Republic of Ghana

Presentation to Investors

September 2014

2

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Presentation Team

3

Hon. Seth Terkper

Governor Henry Wampah

Hon. Kweku Ricketts Hagan

Dep. Governor Millison Narh

Honourable Minister of Finance

Deputy Governor, Bank of Ghana

Governor, Bank of Ghana

Hon. Deputy Minister for Trade and Industry

Dr. Samuel Ameyaw Director, Debt Management Division, Ministry of Finance

Dr. Alhassan IddrisuDirector, Economic Research and Forecasting, Ministry of Finance

Contents

1. Introduction

2. Economic and Policy Update

3. Foundations Remain Strong

4. Financing for Growth

5. Conclusion

1. Introduction

Introduction

Territory & Capital 238,537 sq. Km; Accra

Population (2013) 27 million

Nominal GDP (US$ bn 2013) 42.48 (using period end exchange rate / 47.68 (using period average exchange rate of 1.96)

GDP Growth (2013) 7.1%

GDP Per Capita (US$, 2013) 1,604.1 (using period end exchange rate ) / 1,804.3 (using period average exchange rate of 1.96)

Sovereign Credit Ratings Moody’s: B2 (Negative) / Fitch: B (Negative) / S&P: B (Negative)

Currency Ghanaian Cedi (GHS)

Average Exchange Rate GHS:USD: 2.75 (through August 28, 2014)

System of Government Multi-party democracy with five (5) year election cycles since 1992. Next general elections scheduled to take place in December 2016

Borders Côte D'Ivoire, Togo, Burkina Faso

Ghana is one of the key lower middle income economies in Africa. Despite short term challenges, Ghana’s broad-based commodities endowment and strong institutional framework support a bright future outlook

Background

• Starting in 2008, Ghana embarked on an ambitious adjustment program to rationalise its public sector wage structure labelled Single Spine Salary Structure (SSSS)- Ghana’s fourth attempt at rationalising public sector wages

• SSSS implementation, starting in 2010, was undertaken from a position of strength with record high commodity prices, very high GDP growth rates and accelerated infrastructure development

Short Term Challenges

• The rise in wages and arrears related to SSS implementation, combined with rising subsidy expenditure, higher interest payments, a shortfall in corporate income tax from the oil sector and grants put pressure on the budget resulting in large deficit overshoots in 2012 and 2013

• Economic management was further compounded by the onset of external pressures in 2012 and 2013, notably disruption in gas supply and fall in gold and cocoa prices, which have put stresses on the fiscal and current account deficits, the exchange rate and the broader macro-economy

Our Plan

• As a result, we are engaging the IMF to get policy support as well as funding for temporary balance of payments support• We are also committed to consolidating the gains from our “home-grown” programme which largely adheres to IMF recommendations in the 2014

Article IV Report on Ghana and has already set the foundation for sounder public financial management• We anticipate the IMF Programme will entail tightening our budget substantially. We have a strong institutional history with the IMF and believe our

working relationship will facilitate the negotiation process

EncouragingOutlook

• Despite the short term pressures Ghana’s fundamentals are robust: a diverse economy, large commodities base with rising oil and gas production, and strong institutional framework to support our long-term growth targets

6

2009 2010 2011 2012 2013

0%

3%

6%

9%

12%

15%

6.8% 6.9% 7.6%

8.9% 8.8%

5.8% 6.5%

4.0%

11.7%

10.1%

Wage bill (% of GDP) Fiscal Deficit (% of GDP)

Understanding Ghana’s Short Term Outlook

Ghana faces short term challenges on the back of fiscal imbalance and underperformance combined with macroeconomic pressures

• In 2010, we started to gradually implement the revised public sector pay structure under the Single Spine Salary Structure (SSSS)

• This was done in a bid to reduce the disparities in pay across the public sector and increase productivity

• However, challenges with determining relativities and scales including unanticipated payments of arrears led to the wage bill exceeding budget during 2011-2013 and contributed to an expanding fiscal deficit and rising public debt burden

• At the moment, we have migrated over 99% of public sector workers onto the new SSSS pay structure, and paid all of the arrears owed to workers

7

Source: Ministry of Finance, Government of Ghana, Ghana Statistical Services

Structural adjustments lead to fiscal challenges

2012 Deviations 2013 Deviations H1 2014 DeviationsGHS millions % of GDP GHS millions % of GDP GHS millions % of GDP

Revenues

Grants (389.4) (0.52) (519.0) (0.56) (293.5) (0.26)

Corporate Income Tax (oil) (384.1) (0.51) 311.0 0.33 182.5 0.16

Non-oil Tax Revenue (112.3) (0.15) (3,155.3) (3.38) (828.2) (0.72)

