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* > Ril'Uhl IC; Ul <iHAKA MINISTRY OF FINANCE STATEMENT TO PARLIAMENT Thursday, 28*^ March, 2019 mtAaff4iff*^nas Pte^sxsiisml &Saa^ BSderA, fisston^^ TimsibmiAiQGhattaBeyomAjtf Statement to ParliamentMarch, 2019 Introduction 1.

Right Honourable Speaker, Hon.

Members of Parliament, March 2019 has indeed been a remarkable month.
I wish to, therefore, express my sincere gratitude for the opportunity to address the House on some key recent events that have occurred recently as we bring the First Quarter of 2019 to a close: a.

First, the formal completion of our Extended Credit Facility programme with the IMF; b. Secondiy, the historic US$3 billion Eurobond issuance; c. Thirdly, the recent developments on the foreign exchange market and the Cedi; and d. This week's visit of the World Bank VP for Africa.
Mr. Speaker, and from the Holy Book's Isaiah.... *See, I am doing a new thing.

Now it springs up.

Do you not perceive it?

I am making a way in the wiiderness."

We just want as a nation, to thank God for what He is doing.

^atement to ParUatnent- March, 2019 IMF ECF Programme 2.

Mr. Speaker, you will recall tiiat in section 12 of tiie 2019 Budget Statement and Economic policy, I stated that we wee on course to completing the Extended Credit Facility with the International Monetary Fund.
Well, Mr ^jeaker, I am glad to announce that it is now a mission aocomplishajl!

3.

Mr Speaker, Ghanaians, who have been the wctims of poor economic decisions of the past, know alt so well that the healing process has not been easy, it has been austere, it has been tough, it has been restraining, but it was n«:essary.

It was necessary because what had been broken had to be fixed by the Akufo-Addo government 4.
In August 2014, the Mahama government was compelled by the outcome of its (homegrown policies) and economic management to turn to the IMF for a bailout.

The markd;, indeed the business community, had lost confidence in the capadty of the then government to stea" the economy, with the requisite oomp^ence, care and discipline, back on track.

5.

Mr Speal^, permit me to quote what tte Rnanciai Times wrote on August 3*^, 2014 in a report witii the headline: "GHANA SEEiCS IMF HELP AFTER CURRENCY FALLS 40%."
Statement to Parliament - March, 2019 It reads: "Ghana, the country that epitomised the 'Africa rising' narrative of strong economic growth and improved governance, is to seek help from the InternationarMonetary Fund."

"...
"...

The West African nation will turn to the fund for financial assistance after its currency plunged roughly 40 per cent this year against the US dollar... "Accra's request for a bailout Is likely to shake some Investors, as Ghana was seen as a model of economic and political development In the continent.
In 2007, under the Kufuor Administration, it became the first country In sub Saharan Africa, apart from South Africa, to tap the sovereign bond market, raising $750m through a 10-year bond..." The FT report of 2014 reminds us further of how dire the situation was, "Ghana has this year repeatedly postponed a return to the bond market.

But, Mr Terkper said the country still planned a $lbn, 10 year bond."
He was quoted as saying that the Capital market would find our bond attractive once Ghana entered the IMF programme.

Even then, we needed the World Bank to provide a $400 million guarantee to support Ghana's $l billion sovereign.

Despite this guarantee, the 15yr Eurobond ^atement to Parliament- March, 2019 issued In 2015 unfortunately attracted the highest coupon rate ever in Ghana history at 10.75%.

6.

The world/ Mr Speaker, found our plunge shocidng/ perplexing.
This was because, by 2011 Ghana had begun produdng oil in commercial quantities.

Hopes of a better Ghana were high.

Sadly, Mr Speaker, by the end of the follownng year, 2012, the economy was already in a tailspin, ^{railed by the excessive spending, particulariy In tfie last four months to Ihe 2012 general elections.

This led to Ghana recording a defidtof 11.5% of GDP— highest deficit on record in the 4"' republic.

His Administration, Mr Speaker, never recovered from that 2012 deficit.

7.
7.

By February 2014, the IMF was calling for urgent measures to restore Macroeconomic stability.

