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IMF tells Ghana to adopt new revenue plan before April review

Comments (0) Actualites, Africa, Economy, Politics

ACCRA (Reuters) – Ghana must legislate new measures to boost revenues by at least 0.5 percent of gross domestic product before the IMF reviews a $918 million credit deal next month, the Fund said.

The West African nation must also outline plans to clean up the financial sector and show stronger commitment to cut debt, including limiting its next Eurobond for budget support to $500 million, IMF said in a document seen by Reuters.

Finance Minister Ken Ofori-Atta said last week the government planned to issue up to $2 billion of sovereign issuance by June to pay down debt that hit 68.7 percent of GDP last November and help finance the 2018 budget.

Ghana is seeking a combined fifth and sixth review of the IMF programme in early April, government and IMF sources told Reuters. The fifth review, originally scheduled for December, had delayed pending implementation of benchmark structural reforms.

“Parliament to adopt revenue measures equivalent to 0.5 percent of GDP (one billion cedis) by March 31 and do more later,” the Fund said. The document, dated Feb. 26, formed the basis for talks between an IMF staff mission and the government this week.

The mission left Accra on Thursday after discussing the actions required for the next review, as well as other reforms needed to exit the programme early next year. It is unclear if the talks were conclusive.

Ghana, which exports cocoa, gold and oil, is in its final year of the programme, designed to stabilise an economy dogged by high inflation and debt, and low growth.

The Fund said the government must publish by end of March an agreement between the Finance ministry and Bank of Ghana to reinforce zero financing of the budget deficit, a core condition of the programme.

The government of President Nana Akufo-Addo, inaugurated in January 2017 said it inherited $2.3 billion in accumulated debt owed to power utilities and has launched long-term bonds for repayment. It is also probing unpaid contract arrears of around $1.6 billion.

The IMF said while the country made progress, the central bank must adopt a fully market-based foreign exchange management policy and cut non-performing loans.

The government aims to cut the budget deficit to 4.5 percent of GDP in 2018 from a revised 6.3 percent while inflation is projected to fall to 8.9 percent. It sees GDP growth at 6.8 percent from a projected 7.9 percent in 2017.


(Reporting by Kwasi Kpodo; editing by John Stonestreet)

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In “tough but hopeful” budget, South Africa raises VAT for first time in 25 years

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CAPE TOWN (Reuters) – South Africa’s new leadership announced on Wednesday it was taking the politically risky step of raising value-added tax for the first time in 25 years, part of efforts to cut the deficit and stabilise debt under new President Cyril Ramaphosa.

The government of Africa’s most industrialised country has to plug a revenue hole in its budget and repair its economy after nine years of mismanagement under the scandal-plagued Jacob Zuma.

The move to raise VAT to 15 percent from 14 starting in April is expected to generate an additional 23 billion rand ($2 billion) of revenue in 2018/19.

But with the VAT rate unchanged since 1993 the move was likely to prove unpopular ahead of a national election next year.

“This is a tough, but hopeful budget,” Finance Minister Malusi Gigaba said, acknowledging the reality in his budget speech to parliament on Wednesday.

“We decided that increasing VAT was unavoidable if we are to maintain the integrity of our public finances.”

As Gigaba read his budget speech, the rand extended gains to 0.81 percent against the dollar, government bonds firmed and retail shares on the stock exchange fell.

Whatever cabinet Ramaphosa finally settles on will face an uphill battle to revitalise growth and create jobs in a nation still polarized by race and inequality more than two decades after the end of white-minority rule in 1994.

Much of the blame for the state of the economy has been laid at the door of Zuma and his allies. He was forced to step down as president this month by the ruling African National Congress (ANC), following a series of scandals. He has denied all wrongdoing.

But treasury officials sought to project a relatively optimistic outlook as they assessed economic prospects for the immediate future.

Gigaba said poor households would be cushioned against the VAT rate rise through a zero-rating of basic food items such as maize meal and beans, and welfare payments increases.

And the Treasury saw GDP growth at 1.5 percent this year, up from an estimated 1 percent last year, helped by a recovery in agriculture and improved investor sentiment.

South African debt faces the risk of a downgrade to “junk” by Moody’s after downgrades to sub-investment grade by S&P Global Ratings and Fitch last year. Moody’s said it would make a ratings decision soon after the budget announcement.

