Ghana Pol/Econ Highlights, Fall 2006

UNCLAS ACCRA 002763

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECIN EFIN GH
SUBJECT: Ghana Pol/Econ Highlights, Fall 2006

REFS: A)SECSTATE 176544 B) SECSTATE 176793


1. (U) This report covers noteworthy economic and political events
and activities in Ghana for the period of August - October 2007. The
issues covered are:

-- Macro-economic performance
-- 2007 Draft Budget To Be Published November 16
-- Halting Progress on Ghana Telecom Privatization
-- Tema Oil Refinery - Initial Steps Toward Privatization
-- Electricity and Water Tariffs Not Rising After All
-- AfDB Launches Fixed Rate Eurobond in Cedis
-- Offinso Parliamentary By-election
-- Violence in Wa


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ECONOMICS HIGHLIGHTS:
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Macro Performance:
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2. (U) Ghana's strong macroeconomic performance continued through
the third quarter of 2006, according to recently released data from
the Bank of Ghana (BoG) Monetary Policy Committee. Inflation
dropped to 10.8 percent in September and the BoG expects real GDP
growth to again reach 6 percent. Both imports and exports showed
strong growth, with cocoa and gold leading the way on exports.
Overall, the trade deficit was down slightly. Non-traditional
exports reached about USD 950 million compared to USD 536 million
for the same period last year, largely due to better tracking of
such exports rather than actual increases. Driven primarily by
strong private and official transfers, the overall balance of
payments has moved into a small surplus of USD 13 million compared
to a deficit of USD 195 million at this time last year. Foreign
reserves were at USD 1.84 billion at the end of August. Reflecting
diminished inflation expectations, the maturity structure of public
securities has lengthened. Two year maturities as of September 2006
accounted for 22 percent of total outstanding government debt,
compared to 11 percent in September 2005. Ninety-one day securities
declined from 49.7 percent to 24.1 percent end August 2005 to end
August 2006. Additional detail can be found at the Bank of Ghana's
website: www.bog.gov.gh

2007 Draft Budget to be Published November 16
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3. (U) The 2007 draft budget will be submitted to Parliament on
November 16, a week later than the target date of November 9. Key
challenges include how the government will finance much-needed
public investment in energy and other infrastructure without
accumulating unsustainable debt and how to manage pressures for
increased public sector wages. While the macro picture remains
positive, Ghana remains heavily dependent on donor resources for key
sectors and tax revenue figures are slipping below targets as 2006
comes to a close. According to press reports, November 1, the
Minister of Harbors and Railways publicly stated that corrupt
officials at the ports were shortchanging the government of customs
revenue.

Halting Progress on Ghana Telecom Privatization
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4. (SBU) The government, based on a public tender, is in the process
of choosing a transactions advisor for the privatization of Ghana
Telecom. Price Waterhouse Cooper, GT's auditor, is preparing a
value assessment that is due at the end of December. Key issues for
the transactions advisor to consider will include whether to
separate mobile and land-line operations and whether to terminate
Ghana Telecom's exclusive rights to the SAT 3 undersea fiber optic
cable system. Both government officials and officials inside of
Ghana Telecom have expressed concern about the prospects for
realization of a fully transparent process. The government's goal
is to finalize the privatization by June, 2007.

Tema Oil Refinery - Initial Steps TowardPrivatization
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5. (U) On November 8, the government issued a solicitation in local
papers for an advisor on privatization and expansion of the Tema Oil
Refinery (TOR). The notice should also appear in the Economist.
TOR is currently a major drain on GoG finances. Subsidies in the
first half of 2006 amounted to more than USD 50 million.

Electricity and Water Tariffs Not Rising After All
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6. (U) The Public Utility Regulatory Commission (PURC) announced
that effective November 1, tariffs for electricity and water were to
rise about 25 percent but the government has decided the increases
should not be passed on to consumers. The proposed increase was
part of an effort to put the utilities on a firm financial footing
and to raise adequate revenue for needed infrastructure investment
to improve service. However, according to press reports, a
statement issued from the Office of the President and signed by Mr
Kwadwo Mpiani, Chief of Staff and Minister for Presidential Affairs,
said "Government will continue its commitment to support the utility
companies by giving them more funds to upgrade their investment in
order to improve service delivery to the public." The statement
said while government accepted the PURC's view that there should be
full cost recovery in provision of utilities, it believed that the
time for the adjustment was not right especially in view of the
relatively poor quality service and current load shedding exercise.
Both the electric and water utilities remain state-owned.
Management of the water utility has been under contract of a private
South African/Dutch firm for several months.

AfDB Launches Fixed Rate Eurobond in Cedis
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7. (U) The African Development Bank launched its first
cedi-denominated bond in mid-October. The bond is a two-year fixed
rate Eurobond and is the first issuance by an IFI of a bond in any
West African currency. The bond issue is expected to be equivalent
to between USD 20 million and USD 30 million.




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POLITICAL HIGHLIGHTS:
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Offinso Parliamentary By-election
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8. (U) Dr. Owusu Achaw Duah, a Medical Practitioner and candidate of
the ruling New Patriotic Party, won a Parliamentary by-election in
Offinso-south,0WQQ*`Idmoah of the main opposition National Democratic Congress,
took only 34 percent. Although the NPP declared the win as "the
party's touch for victory in the 2008 general elections", the
results are not significant relative to the party's popularity or
potential showing in the 2008 elections.

Violence in Wa
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9. (U) Following the death of the chief of the Wala people in the
Upper West Region, four related families are currently embroiled in
a succession struggle that recently escalated into communal violence
at the end of Ramadan. Alhaji Issah Seidu, who is leader of three
of the families and who has declared himself to be the next Wa Na
(chief of the Wa) Head of the three royal gates, was attacked along
with his entourage during Eid-al-fitr prayers. Claiming
interference in the succession by politicians, Seidu publicly
accused the Regional Minister of plotting to assassinate him. The
Regional Minister has denied the accusations.


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