By the end of that year, Ghana's «:onomy was characterised by: a) nsing interest rates to around 26 p^cent on short term dom^tic d^ (91-day Treasury Bills) b) high policy interest rate of up to 21 pero^t c) high year-on-year Inflation of 17 jrenoent d) a oedi versus dollar depredation of over 31 percent e) a low net international resenres of 1.8 months imports cover Statement to Parliament - March, 2019 .
- f) Delayed payments of statutory bills g) mounting arrears as contractors' bills could not be paid h) large capital outflows, and i) the 'Dumsor' continued to have a devastating impact on the social and economic lives of Ghanaians Simply put, Mr. Speaker, the economy under the Mahama administration, was in severe crisis.
Mr. Speaker, it is important to give this background, in order for the country to understand where we were, how we got there, the pills the people have had to swallow in our committed efforts to get us out and on the go.

8.

Mr. Speaker, the economic situation left the government at the time with no choice but to sign up to a three-year ECF Programme in April 2015.

This entailed a total of eight programme reviews twice a year.
After each successful review, an agreed amount was to be disbursed as Balance of Payments support to improve the country's international reserves.

The total expected inflow for the three-year period was SDR664.20 million (approximately US$914 million).

^atementto Parliament - March, 2019 9.
Mr. Speaker, the programme primarily aimed to; (i) ensure prudent fiscal consolidation and debt sustainability, contain expenditures through wage restraint and limited net hiring and mobilise additional revenues; (ii) structurally reform to strengthen public finances and instil fiscal discipline by improving budget transparency, cleaning up and controlling public sector payroll, right-sizing the dvil service, and improve domestic revenue collection; (ill) restore effective inflation targeting framework to help bring inflation bade into single digit territory; and (iv) preserving finandal sector stability.
10.

When the President Akufo-Addo administration took over the Mana^ment of the Economy, it was confronted with a very difficult choice, continue with a derailed IMF - ECF programme or completely abandoned it due to the steep fiscal consolidation path that we needed to take.

But Mr. ^jeaker we chose the difficult but sensible path to stabilize the economy.
We resolved to do what we believe was a move In ttte National Interest and fundam^tal to our National development goals, nie feonomy was not in g<M)d shape, the finandal sator was reeling and we n^cted to r^lld the confidence of both Ghanaians and Foreign investors in Ghana and our economy.

Statementto Parliament - March, 2019 i, Mr. Speaker, I am happy to announce today that the difficult choice we made has yielded the desired outcome.
We have successfully completed the programme and the economic indicators are all looking very good 11.

However, Mr. Speaker, macro-economic performance in 2016, another election year under the previous government, was characterized by excessive fiscal dominance even worse than in 2012.

The ECF Programme objectives had been derailed, the then government only managed to complete three Programme reviews against six scheduled.
This, Mr speaker, meant that there was no way Ghana could have completed the programme as scheduled in April 2018.

12.

Mr. Speaker, I am delighted to announce that the Executive Board of the IMF met on 20^ March, 2019 to approve the combined seventh and eight reviews under the ECF supported arrangement, bringing an end to the Extended Credit Facility Prdgramme.

13.

This successful completion immediately made available to Ghana the amount of SDR132.84 million (about US$185.2 million).
This brings the total cumulative disbursement under the ECF supported arrangement to SDR664.20 million (equivalent to US$934.4 million).

.

■^•stement to Parliament - Merck, 2019 14.
Mr. Speaker, the Executive Board issued a ^atement after the Board meeting in which they commendojl the Akufc-Addo Government for putting the Programme bad< ot trade and achieving significant macroeconomic gains over tJie course of tt>e ECF supported programme, which has r^ultal in: a. a rising and broad-based GDP growth momentum with the eaonomy growing by 8.1% in 2017 (up from 2J2% -2015 and 3.4% - 2016) and 6.1% (end-Q3 2018 average); b. effective monetary policy put in place arKi the sustained disinflation (inflation now at 9.2% from 15.4% -2015); c. accelerated fiscal consolidation with defidt oontradiion of over 3% of rebased GDP (I.e.
from 7.3% - 2016 to 3.9% - 2018); d. a successful banking sector dean-up (with over 1 million depositors' funds saved).

e. Mr. Speaker, In 27 months.

President Akufo-Addo's government has achieved the following; a.

