Rachel Savage and Francis Kokoroko

ACCRA, Reuters – Isaac Siaw from Ghana was transformed by the launch of mobile payments in 2017 by his telecoms provider.

The 20-year old store saw sales boom because customers didn’t have to pay cash anymore for household items such as superglue and razors.

Siaw suggested that he might return to full-time cash as Parliament considers the new electronic payment tax of 1.75%.

The e-levy was proposed by Ken Ofori-Atta, Finance Minister, in November in order to broaden the tax net. However, opposition to the proposal caused a brawl within parliament one month later and failed to pass.

The government intends to submit the bill again next week in an effort to expedite its passage. If it’s not passed by the legislature before that date, lawmakers will be forced to recess.

According to estimates, the tax could be applied to mobile money payments and bank transfers as well to inward remittances.

However, Ghana’s public debt of $50.8 billion is not expected to decrease.

Siaw stated that the prices for goods are increasing every day. It won’t work for businesses if a customer has to pay more for a commodity.

Many believe that the e-levy could make Ghana’s small businesses less cash-based and force them to move away from the digital economy. However, officials view it as the solution to financial woes and could even cause an economic crash.

The February consumer inflation rate was 15.7%, up from 14.7% in 2016. This mark is the highest recorded since 2016. This year’s cedi loss was 20% against the US dollar, which is second to the Russian ruble. Public debt remains at around 80% of the country’s gross domestic product.

For a related graphic on Ghana’s Cedi shedding value, click https://tmsnrt.rs/3wOpVlv

Ofori-Atta stated at last week’s press conference that “the unyielding position of the minority parliament against the E-levy… gravely affected(ed?) investor confidence in our ability to implement programs or settle our debts.”

PRAYERS

Global Info Analytics has found that around 73% Ghanaians don’t support the elevy even though it would overthrow Ghana’s dysfunctional parliament.

Analysts believe it will help reduce spreads and reassure bond investors as well lenders about Ghana’s ability generate revenue through tough decisions.

Razia Khan (OTC) chief economist for Africa & the Middle East, Standard Chartered. It’s unclear where revenue upside will come from if there is no major revenue measure.

The yields on Ghana’s Eurobonds has risen in the past year. This effectively shuts it off from international markets as investors view the debt to be too risky.

According to Refinitiv data, Ghana’s Eurobond 2026 worth $1 Billion is below par, trading at 79.25cs with an yield exceeding 18%.

Fitch, the ratings agency for Ghana, downgraded Ghana’s credit rating by reducing it to B- in January due to this lack of access. Moody’s downgrade (NYSE:) a month later caused Ghana’s sovereign dollars bonds to plummet further.

For a related graphic on Ghana’s bonds under pressure, click https://tmsnrt.rs/3DeF28V

JP Morgan analysts predicted that the e-levy would pass in parliament at 30%, according to a JP Morgan note.

They suggested that Ghana could not obtain the International Monetary Fund’s debt relief program without it. This is something Ghana has so far refused to do.

Ofori-Atta explained that “We have a crucial 14 or 15 days to make this happen.” “I am certain that we can pass the electronic levy if you will pray with me.”

($1 = 7.4500 Ghanaian cedi)

Cooper Inveen also reports and writes; Bate Felix, Richard Chang edit.