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Ghana News - Ghana finds a $1.6 billion hole in budget

Ghana finds a $1.6 billion hole in budget

Source: Bloomberg
Date: 01-02-2017 Time: 06:02:01:pm
Finance Minister, Ken Ofori-Atta

Ghana’s three-week-old government said it found a 7 billion-cedi ($1.6 billion) hole in the budget, a disclosure that sent its bonds tumbling.

“We have been very surprised by the fiscal data,” Vice President Mahamudu Bawumia said Tuesday night in a speech broadcast by Citi FM. “We find out that there’s 7 billion Ghana cedis of expenditure that have not been disclosed.”

The central bank on Jan. 23 urged the government to narrow the budget deficit after provisional data for January through November showed a shortfall of 7 percent of gross domestic product, exceeding a forecast of 4.7 percent. The West African nation will probably miss its fiscal-deficit target for 2016 by more than the government’s forecast because of weak income collection and higher-than-planned capital spending, the International Monetary Fund said last month.

“How are you supposed to manage an economy with faulty data,” Bawumia said in his speech given in the capital, Accra.

Former Finance Minister Seth Terkper didn’t answer calls seeking comment. Calls to the phone of Mustapha Hamid, a spokesman for President Nana Akufo-Addo, didn’t go through.

Akufo-Addo and his New Patriotic Party won presidential and parliamentary elections against former President John Dramani Mahama’s National Democratic Congress.

Yields Increase

Yields on Ghana’s benchmark dollar bond due in August 2023 increased 33 basis points to 8.70 percent, the highest since Dec. 19, at 11:30 a.m. in Accra. The cedi weakened for a third day against the dollar, slipping 0.4 percent to 4.38.

Investors will be concerned about a high budget deficit and there’s still the risk of further debt accumulation, said Courage Martey, an economist at Accra-based Databank Group Ltd.,

“There will be a difficulty in payment which can lead to restructuring” of the nation’s debt, he said by phone. “It only shows that our fiscal and debt situation is quite complicated and too complicated to deal with in the short term very quickly, so the Eurobonds will continue to reflect that difficulty in the short term.”

Finance Minister Ken Ofori-Atta will table the 2017 budget next month. The economy probably expanded 4.1 percent in 2016, according to forecasts from the government.

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