It completed In 8 months, August 2017- April 2018, three reviews compared to the three revievK In 2 ^ears in the previous administration.

Statement to Parliament - March, 2019 .

> - b.


It completed 2 back-to-back combined reviews (5'*^ & 6"^ and 7*^ and 8^ reviews) c. It completed 12 structural bench marks d. All our performance criteria were met e. 7 prior actions met to conclude the programme f. The government successfully worked with 3 mission chiefs and 2 resident represents of the IMF and I • g. restored maco-economic stability 15.
Mr. Speaker, while it is evident that significant macroeconomic gains have been achieved over the course of the ECF supported programme and especiaily over the last two years, some challenges remain.

To ensure irreversibility, there is the need to: a.

Maintain fiscal discipline and avoid off-budget expenditure and fiscal dominance b.
Enhance public debt management; c. Continue the prudent monetary policy to guard against upside risks to inflation; d. Enhance the financial system's soundness and resilience.

10 Statement to Parliament — March, 20i9 e. Very crucially Implement an aggressive revenue mobilization regime 16.
Mr. Speaker, to this end, the codification of poildes Into laws and systems to promote fiscal discipline, debt sustainabillty and sanction offenders provides a strong platform to safe-guard our gains and ensure Irreversibillty.

These indude: a.

Fiscal Responsibility Act which, will among others, cap the fiscal deficit at 5% of GDP whiles ensuring poative primary balance beginning from 2019; b.
Financial Stability Advisory Council & Rscal Responability Advisory Council ^tabiished to monitor the Government budget for coherence and compliance; c. Economic Policy Coordination Committee co-chaired by the Finance Minister and the BoG Govemor to coordinate Government's macro-fiscal policy and addr^s any challenges fadng Government's economic programme; d. Public Finandal Management Act C'PFMA") - to ensure care for the public purse with a strong sanctions regime, dricter oversight of SOEs, and mandatory timely reporting; 11 Statement to Parliament- March, 2019 e. Tax Exemption Bill - A tax exemption bill has been laid before Parliament for passage to streamline tax exemptions and minimize its abuse; and f. Zero Central Bank Financing - MoU between BoG and MoF on zero Central Bank financing to government extended through 2020 to strengthen inflation targeting regime.
17.

Mr. Speaker, let me reiterate as I indicated in the 2019 Budget that, the completion of the ECF Programme notwithstanding, Ghana remains a member in good standing with the IMF and we will continue our productive policy and technical collaboration.

We do have choices within the Article IV framework to ensure positive engagement of the IMF as a Trusted Advisor.

US$3.0 billion Eurobond Issuance 18.


Mr. Speaker, as you may recall, we stated in the 2019 Budget that Government's objective is to borrow at the least- cost and at a prudent level of risk.

In line with this Mr Speaker, we have managed to buck the old trend by reducing the rate of debt accumulation from 22 percent per annum at 2016 to 14.5 percent as at 2018.

Consequently, we sought and received your approval to issue sovereign bonds of up to US$3.0 billion.

12 ^^tement to Parliament - March, 2019 19.


Through an open bidding process, Government of Ghana selected Rve (5) Lead Managers and Five (5) Co-Managers for the US$3 billion issuance programme.

The lead managers advi^ Government of Ghana to issue a Eurobond in the shortest possible time to avoid the potential turtxjlenoe we e)q3erienced in 2018.
In twenty-seven (27) days the Ministry of Finance team, assisted by Bank of Ghana, Attorney General's Office, Ghana Stab'stical Service and otiiers, with the Lead Managers and Co-Managers, packaged the transaction, completed due diligence, commenced and completed the roadshow, and priced the deal.

This must also be a record and I would like to commend the team and the Lead and Co- Managers for a job welt done in record time.

20.
20.

Mr. Sf^ker, Ghana embarked on a 3-day roadshow In New York, Boston and London.

On Tuesday 19th March, Ghana priced a US$ 3.0 billiOn tri-tranche bond with a weighted average of 7, 12 and 31 years.

It is the first time Ghana has done a 3-tranch issuance.

21.

Ibe team met with over 130 fixed income inv^ors fece- r* V to-faoe and conference caiis.
Tte generated strong 13 Statement to Parliament,- March, 2019 S interest, with peak orders in excess of US$ 21.0 billion, representing an over subscription of 7 times.