Expenditures

Wages and Salaries 1,028.0 1.37 777.6 0.83 139.2 0.12

Wage Arrears 881.0 1.18 922.6 0.99 (124.3) (0.11)

Interest Payments 245.0 0.33 1,202.6 1.29 203.0 0.18

Utility and Fuel Subsidies 339.0 0.45 135.8 0.15 17.7 0.02Goods & Services 354.7 0.47 (293.2) (0.31) (95.2) (0.08)

Causes of fiscal overruns (deviations from budget)

Understanding Ghana’s Short Term Outlook (cont’d)

Ghana faces short term challenges on the back of fiscal imbalance and underperformance combined with macroeconomic pressures

External pressures build as commodity prices collapse

Cedi depreciation fuels inflation and exacerbates expenses

• The government has sought to bring the fiscal deficit under control via a mixture of expenditure control and revenue measures

• However, economic management and fiscal consolidation were further complicated by unforeseen external factors:

• In 2012 / 2013, prices for Ghana’s key commodities declined

• Power disruptions contributed to declines in domestic output

• The pass-through effects of cedi depreciation along with subsidy reductions fuelled inflation

8

1.0

2.0

3.0

4.0

5.0USD:GHS

Source: Ministry of Finance, Bloomberg

Recognizing these challenges, the Government began implementing a far-reaching “home-grown” policy agenda which it expects will be supported by the IMF Programme, when finalised

Current account balance deteriorates

2009 2010 2011 2012 2013H1

2014

(1,398)

(2,770)

(3,546)

(4,922)

(5,704)

(1,944)

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

Jan-14

Jul-14

1500

1700

1900

2100

2300

2500

2700

2900

3100

1000

1200

1400

1600

1800

2000

Cocoa Gold

9

Expected oil production from TEN and Sankofa fields in 2016/17

Ghana is Implementing Robust Measures to Tackle Key ChallengesThe home-grown programme aims to restore fiscal equilibrium and stem the impact of external pressures. While many issues have been addressed, we are seeking to resolve remaining challenges with the IMF’s support

• Revenue below projections, due to decrease in commodity prices and grants, along with a slowdown in economic activity arising from energy shortfalls

• Wage bill contained, but rising expenditure largely due to increase in domestic funding costs

• Power disruptions and lower output due to the breakdown of the West African Gas Pipeline

• Pullback in donor funding • Initial cocoa price weakness and

continued gold price weakness

• Inflation bump started with reduction in subsidies for petroleum and utilities to help restore fiscal equilibrium

• Fueled by pass-through effects of exchange rate depreciation as the Balance of Payment (BoP) came up short

Addressing Key Issues

Fiscal Deficit Cedi Depreciation and Inflation Increase External Pressures

Broaden tax base and strengthen revenue collection

Wage containment, curb on public expenditure

Oil production exceeds target and cocoa sales at higher prices

Monetary policy tightened

Greater oversight of the foreign exchange market

Proactive public debt management

Addressing donor concerns and monitoring disbursements

In-country Gas plant expected to feed power stations by Q4-2014

Ghana not yet affected by Ebola Virus Disease but on high alert

Ghana has approached IMF for policy support and BoP funding

Budget realignment and structural reforms Macro prudential measures

2003-2006 PRGF 2009-2012 ECF 2014 Article IV “Home-Grown Programme”

Tax Policy and Revenue Administration

• VAT rate increase• Increase in Road Fund Levy• Debt Levy for Tema Oil

Refinery (TOR) Debt• Extension of National

Reconstruction Levy• Creation of a large

taxpayers unit

• National Fiscal Stabilization Levy

• Royalty rates increased• Ad valorem excise duties

on tobacco and beverages

• Administration reforms

• Higher real estate tax rate• Reconsideration of windfall tax• Increase in ad valorem tax on

fuel• Higher excises• Streamlining of tax exemptions

and administration

• VAT increased and base broadened• Road fund and special import levy• National Fiscal Stabilization Levy• Change in petroleum tax to ad valorem• Environmental tax• Increased withholding tax• Free zone income tax review

Public Expenditure Management and Commitment Control

• Systems upgrades to cover key Ministries

• Personnel audit• Implement automatic price

adjustment for petroleum pricing

• Systems upgrades to cover key Ministries

• Civil service payroll audit• Freeze on issuing

commitment certificates for new investment projects

• Time-bound targets for removing subvented agencies from government payroll

• Multi-year wage agreements• Review and streamlining of

allowances• Not replacing staff in areas of

overstaffing

• Ghana Integrated Financial Management Information System (GIFMIS) fully in place

• New HR management system• Weaning off subvented agencies• Payroll system upgrade and audits• Net freeze on employment in some sectors• Moratorium new projects• Regular fuel and utility price adjustment

