“A loan of 2 billion dollars is used to pay interest abroad” – says Isaac Adongo

Deputy Member of the Parliament’s Finance Committee, Isaac Adongo

The monetary policy rate has risen to 17%

Finance Minister announces measures to ease economic challenges

Adongo wonders about the motive for the loan of 2 billion dollars

A deputy member of parliament’s finance committee has accused the government of deceiving it by borrowing $2 billion from a consortium of local banks.

The cedi has seen its value fall by 20% against the US dollar this year which, according to NASDAQ, is only second to the Russian ruble.

Reacting to the development in an article, Isaac Adongo questioned the motive for this loan. According to him, proceeds from the facility which he describes as “illegal” will be used to pay $1.6 billion in offshore interest.

The MP for Bolga Central, in his article, said that the capital market had not responded favorably to the measures announced by Finance Minister Ken Ofori-Atta to address Ghana’s economic challenges, casting doubts on the ability of Ghana to raise the 2 billion US dollars announced by the governor.

“Capital markets have gone flat and jittery after the hollow gimmicks displayed by the finance minister [Ken Ofori-Atta] in the long-awaited measures that are meant to address the debilitating challenges facing Ghana’s economy.

Capital market players are not even convinced that the government can ‘illegally borrow’ the US$2 billion to pay its $1.6 billion in offshore interest due at the end of March 2022,” Adongo alleged.

He continued, “The deception that the US$2 billion is intended to bolster reserves and provide a cushion for Ghana’s epileptic cedi should therefore be ignored.”

Adongo further argued that there is a general lack of investor confidence in the Ghanaian economy and dismissed claims by government officials that the development is the result of downgrades by international rating agencies.

“Market sentiments reflect a lack of confidence in the short to medium term outlook for the economy. Make no mistakes. This is not an action that has been induced by the rating agencies whose names Nana Addo and Bawumia don’t want to hear, Moody’s, Fitch or Standards and Poors (S&Ps)”

The MP for Bolgatanga Central explains that the government’s inability to mobilize resources to meet its interest liability obligation of US$1.6 billion so far is due to what he calls an acute liquidity crisis and struggling domestic financial institutions with excessive exposure to government risk assets.

Recently, the largest local banks in Ghana were downgraded by Moody’s and Fitch Ratings due to their exposure to government risks.

He further argued that the Central Bank does not have enough reserves for the government to fall on.

“Furthermore, it is pretty much evident that the Bank of Ghana (BoG) does not have enough foreign exchange to sell to the government to enable the government to meet its obligation to pay interest abroad.” he added.

Adongo in his article concluded that the measures announced by the finance minister to raise GH¢3.5 billion rather than reducing the country’s deficit will increase it.

Read Isaac Adongo’s article below:

‘Illegal’ $2bn for not bolstering Bank of Ghana (BoG) reserves to support Cedi but to pay $1.6bn in offshore interest due end of March 2022

Capital markets have gone flat and jittery after the hollow stuff displayed by the finance minister in the long-awaited measures that are supposed to address the debilitating challenges facing Ghana’s economy.

Capital market participants are not even convinced that the government can “illegally borrow” the $2 billion to pay its $1.6 billion offshore interest liability due at the end of March 2022.

The deception that the $2 billion is intended to bolster reserves and provide a cushion for Ghana’s epileptic cedi should therefore be ignored.

Investors demanded an additional risk premium on our Eurobonds with maturities in 2025 and 2026 with yields up more than 18%, on March 25 just a day after Mr. Ken Ofori Ata announced the measures cosmetics and its voodoo accounting, most of which turned out to be a rehash of the discredited measures announced in the 2022 budget.

Market sentiments reflect a lack of confidence in the short to medium term outlook for the economy.

Don’t make mistakes. It is not an action that was induced by the rating agencies whose names Nana Addo and Bawumia do not want to hear, Moody’s, Fitch or Standards and Poors (S&Ps)

The government of Ghana is due to pay a huge interest obligation of $1.6 billion at the end of the first quarter of 2022. But the government has so far failed to raise the cedi equivalent of this huge sum in the national economy due to an acute liquidity crisis. compounded by financial institutions struggling with excessive exposure to government risk assets.

Moreover, it is quite evident that the Bank of Ghana (BoG) does not have enough foreign currency to sell to the government to enable it to meet its $1.6 billion foreign interest payment obligation. , even if the government were to raise the cedi equivalent.

A review of the external financing gap approved in the 2022 budget shows that only $600 million, equivalent to GH¢4.8 billion, has been budgeted for sovereign financing such as Eurobonds, term, green bonds and others.

Concretely, this means that the measures announced, instead of illegally reducing the deficit, will instead increase the deficit by $1.4 billion.

Essentially, the government of Ghana has unfortunately just scored an own goal.

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