Our final order- book closed at US$17.2 billion, which was the highest order- book achieved in sub-Sahara Africa.

The next largest sub- Saharan order-book was Kenya's $14 billion last year.

The 31- year bond is also the longest-ever issuance in:Africa.

22.
22.

To put this in context, Ghana issued its first Eurobond in September 2007 to raise $750 million; its order-book was nearly four times larger.

The second Eurobond was issued in 2013 for $1 billion; its order-book was only two times larger.

Moving forward to October 2015, a $1 billion Eurobond was issued; even at a very high coupon rate of 10.75%, its order-book was only two times larger at $2 billion.
The last Eurobond of the previous government, of $750 million, was issued in 2016; the order-book was $4bn, over five times larger, but this came at a high cost of 9.25% for a 6-year bond, compared to this year's 7.875% for a 7-year bond.

Indeed, the size of this year's order- book was truly unprecedented, especially when considering its competitive pricing.

23.

Furthermore, Mr. Speaker, this multi-tranche bond offering was Ghana's largest single transaction, by nominal size.
14 Sts^ementto Pa^iament — March, 2019 since its inaugural international debut in September 2007 to date.

Leveraging the considerable demand, Ghana priced all the thtee tranches at or inside fair value, as follows: a. US$750 million for a 7-year bond issued at 7.875%; b. US$1.25 billion for a 12-year bond issued at 8.125%; and c. US$1.0 billion for a 31-year bond issued at 8.95%.

24.
24.

These bonds were competitively priced, compared recent issues from African peers vrith similar exchange rate r^imes, for example in November 2018, Nigeria Issues a 12- year bond at 8.75 percent compared to our 8.125 percent, and a 30 year bond at 9.25 percent, compared to our 8.95 percent.

Comparisons to Senegal and Cote dlvcMre are not appropriate, as Itiey do not have their own currency.

The currency of the francophone countries, the CFA, is pegged to the Euro and guaranteed by the French Treasury.
We can't compare appl^^ ^ with oranges.

25.

Mr. ^jeaker, in terms of g«)graphic participab'on, the USA and UK dcxninated die issuance.

We, however, also ob^rved an Inaease in partidpation from Asia from less than 1% to 4%, iiKlicating the poative rKults from our Investor 15 .. ^atement to Parliament - March, 2019 engagement within that region in 2018.

In terms of investor type, the bonds were bought mainiy by Asset Managers (~87%), followed by Hedge funds (~6%) and Banks (~5%).

26.
26.

Mr. Speaker, the transaction is incredibly beneficial for Ghana for a number of reasons: a.

It shows that Republic of Ghana has market access to long dated Eurobond financing in size; b.

It confirms long-term financial support from buy-and- hold high quality investors, including many first-time buyers of Ghana bonds from all 4 regions; c. It validates the successful completion of the IMF programme and the inherent trust that the investor corpmunity has in our country.
d. The trading pattern of the bonds post issuance confirms the fact that they were fairly priced, meaning that Ghana did not leave any money on the table; 16 Satemenf to Pariiam&nt - March, 2019 Developments on the Foreign Exchange and the Cedi 27.

Mr. Speaker, now to the Cedf.

The oadi sufifered some tuituience dtiring the first quarter of ttiis year mainly as a result of a (influence of factors including; a.
Pressure on the current account as a resu^ of income transfers by corporate as well as sea^jnai demands by importers; b.

Portfolio reversals by investors in our country's debt who were caught by surprise with thejlOObps r^ucBon in the ''mpC rate to-16% at the end of January and thus over reacted by selling off and extemalisang fourth quarter coupon payments; and c. Statistical adjustments to the exchange rate calcutation by the Bank of Ghana in efforts to improve market transparency.
17 Statement to Parliament - March, 2019 - d. Uncertainties on the future with Ghana's conciusion of the IMF program 28, Mr. Speaker this turbulence happened despite the strong economic fundamentals and improvement in our balance of payments; which our Government has achieved in the last 2 years.

We have done a lot of work to ensure that the economic fundamentals are robust and able to support economic growth and transformation.

This is further evidenced, for example, by the following statistics: a.
Inflation declining from 15.4% in 2016 to 9.^% in 2018; b.