Debt Management

• Fiscal policy focused on reduction of domestic debt

• Adopt a debt management strategy

• Full debt management strategy • Plan to move to recovery schemes for

commercially viable projects• Emphasis on paying for counterpart

funds to fast-track disbursement of existing loans

Previous Experience and Recommendations Have Shaped Current PoliciesA historical comparison indicates that Ghana’s current home grown measures are built on and conform to the IMF’s recommendations

10

Timeline view of Ghana’s Historical Engagement with IMF

Ghana implements and consults IMF on its “home-grown” programme

Economic Reform and Structural Adjustment Programmes (ERP/SAP) with IMF

Ghana becomes member of IMF

IMF grants Ghana a US$581.28 million Extended Credit Facility

Ghana requests initiation programme discussion with IMF

HIPC Decision Point

1957 1999-2002 Feb 2002 2003-2006 2009-2012 20141983-1999

IMF grants Ghana a US$209 million Enhanced Structural Adjustment (ESA) Facility

US$258 million Poverty Reduction and Growth Facility

2013-2017

Support Requested from IMF

To support the ongoing rebalancing, Ghana has approached the IMF for support in addressing current challenges

• Ghana submitted its “home-grown” programme to the IMF board during the Article IV consultations in 2014 and received feedback from IMF on how to improve the home-grown programme

• Ghana requested formal support from the IMF in early August to initiate discussions on an economic programme that could entail receiving policy and credit support from IMF

• The IMF Programme, when agreed, should enhance more significant and durable consolidation over the medium term and provide policy tools to manage volatilities and productivity

Ghana’s Request

• Full mission to arrive in country in September to initiate discussions

• Earliest expectation is that any agreed Programme might be ready for IMF Board approval before end of 2014Timelines

Ghana’sCommitment

• Ghana is committed to reaching an agreement with IMF as it has always done

• Ghana has already begun preparing to receive the IMF mission and is targeting the end of 2014 to reach an agreement to a medium term programme of policy support [should be able to be in place before the end of 2014

• Ghana has a long history with IMF and has a track record of fulfilling IMF programme requirements

Expected Impact

• Ghana is seeking a funded IMF program that would provide temporary balance of payments support and encourage resource flows from our development partners

• Ghana to be eligible for both a stand-by arrangement or concessional funds via an Extended Credit Facility (ECF)

• Previous IMF program was a three-year ECF under which IMF provided Ghana with US$581.28 million

11

12

A Beacon for Democracy Rising Middle Class Advantage

Diverse Economy and Focused Approach to Address Challenges

Committed to fiscal reforms and development agency support to tackle short term pressures

Economic diversity supports the long-term outlook for Ghana, including moving into value-added sectors such as gas-processing

Ghana benefits from a relative diverse domestic economy with services sector which accounted for an estimated 49% of GDP in 2013

Robust framework for managing oil wealth ensures that oil revenues are put to productive use (Petroleum Revenue Management Act (PRMA) and Ghana Petroleum Funds)

Ghana’s Medium-Term Prospects Remain Bright

One of Africa’s emerging oil exporters

New hydrocarbon projects coming on-line (including second FPSO, TEN, Sankofa fields)

Gas production expected in Q4 2014

2nd largest producer of cocoa and among top 10 gold producers globally

Strong political stability and government effectiveness promote growth

Improved regulatory quality and anti-corruption measures encourage investments

Large middle class at 47% of the total population

Outranks peers on most measures of human development

Evidence of successful poverty reduction

A Growth Outperformer An Emerging Commodities Powerhouse

One of the fastest growing countries globally with 13 consecutive years of robust growth above Sub-Saharan Africa average

Nominal GDP has more than doubled since 2006

Growth of over 7% in 2013 despite challenges

Despite current challenges, Ghana’s robust fundamentals will support continued inclusive development and high growth

*TEN- Tweneboa-Enyera-Ntomme*FPSO- Floating production, storage and offloading vessel

13

Operator Discoveries Hydrocarbon Type StatusGNPC Ebony Condensate/Gas Marginal

Tweneboa-1 Gas Condensate Plan of Development Tweneboa-2 Oil Plan of Development

Owo/Enyenra-1 Oil Plan of Development Ntomme Oil & Gas Plan of Development

Wawa Oil & Gas ExplorationOdum-1 Heavy Oil MarginalTeak-1 Oil & Gas AppraisalTeak-2 Gas Appraisal

Banda-1 Oil MarginalMahogany Deep Light Oil Appraisal

Akasa-1 Light Oil & Gas AppraisalSankofa-1 Gas Appraisal Completed

Gye Nyame-1 Gas Appraisal CompletedSankofa East Oil & Gas ExplorationParadise-1 Oil & Condensate Exploration