“We believe we have done enough to avoid a downgrade. We have taken the tough decisions. You can see our debt rates stabilising, you see our budget deficit improving,” Gigaba told a media briefing separately.



But opposition leader and head of the Democratic Alliance party Mmusi Maimane said the budget meant the cost of living for poor people would rise sharply.

“This is a budget that is an assault against poor people. What we saw today is a consequence of nine years of mismanagement of the economy by the ANC.”

The ultra-left Economic Freedom Fighters, which has six percent of the seats in parliament, boycotted the speech. It demanded that Gigaba, a Zuma ally, be removed.

The Treasury said South Africa faced a 48.2 billion rand revenue gap in the current 2017/18 fiscal year ending in March, down from an earlier estimate of 50.8 billion rand, and that the revenue shortfall was expected to continue into the medium term.

In a sign that it was mostly middle to high income earners who were targeted by the tax increases, the Treasury said the excise duty on luxury goods would be raised to 9 percent from 7 percent, among other taxes.

The budget deficit is expected to narrow to 3.5 percent of gross domestic product (GDP) by 2020 from 4.3 percent in the 2017/18 fiscal year, while gross debt is seen narrowing to 56 percent of GDP in the 2020/21 fiscal year from nearly 60 percent seen in the October mid-term budget statement.

($1 = 11.6359 rand)


(By Olivia Kumwenda-Mtambo and Mfuneko Toyana. Additional reporting by Wendell Roelf and Alexander Winning in Cape Town; Editing by James Macharia and Richard Balmforth)

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Nigerian acting president to sign budget on Monday

Comments (0) Latest Updates from Reuters

ABUJA (Reuters) – Nigeria’s acting president will sign the 2017 budget into law later on Monday, one of his aides told Reuters, as Abuja plans record spending to pull Africa’s biggest economy out of recession.

The OPEC member has been in recession since last year, largely due to low oil prices and militant attacks on the country’s Niger Delta energy facilities. Oil sales usually bring in two-thirds of the government’s revenue.

Vice President Yemi Osinbajo is standing in for President Muhammadu Buhari, who has been on medical leave in Britain since May 7, his second prolonged absence this year. Buhari’s medical condition is unclear.

“The acting president will be signing the budget today,” the presidency aide said.

President Buhari issued a statement saying it was in the interest of the country for Osinbajo to sign the budget into law.

Lawmakers last month passed the record 7.44 trillion naira ($23.6 billion) budget plan, which is bigger than the 7.298 trillion naira draft spending plan submitted by Buhari in December.

Two other presidency sources who did not want to be named also said the budget would be signed on Monday.

Sources said Osinbajo was at an event in the southeastern state of Anambra on Monday and would fly back to Abuja for the budget signing ceremony later in the day.

Last year’s budget, passed in May 2016, was delayed for months due to disagreements between lawmakers and the presidency over spending plans that cut the supply of government money and deepened the economic crisis.

Buhari said in his statement, signed by his spokesman Garba Shehu, that the 2018 budget proposal will be submitted by October and parliament will conclude the process by December so the country can return to a normal budget cycle from next year.


(Reporting by Felix Onuah and Camillus Eboh; Writing by Ulf Laessing and Chijioke Ohuocha; Editing by Hugh Lawson)


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Ghana says on track to halve budget deficit after IMF deal

Comments (0) Africa, Latest Updates from Reuters, Politics

ACCRA (Reuters) – Ghana is on target to halve its fiscal deficit this year after its $918-million aid deal with the International Monetary Fund, Finance Minister Seth Terkper said on Wednesday.

His comments appeared designed to allay uncertainty over the deal that emerged this month when parliament rejected a key component that was designed to promote fiscal discipline. The following day the government suspended a planned Eurobond issue.

The government issued a bill to eliminate central bank financing of the budget deficit in line with the requirements of the deal but on Aug. 2 parliament passed the bill with an amendment allowing financing of up to 5 percent.

Ghana’s public debt eased to 63 percent of GDP in May from 72 percent at the end of 2015, while consumer inflation dropped to 16.7 percent in July from 19 percent in January, Terkper said, citing the impact of the deal that began in April 2015.

The central bank expects inflation to slow to 8 percent, plus or minus two, by September 2017.

“We are set to halve the deficit from 12 percent in 2012, and we have also started stemming the rate of growth of the public debt,” he told a meeting of private businesses in Accra.

Ghana, which exports cocoa, gold and oil, signed the assistance programme to bring down inflation and the budget deficit and stabilize the currency.