Fiscal deficit falling from 6.5% in 2016 to 3.9% in 2018; c. Interest rate on 91-day treasury bill from 16.3% in 2016 to 14.6% in 2018; and d. Current account deficit from 6.6% in 2016 to 3.2% in 2018.

29.
29.

Mr. Speake«^s they say the numbers don't li^as such it is clear from the daferBTat the depreciaborrsrffie cedi was not due to weak economic fundamentals but rather a combination of structural rigidities and the apparent speculative behaviour of portfolio investors and market participants.

It is also noteworthy 18 statement to Parliament - March, 2019 that while this Is a challenge, the Cedi has however performed better over the last two years than when compared specifically to 2012 to 2016.

30.
30.

In 2012, the Cedi depreciated by 15.95%, 12.81% in 2013, peaked at 32.45% in 2014, halved to 15.68% in 2015 and depreciated by 9.65% end 2016.

Cumulative depredation from 2012 to 2016 was 65.423%.

Between Dec 2017, through the whole of 2018 to Mar 21^^, 2019, the Cedi had depredated by 17.325% compared to 25.33% in 2015 and 2016.

31.

Mr. Speaker, indeed the Cedi recovery had started even before the Eurobond was issued, and if I may add, before the Vice President's trip to India.
But what the Eurobond issuance did was confirm the confidence investors have in our economy, with their $21 billion rush, which supported the recovery; possible because of our successful macroeconomlc turnaround as well as the implementation of various policy measures.

32.

Mr. ^}eaker, the Cedi has made great strides towards recovery on the back of the successful issue of the IJS$3 billion Eurobond and the compl^on of the 7th and 8th IMF Reviews whkh restored cottfidenoe in the Ghanaian economy.
Currently, the Cedi has 19 statement to Parliament - March, 2019i, ' .. -.i,- witnessed substantial gains and with the measures we have put in place, based on the existing sound economic fundamentals, we anticipate the stability of the Cedi going forward.

Indeed, the Cedi has appreciated by 5.12% in March 2019 alone as against a depreciation of 2.71% in the same period last year.

33.
33.

It is this success that we need to build on and put in place the structures to strengthen the resilience of the Cedi against its major trading currencies.
Mr. Speaker, we recognize the need to take the following steps: a. enhance the transparency of our foreign exchange market to minimize information asymmetry and panic buying of currency by businesses and the public when there are seasonal blips in the currency; b. develop our capital market, insurance and pension industries to ensure that Government domestic borrowing relies less on foreign portfolio investors.
c. Mr. Speaker, the President has directed that I investigate the structural causes for the depreciation of the Cedi and to propose measures to address the situation.

The Governor and I will put a bipartisan committee together to proceed immediately.

20 .Matement to Paiiiamenf - March.

2019 34- Mr. Speaker, our current progress on the economy, sustained GDP growth and economic transformation will eventually ensure that the currency is stable over the medium term.
The Bank of Ghana will remain vigilant in the short term to buikJ adequate reserve buffers and promote market discipline in the B< market; and over the medium term, the Government will ensure that we have a transformed economy that will strengthen our trade, ojn-ent and capital accounts.

35.
35.

We believe that our current efforts to boost exports and reduce imports by diversifying and deepening the economy through industrialization and developing the agri-bu^ness, and the improvements in our financial sector architecture will provide the needed scope to guarantee that our currency becomes even more resilient.

In oth«- words, Mr Speaker, we need to grow more, manufacture more.
Buy Ghana, Wear Ghana, See Ghana, Eat Ghana, which means more Kenkey and Fish, more Waakye, more TZ, more Sdxjio, more coconut juice, to make our cali ^rong.

For a prcKjd and confKient people, we should c^ebrate patnotism and not dOTigiate It.

21 statement to Parliament - March, 2019 36.


If there is any lesson for us, our recent success in the Eurobond market demonstrates the clear confidence that the international community has in the work that we have done - it is hard work, and we know that this confidence resonates with our vision of a Ghana Beyond Aid.

Ws/t by the World Bank Vice President for the Africa Region 37.
Mr. Speaker, as a sign of the continued confidence the international community has in our country, the World Bank Vice president for Africa Region, Dr. Hafez Ghanem, visited Ghana between 24th - 27th March, 2019.