Hickory North Oil & Condensate ExplorationAlmond Oil & Condensate ExplorationBeech Oil ExplorationPecan Oil ExplorationPN-1 Oil ExplorationCob Oil Exploration

Dzata-1 Oil & Gas Appraisal

New discoveries in 2013 adds up to a total of 28 new fields discovered. Gas also coming on-line in Q1-2015

Ghana’s Oil Sector to Boost Future Growth

• TEN Project: Recoverable reserves of 245 mmbls of oil and 365 bcf gas. First oil expected in 2016/ 2017• Sankofa – Gye Nyame Project: 116mmbls of oil and 1,110bctf gas. First oil expected in late 2016 / early 2017• Western Corridor Gas Project:

• Pipelines installed and tie-in to the Jubilee floating production, storage and offloading vessel (FPSO) in Q4 2014• Will supply 120 mm btu gas daily to VRA to fuel thermal power plants • Funded by a US$850mn loan from CDB and US$150mn counterparty funding from Government of Ghana

• New Discoveries: 2 new discoveries in 2013 at Cob and PN-1 fields

World-class partners helping to deliver key projects

As at June 2014

Proven Oil Reserves(mnboe)

1,284

Proven Gas Reserves (Bcf)

2.177

Snapshot of current reserves

Source: GNPC

Post-Jubilee discoveries being developed with world-class partners

*TEN- Tweneboa-Enyera-Ntomme

2. Economic and Policy Update

15

Growth Steady but Macro Challenges Persist

  2012 Actual

2013 Projected

2013 Outturn

2014 Projected*

Real GDP Growth (%) 8.8 8.0 7.1 7.1

Headline Inflation (end of year %) 8.8 8.9 13.5 13.0% (+/-2%)

Revenues (Ghs mn) 16,668 22,533 19,472 26,230

Expenditures (Ghs mn) 25,317 30,544 28,926 36,358

Budget Deficit (% GDP) (11.5) (9.0) (10.1) (8.8)

Public Debt (% GDP) 48.0 - 55.8 -

Current Account Deficit (4,922) (5,337) (5,704) -

Gross International Reserves (US$ mn) 5,349 - 5,632 -

Reserves (Months of Import Cover) 3.0 3.0 3.1 3.0

GHS:USD Exchange Rate (period end) 1.88 - 2.20 -

Although growth has remained strong, macroeconomic headwinds and fiscal challenges persist and Ghana is now engaging the IMF on implementing a Programme to help realign the economy

Source: Budget Statements 2013 and 2014* Supplementary Budget 2014

Curbing Fiscal Deficit is a Key Focus for Ghana

Targeted action improved Ghana’s fiscal situation with signs of improvement seen in H1 2014

Revenue pressures and Cedi depreciation effect on expenditure figures compounded the fiscal and current account deficits

Key pressure points identified

2009 2010 2011 2012 2013 2014 (proj.)

H1 2014

5.8 6.5

4.0

11.710.1

8.8

4.2

2009 2010 2011 2012 2013 2014 Projected

18.80% 19.14%

21.58% 22.24%20.83%

22.90%

23.00%25.05%

22.45%

27.94% 29.38% 29.40%Revenues & Grants (% of GDP)

Revenues (% of GDP) 2012 2013 Comments

Total revenue 22.24% 20.83%

Income & Property Taxes 7.39% 6.74% Economic headwinds resulted in reduced domestic activity which led to shortfalls in tax revenuesTaxes on Domestic Goods & Services 5.62% 5.17%

International Trade Taxes 3.69% 3.39% International trade taxes came in below budget due to lower import volumes Non-Tax Revenue 3.99% 4.73% Non-tax revenue trending higher to provide much needed bufferGrants 1.55% 0.79% Slower disbursement of donor grants exacerbated the deficit

Expenditures (% of GDP)

Total expenditure 27.94% 29.38%Compensation of Employees 9.58% 10.14% Higher than expected wage bill due to single spine salary structure related arrearsGoods & Services 1.76% 1.55% Cost-cutting measures which resulted in a smaller goods and services bill Transfers (subsidies and grants to govt units) 5.29% 5.64% Macroeconomic and external pressures led to an increase in interest payments and

transfersInterest Payments 3.25% 4.70%Capital Expenditures (Total) 6.63% 6.49%

Prudent management of capital and other expenditures but avoid curtailing growthOthers 1.43% 0.85%

16

Source: Ministry of Finance, 2014 Mid-Year Budget Review Statement

Fiscal deficit (% of GDP)

