by Jerome Kuseh
It looks like Ghana’s economy can get no relief. Just a few days after the minutes from the US Federal Reserve July meeting suggested that interest rates may not be hiked in September (I explain why that is good for Ghana here) emerging market currencies fell to record levels as abysmal manufacturing figures from China sent investors fleeing to safer economies.
Well, when it rains it pours – the cedi was among the worst performing currencies today (8 out of 10 of them African as at 12:29 UTC) according to Bloomberg. Chinese stocks fell by almost 9% and the yield on the US 10-year bond fell to below 2% for the first time since April as investors sought it as a safe haven for their money. Oil prices fell to their lowest since March 2009 with US Crude selling below US$38 and Brent Crude at $43.38.
Like many other African countries, Ghana’s government is heavily dependent on the sale of commodities for revenue. The country is currently targeting a 7.3% budget deficit this year after failing to meet targets in the last two years. For the first five months of 2015, oil and gold revenues have fallen 45% and 28% respectively over the same period in 2014. The continuing slide in oil prices makes it more difficult to meet the target.
The resumption of services by the nation’s doctors after a three week strike over conditions of service gives some breathing room to government but their demands will be sure to increase expenditure from 2016. In a move to improve domestic revenue, the Ghana Revenue Authority has set up a task force that has retrieved GH¢12.3 million from defaulting tax payers in just two weeks.
The cedi has depreciated by 33% against the US dollar since the start of the year.