fed them. With oil taking up less of the economy the states can now feed themselves from mining tourism agri. Etc

Structural changes are the demands tied to the loans such as devaluation of currencies in some instances
 
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