The Finance Minister, Ken Ofori-Atta, today presented the budget statement for 2019 to parliament. There’s a whole lot to go through but in this post I will focus on 3 items that I think investors should look out for.

IMF Hands Off

The 2019 budget is the first budget statement after the end of the extended credit facility that the country arranged with the IMF in 2014. The implications are that the extra level of pressure to keep the fiscal deficit on target would be gone. The finance minister expects a fiscal deficit of 4.2% of GDP in 2019. Bear in mind that this is on the new GDP figure which was expanded by 25% due to rebasing. A failure to keep to fiscal targets would raise the yield on government debt securities, making them more attractive for investors. (Already yields on T-bills are seeing a slight increase).

Protecting investors’ deposits

The minister in his statement assured investors that their deposits were safe. He explained that about GH¢11 billion in deposits had been protected due to the interventions of the government in taking over 5 banks and helping GCB take over 2 more. A similar programme, he said, is underway for finance houses, microfinance institutions, rural banks and others. If this is implemented, it would bring relief to several finance companies and clients who are feeling the impact of the current liquidity crisis. A successful implementation would increase the attractiveness of fixed deposits and other products offered by non-bank financial institutions as confidence in them would return.

long, long term investing is here

The government plans issue bonds of about US$3 billion for critical infrastructure projects and for liability management. But that is not all the plans for borrowing on the international capital market. The finance minister hinted at an ambitious plan to refinance about 50% of the nation’s entire debt of GH¢170.8 billion with ultra-long sovereign bonds including a century bond. The idea is to get lower interest rates for the debt and raise capital for huge infrastructure projects. Big time investors would be watching this development with interest, as it could present an opportunity for a rare investment product.