Terkper said the debt stock could rise marginally to 65-66 percent of GDP on planned disbursements towards the end of the year but will remain below 70 percent.

Ghana pulled out of a planned five-year $500 million amortising Eurobond this month because investors demanded a yield higher than the single digits the government had expected.

Terkper led the government finance team on the deal and said his team only suspended pricing of bids.

“We did not call off the 2016 bond …. What we did was to suspend pricing …. We must sometimes hold our nerves when we’re in the capital market to look for the right window before we strike in order to get the best results,” he said.

Ghana will on Thursday begin pumping oil from a second offshore oil field, Tweneboa-Enyenra-Ntomme or TEN, in addition to its flagship Jubilee production which began in late 2010.


(By Kwasi Kpodo. Editing by Matthew Mpoke Bigg)

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Rwanda says eyeing $200 mln worth of short-term facility from IMF

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KIGALI (Reuters) – Rwanda said on Wednesday it had asked the International Monetary Fund to offer it a short term facility worth $200 million to help fend off foreign exchange risks in case the country’s reserves dwindled.

The central African state has previously said it had approached the IMF for help but had not revealed the amount involved.

“The IMF facility is actually to help us not going into problems and that facility is $200 million,” Finance Minister Claver Gatere said at a post-budget press briefing in the capital Kigali.

Gatere said Rwandan authorities expected the IMF to announce a decision on their request “tonight” (Wednesday).

In the budget speech, Gatere said Rwanda’s overall expenditure in 2016/17 fiscal year would rise to 1.95 trillion francs ($2.60 billion) from 1.81 trillion francs in the year ending this June.


(Reporting by Clement Uwiringiyimana; editing by Elias Biryabarema/Mark Heinrich)


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Nigeria’s Buhari signs delayed 2016 record budget into law

Comments (0) Africa, Latest Updates from Reuters, Politics

ABUJA (Reuters) – Nigeria’s President Muhammadu Buhari signed the delayed 2016 budget into law on Friday, ending weeks of wrangling with lawmakers and tripling capital expenditure as Africa’s biggest economy contends with its worst crisis in years.

The 6.06 trillion naira ($30.6 billion) budget is an attempt by Africa’s top oil exporter to stimulate an economy hammered by the fall in crude oil prices. Oil sales make up about 70 percent of national income.

The budget assumes oil production of 2.2 million barrels per day at 38 dollars a barrel, Budget Minister Udoma Udo Udoma told reporters shortly after the signing.

Growth last year fell to its slowest rate since 1999 at 2.8 percent and inflation rose to a near four-year high of 12.8 percent in March while capital imports declined by 74 percent year-on-year in the first quarter of 2016. [nL5N1817H4]

In a speech given after the signing, Buhari said the current period was “probably the toughest economic times in the history of our nation”.

“In designing the 2016 budget, we made a deliberate choice to pursue an expansionary fiscal policy despite the huge decline in government revenues from crude oil exports,” he said.

The president said 350 billion naira would be spent on capital projects, and he compared the 200 billion allocated to road construction with the 18 billion earmarked for that purpose in the 2015 budget.

Buhari withdrew his original budget bill in January because of an unrealistic oil price assumption. Parliament approved an amended proposal in March but only submitted highlights, prompting Buhari to say he would only sign the bill after it was resubmitted.

The lack of a budget, almost a year after Buhari took office, meant ministries were unable to allocate funds to projects in various sectors.

“The passage of the budget has been a long journey, and it has been as much about process as content,” Nigeria-focused PM Consulting’s Antony Goldman, said.

The government plans to generate 3.38 trillion naira this year from non-oil sources, up 87 percent from 1.81 trillion in 2015 [nL5N17E2KU]. But, with the heavy reliance on oil sales, it is unclear how this will be achieved.

Finance Minister Kemi Adeosun has said Nigeria is expected to post budget deficits for the next two to three years [nL5N17E17G]. In 2016, the deficit is seen at 2.2 trillion naira compared with a previously estimated 3 trillion.

She has said Nigeria plans to borrow a total of 1.8 trillion naira from abroad and at home.