17

• VAT increase of 2.5 percentage points and a broadening of the VAT base

• Withholding tax on commercial rent now 15% from 8%Broaden tax base and remove inefficiencies

• A proposal of a moratorium on public sector wage increase in 2014 (with only a COLA uplift)

• Net freeze on employment into some sectors of the public serviceAggressively manage public sector wage bill

Tax Reform

Wage Measures

• Strengthening expenditure management through GIFMIS

• Restrain utility and petroleum subsidies

• Reduce the public sector wage bill as a share of tax revenue

• Reduce “ghost” workers via payroll audits and electronic payroll platforms (ESPV)

Curb and streamline public expenditures

Realign Expenditures

• Move to a credit and refund system from upfront exemptions

• Ghana Investment Promotion Centre (GIPC) Act being reviewed to reduce exemptions

• Strengthening tax compliance through electronic platforms (TRIPS)Minimize abuse, tax evasion and

tax avoidance

Exemption Reduction

Focused Action to Reduce Fiscal Deficit in 20142014 Budget introduced a number of policy initiatives, which have been implemented, to

control the deficit

Source: A Policy Statement on the Ghanaian Economy, April 1, 2014

Stricter programme-based budgeting process and fiscal decentralization being adopted

18

Pay Policy - Key Deficit Driver is Being Tackled

Wage Negotiations

• Single Spine Salary Structure (SSSS) cost has been higher than expected due to legal challenges within Ghana and union negotiations

• Public sector wage containment to manage down costs going forward – negotiations with labour ongoing with encouraging signs both for this year and medium term

• Wage freeze in inflationary environment lowers costs considerably – with only extra cost one-off Cost of Living Allowance (COLA) negotiated in May 2014

• Committed to reducing level of wages as a percentage of revenue

Removing Agencies from Payroll

• 12 agencies have been identified as able to independently meet personnel payments

Recruitment and Replacement

• Hard constraints set on budgeted wages and salaries at Ministry level for recruitment and replacement of staff

Payroll Audit• Payroll audit to focus on Ghana Education Service and

Ghana Health Service (1st Phase)

• The review and headcount exercise extended nationwide

IT and Systems Upgrades

• Payroll system upgrade

• Electronic salary payment vouchers (ESPV) to reduce the phenomenon of “ghost” workers and reduce the size of the payroll

Successful negotiations have resulted in a salary freeze (apart from COLA) for government employees in 2014 while ongoing reforms aim to rationalise the government wage bill

Source: 2014 Budget Statement, 2014 Mid-Year Budget Review Statement

Wage bill overshoot has been one of the key drivers of the deficit

2011

2012

2013

2014 (Jan-Jun)

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

6.9%

8.1%

8.4%

4.0%

7.6%

8.9%

8.8%

4.0%

Outturn / GDP Budget / GDP

19

Budget On-Track for H12014 but Risks RemainTighter fiscal management is evidenced in H1 2014 with the wage bill under control and the overall deficit reaching -3.4% of GDP versus projected level of -3.6% of GDP

GHS millions Projection OutturnTotal Expenditure 15,401 13,532

Compensation of Employees 5,358 5,051

Use of Goods and Services 421 395

Interest Payments 3,314 3,243

Subsidies 40 58

Grants to Other Government Units 3,288 1,900

Social Benefits 27 1

Others 358 460

Capital Expenditure 2,594 2,425

GHS millions Projection OutturnTotal Revenue and Grants 12,153 11,145

Tax Revenue 9,044 8,630

Taxes on Income and Property 4,217 3,946

Taxes on Domestic Goods and Services 3,090 2,955

International Trade Taxes 1,737 1,729

Social Contributions 82 113

Non-Tax Revenue 2,470 2,061

Grants 556 342

Slower than expected growth and macro headwinds affected income taxes

Compensation to employees below forecast

Reduced expenditure to other government units and social benefits

Slower utilisation of capital budget due to grant shortfalls and revenue constraints

Jan – June 2014 Revenues largely in line with budget

Jan – June 2014 Expenditure lower than forecast, despite overruns in interest payments

Source: 2014 Mid-Year Budget Review Statement

Total revenues and grants lower than expected signalling that risks persists

20

Tight Policy Stance to Deal with Rising Inflation

Inflation rose through H1 2013 with the combined impact of petroleum prices adjustment, the energy crisis and demand pressures from an expansionary fiscal stance during the 2012 pre-election period

Seasonal food harvest results in marginal decline

Reduction in subsidiaries for petroleum prices, transport fares and utility tariffs

see inflation rise in Q4-2013 to 2014

20

Source: Bank of Ghana Inflation Outlook Report, February 2014, Bank of Ghana

Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Mar-14 June-14

9.9 10.2 10.6 10.7 10.9 11.7 11.8 11.5 11.7 13.1 13.3 13.5 14.5 15.0

Pressures from Cedi depreciation, the fiscal deficit and effects of fuel price adjustments have pushed headline inflation out of the target band. As a result the BoG has maintained a tight policy stanceEvolution of inflation (%) through 2013 reveals key drivers are non-food-related elements

Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-1410

12

14

16

18

20

12.513.5

15.0 15.0 15.0 15.016.0 16.0 16.0

18.0 18.019.0Monetary Policy Rate (%)

BoG used the Monetary Policy Rate (MPR) as a tool to address inflationary pressures

BoG has raised MPR by 300bps since Dec 2013

21

Reining-In Cedi Depreciation

2007 2008 2009 2010 2011 2012 2013 417910.5

1.0

1.5

2.0

2.5

3.0 GHS:USD (period end)

Cedi has depreciated rapidly over the last 12 monthsRate of depreciation is now expected to slow

following targeted action from BoG

Shortfalls in balance of payments and reduced confidence have led to currency pressures over the past year. However, a tightening of regulation and monetary policy is beginning to help to stem depreciation pace

• Monetary policy tools are the primary mechanism for managing the Cedi depreciation:

MPR raised to 18.00% in March 2014 then to 19.00% in July 2014

Cash Reserve requirement raised by 200bps to 11.00%

Net open position of banks lowered on both single currency and aggregate currency basis

• In order to complement these traditional measures, in Q1 2014, the Bank of Ghana implemented a series of enhancements to ensure transparency, streamline activity and reduce leakages in the foreign exchange markets:

•  Strengthening the requirements for banks to repatriate export proceeds to local banks to ensure more foreign exchange supply to banks

• More stringent Anti-Money Laundering measures for forex bureaus giving greater oversight on retail demand

• Measures are being monitored to determine their efficacy and amended where necessary

BoG deployed multiple measures to restore exchange rate stability

Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-142.00

2.50

3.00

3.50

4.00 GHS:USD

Source: Bank of Ghana, Bloomberg (Jan 2014- Aug 2014)

22

In light of ongoing pressures in the economy since the budget was proposed, the Government presented in July a mid-year review and supplementary estimates for 2014. The supplementary estimates make adjustments to key macro targets to account for:

• Higher interest costs due to rising interest rates, borrowing and exchange rate depreciation• Erratic gas supply from West Africa gas pipeline and delays in completing gas infrastructure• Grant shortfalls• Higher subsidy costs due to slower than expected implementation of automatic utility and petroleum price adjustments• The cost of public sector wages including the COLA (Cost-of-Living Allowance)

2014 Targets and Medium Term Goals

The Government is taking decisive action to correct current imbalances in the economy and ensure positive future prospects for Ghana

Achieve and Sustain Macroeconomic Stability:

• Average GDP growth of 8.7% (2014-2016) and average non-oil real GDP growth of 8.2%

• Stabilization of public debt to GDP at 45% by 2016

Fiscal Consolidation:

• Gradual consolidation to achieve deficit of 6.0% of GDP by 2017

• Programme-based budgeting and fiscal decentralization

• Wage bill reduction

• Shit to commitment-based budgeting and automation

Monetary Policy:

• Inflation of 9.5% within a band of +/- 2 percent

• Gross international reserves ≥4 months of import cover

• Reduce BoG lending to Government to at or below 5% of current-year revenue

Real GDP Growth: 7.1% from 8.0%End Period Inflation: 13.0% (+/-2%) from 9.5%

Gross International Reserves: Unchanged at 3x months of import cover

Fiscal Deficit: 8.8% of GDP from 8.5% of GDP

2014 Revised Targets Medium Term Goals

Source: 2014 Mid-Year Budget Review Statement

3. Foundations Remain Strong

Resolving Insolvency

Enforcing Contracts

Dealing with Construction Permits

Getting electricity

Getting Credit

0 10 20 30 40 50 60 70 80 90 100

27.763.363.664.365.7

73.476.3

81.081.382.5

Rank Country ScoreChange since

20001 Mauritius 82.9 7.32 Botswana 77.6 5.63 Cape Verde 76.7 6.04 Seychelles 75.0 5.55 South Africa 71.3 0.66 Namibia 69.5 2.37 Ghana 66.8 5.38 Tunisia 66.0 4.49 Lesotho 61.9 7.7

10 Senegal 61.0 4.3

Voice and Accountability

Political Stabil-ity

Government Effectiveness

Regulatory Quality

Rule of Law Control of Cor-ruption

010203040506070

32 30 2833 30 28

6251 54 56 55

63Sub Saharan Average Ghana

Pe

rce

nti

le R

an

kA Beacon of Democracy in Africa

24

Ghana is one of the most stable and best governed countries in Africa with an institutional maturity that provides the ideal foundation for future growth

