Accra, Ghana, April 29, 2019//-Ghana’s recent exit of the International Monetary Fund (IMF) program should provide the country the opportunity to demonstrate that its economic policies deserve the support of international players.
It also provides the opportunity for relevant information flow to citizens which were not forthcoming when the IMF program was ongoing, according analyst Professor John Gatsi.
For instance, the IMF was quiet about the debate about Ghana Amalgamated Trust (GAT), a special-purpose vehicle created by the government to support five struggling banks to help them meet the minimum capital threshold of GH¢400 million.
But the Fund has indicated the fiscal risk of GAT to the economy after the exit. The benefit of the exit therefore means revealing comments about the Ghanaian economy will be easily available, Prof Gatsi said.
“Just before the IMF exit, debates such as the relationship among inflation, interest rate and exchange rate emerged”.
Not encouraging exit signals
Prof Gatsi who is a Professor of the University of Cape Coast (UCC) observed: “After the exit, the signals given by the first quarter Ghana Stock Market performance is not encouraging”.
The performance of the market among others reveals the long term confidence of the economy by investors and the extent to which fundamental economic indicators and policies define market sentiments, he added.
Prof Gatsi advised that given the above fundamental economic analysis should not avoid the stock market signals.
In the first quarter of 2018 the composite index gained more than 30% but recorded a lost of about 4.6% in the first quarter of 2019. The financial index gained 32% in the first quarter of 2018 but gained only 0.07% in first quarter of 2019, he noted.
The value of shares that changed hand in the first quarter of 2018 was GHS260, 680,509.00 reduced significantly to GHS82, 334,890.00 the same period in 2019.
This shows weakness in secondary market activities. It is like investors don’t want to invest.
37% of Stocks did not record change in prices during the first quarter of 2019 and 31% of the stocks were losers in terms of price changes.
“Stock market performance is a reflection of many factors including fundamental performance of the economy, fundamental performance of the specific listed companies and other factors normally expressed by investor actions”.
Prof Gatsi therefore advised the managers of the economy to put their eyes of the first quarter stock market signals.
Recently, the Executive Board of the International Monetary Fund completed the seventh and eight reviews under the Extended Credit Facility (ECF) support arrangement.
The completion which was on Wednesday March 20, made available to Ghana the cumulative amount of US$185.2 million).
IMF in a news release last month, stated that “Considering the authorities’ resolved to tackle difficult reforms, the Executive Board also approved the authorities’ request for a waiver of the nonobservance of a few program targets.”
It said “Ghana’s three-year arrangement was approved on April 3, 2015 (see Press Release No.15/159) for SDR 664.20 million (about US$925.9 million or 180 percent of quota at the time of approval of the arrangement). It was extended for additional year on August 30, 2017 and is to end on April 2, 2019.”
According to the release “the arrangement aimed to restore debt sustainability and macroeconomic stability in the country to foster a return to high growth and job creation, while protecting social spending.”
Tao Zhang, Deputy Managing Director and Acting Chair, is quoted as saying “the authorities have achieved significant macroeconomic gains over the course of the ECF-supported program, with rising growth, single digit inflation, fiscal consolidation, and banking sector clean-up. Continued macroeconomic adjustment should underpin these improvements, as the 2020 elections approach.”
It said “In a sign of the authorities’ commitment to fiscal consolidation, the end-2018 fiscal targets were met. Sustained fiscal discipline is needed to reduce financing needs and anchor debt dynamics.
As stronger revenue mobilization is critical, the submission of the tax exemption bill is welcome, but needs to be complemented by efforts to strengthen tax compliance. Fiscal space is needed to support priority programs, while off-budget expenditures should be avoided.”
African Eye Report