($1 = 199.0000 naira)


(By Felix Onuah. Writing by Alexis Akwagyiram; Editing by Louise Ireland)

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Nigerian lawmakers to question presidency over long-overdue budget

Comments (0) Africa, Latest Updates from Reuters, Politics

Nigerian President Muhammadu Buhari

ABUJA (Reuters) – Nigerian lawmakers said on Wednesday they planned to hold talks with the presidency over the 2016 budget bill, which has yet to be signed into law by President Muhammadu Buhari after being passed by parliament last month.

The announcement suggests further delays before the legislation takes effect in Africa’s biggest economy and top oil producer, which is going through its worst crisis in years brought on by the slump in global crude prices.

Buhari withdrew his original budget bill in January because of an unrealistic oil price assumption and flaws in the draft. Lawmakers approved an amended proposal last month but only submitted headline figures rather than the whole document to the president’s office.

That prompted Buhari, who is currently in China, to say he would only sign the bill after checking it thoroughly.

Following closed-session talks by lawmakers in the lower house of parliament, a spokesman for politicians in that chamber said media reports about the contents of the budget submitted to the president last week had caused concern.

“We agreed as a chamber, as a House delegated the Speaker to please go ahead and engage the executive to identify the areas of concern,” said House of Representatives spokesman Abdulrazak Namdas.

He said there was particular concern about media reports that a proposed rail project linking the southwestern commercial capital, Lagos, with the eastern city of Calabar had been removed by parliament as part of their amendments.

Namdas said it “was not among the projects submitted by the President to the National Assembly”.

“Our own area of concern is that people say this thing was in the budget and we removed it. That is why we asked our speaker to liaise with the executive,” he said.

Last month Lai Mohammed, the information minister, said there was no rift between the executive and legislature over details of the budget.


(By Camillus Eboh. Writing by Alexis Akwagyiram; Editing by Hugh Lawson)

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Buhari to check Nigeria budget “ministry by ministry” before signing

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ABUJA (Reuters) – Nigeria’s President Muhammadu Buhari will check the 2016 budget bill passed last week “ministry by ministry” before signing it, he said on Thursday, signaling further delays before the legislation takes effect.

The budget for Africa’s top oil producer has been held up for months as Buhari had to withdraw his original bill, which set spending at a record $30 billion, in January, due to an unrealistic oil price assumption and flaws in the draft.

Lawmakers approved an amended bill last week that Buhari has yet to sign as parliament has so far only sent highlights of the new document to his office, a government official told Reuters on Tuesday.

“Some bureaucrats removed what we put in the proposal and replaced it with what they wanted,” Buhari said, according to a statement from his office.

“I have to look at the bill that has been passed … ministry by ministry, to be sure that what has been brought back for me to sign is in line with our original submission.”

On Thursday, the information minister said there was no rift between the executive and legislature on details of the budget. A day earlier, a senior lawmaker said parliament might need another week to work out details of the budget.

Buhari hopes the bill will revive the economy but officials have left open how it would be funded. The government has said it might sell Eurobonds or sign a loan deal with China and the World Bank but no deal has emerged.

Oil revenues, which make up about 70 percent of Nigeria’s income, have slumped, hammering the naira currency, halting development projects and leaving budget funding uncertain.

Nigeria has been trying to restart outdated refineries in Port Harcourt, Warri and Kaduna to end its dependency on costly fuel imports for around 80 percent of its energy needs.

Three of its four state-owned refineries were closed for five months in 2015 due to maintenance issues and vandalism.

On Thursday, the Nigerian National Petroleum Corporation

(NNPC) said it was committed to boosting refining capacity as it opened the technical bid for the location of new refineries within the nation’s existing refineries.

Anibo Kragha, NNPC chief operating officer for refineries, said the open bidding exercise demonstrated the determination of the government and state oil company to increase the country’s refining capacity from 445,000 barrels per day to 650,000.

“The aim is to leverage on the existing facilities to fast track the take-off of the refineries as soon as possible,” he said. NNPC said nine companies submitted bids.


($1 = 198.8000 naira)


(Reporting by Felix Onuah and Camillus Eboh; Writing by Ulf Laessing and Alexis Akwagyiram; Editing by Tom Heneghan)

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Kenya aims to cut 50 bil shillings from net 2015/16 spending

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NAIROBI (Reuters) – Kenya’s Treasury has sent parliament supplementary spending plans for the fiscal year ending in June that introduce net cuts of about 50 billion shillings ($493 million), the finance minister told Reuters on Thursday.