Source: Mo Ibrahim Index 2013, World Bank 2013 Ease of doing business survey, World Bank Governance Indicators 2013Sub-Saharan Average derived from top 20 most populated countries* Distance to Frontier measures economy’s performance against the highest performers globally. Frontier score is 100

Consistently Ranks in Top 10 for African Governance (Mo Ibrahim Index 2013)

Ghana Continues to Outrank Peers Across All Measures of Governance

Year Rank Change

2014 67 102010 77

Economy Ease of Doing Business Rank

Sub Saharan Africa Rank

Mauritius 20 1Rwanda 32 2South Africa 41 3Botswana 56 4Ghana 67 5Seychelles 80 6Zambia 83 7Namibia 98 8Cape Verde 121 9Swaziland 123 10

Ghana’s business environment achieves scores close to those for the highest performers

Ghana Distance to Frontier*

25

Services49%

Industry19.00%

Agriculture 32%

Services49.50%

Industry28.60%

Agriculture 22.0%

Services Industry Agriculture

Strong and Consistent Growth Profile

Robust and Consistent Nominal GDP Growth

Growth continues to surpass sub-Saharan regional averages

Well Balanced Sectoral Contributions to GDP with a Leading Services Sector

2009 2013

• Despite challenges, a diverse domestic economy ensured that overall growth remained strong at 7.1% in 2013, with services boosting output

• Lower growth rate in 2013 can be attributed to disruptions in gas and hydro supply which contributed to power shortages, higher interest and inflation rates, declining world-wide prices of gold and cocoa (key exports for Ghana) as well as lower than forecasted Oil & Gas receipts

Nominal GDP (GHS billions)

2009 2010 2011 2012 2013 2014 (proj.)

0.0%

4.0%

8.0%

12.0%

16.0%

4.0%

8.0%

15.0%

8.8%7.1% 7.1%

Real GDP Growth (%)

2009 2010 2011 2012 2013 2014 (proj.)

0

30

60

90

120

36.6046.04

59.82

74.96

93.46

114.79

Source: Ghana Statistical Services, Ministry of Finance

Ga

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n

Bo

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an

a

Na

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ia

Gh

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a

Ke

nya

So

uth

Af..

.

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Se

ne

ga

l

Nig

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a

Ug

an

da

Za

mb

ia

Za

mb

ia

Ta

nza

nia

0%

20%

40%

60%

80% 75%

48% 47% 47% 45% 43%37% 36%

23% 19% 14% 14% 12%

% 2

01

1 P

op

ula

tio

n

HDI Rank Value Income index Education index Health index0%

20%

40%

60%

80%

54%

40%

57%

70%

46% 43% 43%

54%

Ghana Sub-Saharan Africa

HD

I In

de

x 2

01

1

• Ghana’s large middle class, successful poverty reduction and strong human development indicators are evidence of broad based and inclusive development policy

• The Ghana Shared Growth and Development Agenda (GSGDA) serves as a policy kit for poverty reduction and inclusive growth

• As incomes continue to rise the large middle class will contribute to increased consumption, bolstering long-term growth

• Ghana’s infrastructure development plans aim to improve

economic conditions in both urban and rural areas

Strong Record of Poverty Reduction and Development

26

Ghana’s large middle class is evidence of successful poverty reduction via an inclusive growth agenda and bodes well for future development

Source: Ghana Statistical Service, AFDB Middle Class Index, UN Human Development Index

Steady income growth has propelled Ghanato middle income country status

Ghana has one of the largest middle class populations in Sub-Saharan Africa

Ghana still outranks African peers across most measures of human development

2009 2010 2011 2012 20130

500

1,000

1,500

2,000

1,1171,364

1,606 1,603 1,604

GDP per capita (US$)

272009 2010 2011 2012 2013 H1 2014

0

4

8

12

16

20

5.8

8.0

12.813.5 13.8

6.98.0

10.9

15.8

17.8 17.6

7.2

Exports (LHS) Imports (LHS)

2009 2010 2011 2012 2013 H1 2014*0

4

8

12

16

2.553.80 4.92 5.64 4.97

2.14

1.872.22

2.872.83

2.27

1.16

1.42

1.94

2.222.09 2.63

1.26

2.77852.9761

3.8851

2.02

Gold Cocoa Oil Others

Viable External Position

Trade gap remains a challenge but narrowed in H1 2014

FDI and portfolio inflows which moderatedtrade deficit effects can still be improved

Diversified and growing exports with gold, oil and agriculture as key contributors

F.O.B Exports Value (USD millions)(USD mn)

Portfolio flows (US$ millions)

