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Ghana lawmakers approve $750 million loan from Afreximbank

• Country targets $1bn foreign loans this month for budget • Facility will bolster finances, give support for cedi currency

GHANA’S parliament approved a plan by the government to borrow up to $750 million from the African Export-Import Bank (Afreximbank) for the 2022 budget.

The vote by the nation’s hung parliament removes a major hurdle for President Nana Akufo-Addo’s government to press on with budget projects and stabilise finances after losing access to the international capital market this year, Bloomberg reported.

The facility is the first part of the $1bn in loans that the government’s looking to wind up this month for the budget. Lawmakers are still studying the second part, syndicated loans worth $250 million from other international banks, Kwaku Kwarteng, chairman of the finance committee in parliament, said by phone.

The loan proceeds are expected to make room for West Africa’s second-biggest economy to reduce domestic borrowing and put it in a stronger position to support the local currency, which has lost 25.6 percent of its value to the dollar this year, making it Africa’s worst performer.

Ghana reversed course to seek a funded program with the International Monetary Fund earlier this month after a decision early in the year to cut budget expenditures by as much as 30 percent failed to stem a sell-off in its international bonds.

According to Bloomberg, the yield on Ghana dollar bonds maturing in 2032 declined 62 basis points on Wednesday to 21.2 percent. The premium investors demand over US Treasuries to hold Ghana debt currently stands at 1,894 basis points, according to JPMorgan Chase & Co. indexes, effectively locking the world’s second-biggest cocoa producer out of the Eurobond market.

Ghana’s recent debt woes were caused by a sweeping clean-up of the banking sector, energy-sector loans, the impact of the coronavirus pandemic and the fallout from Russia’s invasion of Ukraine, driving its debt ratio to 78 percent of gross domestic product at the end of March from 62.5 percent five years ago. The country hopes to receive about $1.5 billion from the IMF programme to enhance the home-grown policies it is already implementing.

 

Source
Moses Mozart Dzewu/Bloomberg

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