* Finance minister says will seek concessions from IMF
* Ghana follows Zambia, which said it June it would seek IMF
(Adds comments, background)
By Kwasi Kpodo
ACCRA, Aug 2 Ghanaian President John Mahama has
ordered his government to open talks with the International
Monetary Fund on a programme to help stabilise the economy and
halt a slide in the cedi currency, officials said on Saturday.
Mahama told a meeting of his economic advisors on Friday
that urgent measures should be taken to prop up the cedi,
which has fallen by around 40 percent against the dollar this
year, placing it among the world's worst performing currencies.
The West African country, which became the first sub-Saharan
African country outside South Africa to tap the Eurobond market
in 2007, is struggling to tame large budget and current account
deficits, turning investor sentiment against the onetime
frontier market darling.
With Ghana looking to issue a new $1.5 billion Eurobond
toward the end of this month, some bond market participants said
the backing of an IMF programme would be necessary to reassure
investors over the stability of the currency.
"The president has directed that we open negotiations with
the IMF," Finance Minister Seth Terkper told Reuters, adding the
talks with the IMF would be focused on resolving specific
problems rather than a general assessment of the economy. "This
programme is not going to be like any other programme that
countries have with the IMF."
"Ghana is currently in a transition as a lower-middle income
country. It's in that context that we will be negotiating with
the IMF," Terkper said by telephone on route to Washington for a
U.S.-Africa summit next week that Mahama is attending.
Deputy Finance Minister Casiel Ato Forson told Reuters the
government had already informed the IMF of its decision to sign
a new programme. Ghana's last three-year $600 million IMF
programme ended in 2012, two years after the country started oil
Forson said Ghana would look for concessions from the Fund
to help its stabilisation efforts and would continue to tap the
bond market and other commercials sources of credit to support
expenditure and economic growth.
OPPOSITION WELCOMES MOVE
Despite being a major exporter of gold, oil and cocoa, Ghana
posted a current account deficit of 12 percent of GDP last year
as demand for imports boomed amid economic growth of 7 percent.
Ghana is also grappling with a wide budget deficit, which stood
at 10 percent of GDP last year, undermining its reputation for
Moody's cut its debt rating in June to B2 from B1 and kept
the rating on negative outlook, citing Ghana's deteriorating
fiscal position and rising debt levels.
Razia Khan, head of Africa research at Standard Chartered
bank, said she expected the news of talks with the IMF to be
positively received by financial markets.
"An IMF program would likely give to investors that
additional level of confidence that fiscal consolidation might
be pursued more seriously," she said.
She noted that Zambia, Africa's second-largest copper
producer, had seen its Eurobond prices rise as investors
welcomed the government's decision in June to approach the IMF
for help in stabilising its currency and economy.
"However news of potential talks with the IMF is unlikely to
be enough, on its own, to make a meaningful difference to the
cedi just yet," she told Reuters.
Mark Asibey-Yeboah, economic spokesman for the main
opposition New Patriotic Party, welcomed the move as a step in
the right direction to calming the economy, but he warned that
austerity measures could inflict hardship on ordinary Ghanaians.
"It will come with conditions that will demand that the
government adopt additional measures to fight inflation. They
will also demand a freeze on wages," he said. "But in all, the
benefits will still outweigh the downside, so it's a step in the
Mahama on Friday also instructed his economic team to
increase domestic gas supplies to the market to provide cheaper
fuel for power generation and minimise the burden of oil imports
on the currency, a communications ministry statement said.
(Writing by Daniel Flynn; Editing by David Evans)