The objective of the visit was to discuss with the Government and other stakeholders, the World Bank's assistance program for Ghana and explore areas of future collaboration that are more transformative and supportive of the country's Ghana Beyond Aid vision.

38.
38.

The discussion centered on efforts to mobilize funds for sustainable economic transformation towards achievement of a Ghana Beyond Aid and of the SDGs.

Specifically, areas of discussion included; 22 ^atem^nt to Parliament - March, 20t9 a.

How Ghana can take advantage of the Digital Economy b.

Building Human Capital; and c. Support for Industrialization through access to downstream energy capacity.

39.
39.

Mr. Speaker, thankfully, - the World Bank Vice-President indicated the Bank's interest in supporting Ghana in all three areas.

Specifically: a.

On the Digital Economy, Dr. Ghanem said the Bank vwll be interested in supporting Ghana on: (a) infrastructure and connectivity; (b) regulations; and (c) digital {Matforms to support areas such as e-government, revenue mobilization, education, and fintech.

b.
b.

On Building Human Capital, World Bank support could be for: (a) the free SHS program, (b) quality improvements, and (c) interventions to improve education of girls, by providing incentives to parents to encourage them to keep - (heir daughters in school rather than marrying (hem off at such young ages, and in doing so also reduce (t« inddence denting of children since educated mothers are more imovdedgeabie about nutrition.
23 ^ : J Statememt to Parliament - March, 2019 c. On Industrialization, Dr. Ghanem indicated the Bank's willingness to help Ghana take advantage of its current and prospective excess supply of power and gas by developing industries that are intensive in the use of these energy resources.

d. Furthermore, the Bank will be willing to assist Ghana to export some of its excess energy to other countries in West Africa.
e. The Bank has also indicated its willingness to increase our window by $2 billion including doubling budget support to $520rnillion subject to certain prior actions.

40.

Mr Speaker, as I indicated during the 2019 Budget Statement, we recognize that while current resources are insufficient to meet every need and every demand of every Ghanaian, there are no limitations on our collective potential.
So, Mr Speaker, we have been creative in our efforts to take Ghana Beyond aid through Social Partnerships and harnessing our entrepreneurial spirit as a country to build infrastructure, develop industry and support agriculture.

24 ^atemenf to Parliament — March, 2019 - 41.

Mr. Speaker, Ghana is doing something right and it is time v^e all pulled in one direction.

The Lord is indeed doing a new thing for Ghana and we should not be afraid.
It is time we built a broad consensus on what is good for the Republic.

As Edmund Burtcetold his electors in 1774, ^^Pariiament is not a congress of ambassadors from different and hostile interests... patiiament is a deliberative assembly of one nation, with one inter^t, that of the whde."

42. fvir Speaker, I believe as a nation, we are witnessing God's special regard for Ghana.
In a space of one week, we saw a $ 21 billion rush for our Eurobond issuance; we succes^ully concluded the IMF program and we are experiendng an impressive recovery of the cedi; ending with the Woiid Bank doubling what it had Intended to support us with.

The Lord has indeed given us hidden treasures stored in ^cret places, so we all know that He is the Lord.

43.

Mr Speaker, we intend to continue with this disdpline, comp^ence, and compassionate management of the Qianaian economy .
And we are dang so by also protechng the public purse.

So much so that tte Public Procuremoit Authority has In the^oe of 24 moiths made savings on Procurement for goods, works and s25 n ■.<> Statement to Parliament — March, 2019 ... t, \mp ' n services to the tune of GHC1.9 billion cedis equivalent.

This Mr Speaker, compares favourably, to the Zero savings made under the previous government.

44.
44.

Mr Speaker, we promised to deliver on the economy, and with the support of this house and the Ghanaian people, and with the Lord being our anchor, we shall continue to work in humility to defend our republic and make it great and strong.

45.

Mr. Speaker, let me end by sharing yvith you our Ministry's weekly devotions at 6.30 am from Psalm 126; "Our mouths are filled with laughter, our tongues with songs of joy.

Then Jt was said among many nations.

The Lord has done many things for them".


And for me personally, Mr. Speaker, I say.

wPraise the Lord O my soul, all my inmost being, praise His Holy Name.

EHIOFGHAHALlBRARyl 26