Further monetary restraint on the part of the Central Bank of Ghana to keep its policy rate at 13.5 percent and support “still-sluggish domestic demand”–coupled with recently initiated oil production that will increase from an initial 50,000 to around 120,000 bpd within three to six months per Tullow Oil and also help the country achieve real GDP growth of roughly 13 percent next year (versus 6.5 in 2010)–should maintain the attraction of impending primary auctions of cedi denominated, 3-year sovereign paper which remain “the most attractive local debt market opportunities in Sub-Saharan Africa” according to Absa Capital.  Demand stemming from said auctions has steadily grown this year as investors become more convinced that hitherto volatile CPI figures have been tamed–inflation reached a five-year high of 20.7 percent in June 2009 but fell to 9.5 percent this past June (declining for the first time since December 2007 below 10 percent).  That said, analysts foresee public sector wage increases, higher food prices and utility price hikes all pushing inflation back into double-digits (around 11 percent) in the coming year.  Moreover, despite the newfound oil revenue some observers (including the IMF) question the country’s fiscal discipline.  While total public debt rose from USD8.5bn in September 2009 to USD11.3bn a year later “the fact remains that at least during the cost-recovery period, fiscal revenues will likely not be substantial enough to fund huge [social and other] infrastructure outlays” Absa wrote earlier this month, highlighting the cost-recovery period as well as a proposed bill before parliament that would automatically siphon some 30 percent of oil-related revenues to a “Stabilisation and Heritage fund.”  Nevertheless, finance minister Kwabena Duffuor maintained to Bloomberg in November that the nation’s cash budget deficit would narrow to 7.5 percent of GDP in 2011 from roughly 9.7 percent this year, and then drop to to 4.7 percent in 2012 and 3 percent in 2013 as energy revenue “built up.”

Advertisements