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Ghana elections: Do they pose any major risk?
In September, Moody's investor's service affirmed Ghana's issuer and unsecured rating at B3 and changed the outlook to stable from negative. As the West African nation gears up for elections tomorrow, Ayalenesh Tafesse, Country Risk Analyst at Rand Merchant Bank join CNBC Africa to analyse the possible risks associated with the elections.
Tue, 06 Dec 2016 08:06:07 GMT
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AI Generated Summary
- Historical divisions along ethnic and political lines in Ghana's elections add complexity to the current election landscape
- Potential runoff elections pose challenges and require close monitoring of swing voters' decisions and impact on investors
- Contrasting economic policies of incumbent and opposition parties present different visions for Ghana's economic future
As Ghana gears up for its upcoming elections, the nation finds itself at a critical juncture where the economy serves as the battleground for political contestation. Analysts and economic experts are closely monitoring the possible risks associated with the elections and the implications it may have on investors. Ayal and Nej Tafisi, a country risk analyst at Rand Merchant Bank, shared valuable insights on the current state of affairs and what the future may hold for Ghana.
The elections in Ghana have historically been characterized by divisions along ethnic and political lines. With the country's economy facing challenges such as high inflation, electricity supply issues, and corruption scandals, voters find themselves at a crossroads. The current ruling party is grappling with discontent among voters, but the uncertainty of whether this will translate into a shift in allegiances adds to the complexity of the election landscape. As a result, analysts describe the upcoming elections as 'too close to call,' with contrasting outcomes for the two major political parties, NPP and NDC.
Ghana has built a reputation for holding peaceful elections, and the promise of a peaceful 2016 election remains a key focus. However, the possibility of a runoff election looms if neither candidate secures the required 50% threshold. This scenario presents a critical juncture where swing voters and the decisions of minor candidates could sway the final outcome and potentially impact investors' confidence. The smooth conduct of runoff elections is crucial to avoid disputed results that may raise concerns among investors.
Economic policies advocated by the different political parties in the election further add a layer of complexity to the electoral narrative. The incumbent government emphasizes infrastructure development and regional integration, with a focus on policy continuity if re-elected. In contrast, the opposition party aims to create a more enabling environment for businesses, reduce government borrowing, and promote private sector-led growth. Noteworthy is the opposition party's alignment of monetary and fiscal policy under a former central bank deputy governor, signaling potential economic policy adjustments.
Ghana's engagement with the International Monetary Fund (IMF) through a three-year extended credit facility agreement has brought stability to the economy. The IMF serves as a backstop against excessive spending before elections, maintaining fiscal discipline and reassuring investors. The stabilization of the currency and lower bond yields reflect improved investor sentiment and confidence in Ghana's economic outlook.
Looking ahead, Ghana anticipates economic recovery in 2017, with a projected GDP growth of 8.7%. The expected growth is underpinned by upcoming oil production from ten oil fields, signaling a positive trajectory for the economy. However, concerns persist regarding high inflation rates and overreliance on commodities like oil and gold. Diversification of the economy remains vital to shield Ghana from external shocks and ensure sustainable growth.
Overall, the Ghanaian elections stand as a pivotal moment where economic challenges intersect with political dynamics, shaping the country's future trajectory. Investors closely monitor the election outcomes and the subsequent economic policies to navigate potential risks and opportunities in Ghana's evolving landscape.
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