The government had forecast a budget deficit of 8.7 percent of gross domestic product for 2015/16, which unnerved investors. Draft figures released in February showed a revised 2015/16 deficit of 8.1 percent, falling to 6.9 percent in 2016/17.

Finance Minister Henry Rotich said in a short telephone interview that the supplementary figures sent to parliament had increased spending in some areas, such as security, but these were outweighed by cuts elsewhere.

“We are increasing spending in some areas and cutting in others but, overall, cuts are more than increases, so we have a net cut of around 50 billion (shillings),” he said.

President Uhuru Kenyatta’s political coalition dominates parliament and is expected to back the revised numbers.

When the 2015/16 budget was announced last year, expenditure including interest payments was forecast at a little over 2 trillion shillings. The International Monetary Fund has urged the government to narrow the deficit. [nL5N16N0KK]

Rotich said last month that the government would cut net domestic borrowing for 2015/16 by a quarter to 168.2 billion shillings as a result of spending cuts prompted by sluggish revenue collection.

($1 = 101.3500 Kenyan shillings)


(Reporting by Duncan Miriri; Editing by Kevin Liffey)

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South Africa announces austere budget to trim deficit, avoid downgrades

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CAPE TOWN (Reuters) – South Africa announced an austere budget on Wednesday aimed at avoiding cuts in its credit ratings, and vowed to focus spending on priority areas after weak economic growth reduced its revenue.

The measures may appease ratings agencies, which have said they might lower South Africa to sub-investment grade after President Jacob Zuma changed finance ministers twice in less than a week in December, casting doubt over Pretoria’s commitment to prudent fiscal policy.

Still, the package of spending cuts, civil service job freezes and moderate tax hikes on property sales, fuel, alcohol and capital gains may not go down well with voters ahead of municipal elections this year in which the ruling African National Congress faces a stiff challenge from the opposition.

“We cannot spend money we do not have. We cannot borrow beyond our ability to repay. Until we can ignite growth and generate more revenue, we have to be tough on ourselves,” Finance Minister Pravin Gordhan told parliament.

The tax hikes should help raise an additional 18.1 billion rand in revenue in 2016/17, he said.

Asked if the budget was enough to stave off ratings downgrades, Gordhan told ENCA news channel: “That’s what I hope.”

He said the economy may expand just 0.9 percent in 2016, down from a previous forecast of 1.7 percent and compared with estimated growth estimate of 1.3 percent in 2015.

It would be the lowest rate of growth since South Africa emerged from recession in 2009 and would reflect the impact of a severe drought and a sluggish global economy.

Growth has now fallen behind the rate of population increase, resulting in declining per capita incomes, the National Treasury said in a budget statement outlining spending plans for the next three years.

“In other words, the average South African is becoming poorer,” it said.

The rand extended losses over the lower growth forecast, trading 2.5 percent weaker to the dollar on the day.

“I would say the rand weakened so much immediately after the budget was released primarily because of the lack of sufficient reforms to tackle South Africa’s economic problems,” London-based EMEA analyst at 4cast Rajiev Rajkumar said.

“Whilst the lower projections for the budget deficit are a plus, ratings agencies previously said the country’s weak economy could be cause for further ratings downgrades to junk status.”

The cost of insuring exposure to South African debt via credit default swaps rose 17 basis points (bps), indicating investors’ disappointment with Gordhan’s budget.



Despite weaker growth, the government would still aim to reduce its budget deficit to 3.2 percent of GDP in the next fiscal year from 3.9 percent in the current 2015/16 period by tightening spending.

Fitch and Standard and Poor’s have South Africa on BBB-, just a step into investment grade. Any further cut would label them as junk status. The third main ratings agency, Moody’s, rates South Africa at Baa2, two notches above junk.

Moody’s said last week the drought risked tipping an already weak economy into recession as rising agricultural imports feed into rising inflation.

The Treasury said a credit downgrade to sub-investment grade, or “junk” status, could trigger a sharp reversal of capital flows and precipitate recession.

“In such an event, aggressive austerity measures would likely be required to restore public finances to a sustainable position,” it said.

The Treasury said it had cut government departments’ budgets for non-essential services, would borrow $4.5 billion from global markets over the next three years, and seek a minority equity partner after merging two of its state-owned airlines.


(By Stella Mapenzauswa and Olivia Kumwenda-Mtambo. Additional reporting by Wendell Roelf in Cape Town and Mfuneko Toyana in Johannesburg; Editing by James Macharia and Hugh Lawson)

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