Prudent reserves management in face of macro challenges and seasonal FX inflows

Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-140

1,500

3,000

4,500

6,000

1.5

2.0

2.5

3.0

3.55,035

5,643 5,6325,306

4,877 4,722

2.8

3.1 3.13.0

2.7 2.7

Gross International Reserves Imports Cover(months) (US$ mn)

Source: Ghana Statistical Services, Ministry of Finance, Bank of Ghana (H1 2014 provisional data)*Gross international reserves at US$4.47 billion as at June 2014

2009 2010 2011 2012 2013 H1 2014*

0

2,000

4,000

6,000

8,000

551 1,110

6,820

4,904

3,946

425

28

An Emerging Regional Leader in CommoditiesA diversified commodities endowment with traditional gold and cocoa, enhanced by rapidly developing hydrocarbon production provides a powerful foundation for future growth

Ghana is one of the top 10 gold producers globally

Ghana’s oil reserves are comparable in size to other new producers on the continent

Rising crude oil production to be boosted by new wells

Co

te D

'Ivo

ire

Gh

an

a

Ind

on

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a

Re

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...

Nig

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a

Ca

me

roo

n

Bra

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Ecu

ad

or

0

400

800

1,200

1,600 1400

870

500 412230 220 185 1700

00

’s t

on

ne

Second only to Cote D’Ivoire, Ghana has a 20% share of the international cocoa market

Source: BP Statistical Review of World Energy 2014, Ghana as per Government of Ghana, US Geological Survey, AfDB, FAO

South Sudan

Equatorial Guinea

Chad Sudan Ghana0.0

1.0

2.0

3.0

4.0 3.5

1.7 1.5 1.51.2

Proved oil reserves (end 2012, billion barrels)

Ch

ina

Au

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Un

ited

S..

.

Ru

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Sou

th A

f...

Peru

Can

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a

Gh

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a

Uzb

ekis

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Mexic

o

Pap

ua N

...

Bra

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Ch

ile

0

100

200

300

400 370

250 230 205170 165

102 99.8 95 90 8760 56 45

Me

tric

to

nn

e

2014 2015 2016 2017 2018 2019 20200

15

30

45

60

75

90

39 4052

7682 83

77

million barrels

Composition of Petroleum Receipts

Distribution of Petroleum Receipts

H1-2014 Distribution of Petroleum Receipts

Item (US$ mn) 2012 2013

Royalties 150.7 149.0

Carried and Participating Interest

390.4 385.2

Surface Rentals 0.45 0.80

Corporate Income Tax

0 172.2

Gas Receipt 0 -

Total 541.6 707.3

Item (US$ mn) 2012 2013

Transfer to GNPC 230.9 186.1

Net Receipts for Distribution to ABFA and GPFs

310.7 520.9

o/w ABFA 286.6 204.9

o/w Ghana Stabilization Fund 16.9 221.3

o/w Ghana Heritage Fund

7.2 94.8

Total 541.6 707.3

Robust framework for managing oil wealth ensures that oil revenues are put to productive use

Oil Becoming Key Revenue Contributor

29Source: BOG Petroleum Funds Report, June 2013 and Petroleum Holding Fund & Ghana Petroleum Funds Report Jan-June 2014, Budget Statement 2014

Ghana Petroleum Funds Balances (Jan-Sep 2013)

US$ mnOpening

Book Value

Allocations

Net Income

Closing Book Value

Opening Book Value

Allocations

Net Income

Closing Book Value

Ghana Stabilization Fund 71.9 221.3 0.8 293.9 319.0 121.2 0.9 264.7

Ghana Heritage Fund 21.7 94.8 0.7 117.2 128.1 51.9 0.9 181.0

Total 93.6 316.1 1.5 411.1 447.1 173.1 1.8 445.7

Ghana Petroleum Funds Balances (H1 2014)

Item (US$ mn) H1-2014

Transfer to GNPC 80.5

Net Receipts for Distribution to ABFA and GPFs

482

o/w ABFA 204.5

o/w Ghana Stabilization Fund

121.2

o/w Ghana Heritage Fund 51.9

Total 562.5

30

Sound Banking System

Well capitalized banksNon-performing loans have trended downwards

despite macro challenges

• Due to BOG's robust supervision and sound policies, the banking system has improved in terms of capitalisation, soundness and liquidity, and the industry's expanding loan portfolio has improved in quality

• Under the current banking system, licensed banks may engage in both commercial banking and investment banking

• There are currently 27 universal banks which are diversified in geographic origin, corporate character and reach in the global financial markets.

• In addition to the universal banks, Ghana has a rural banking system in which 139 Rural and Community Banks (RCBs), which are licensed only for domestic banking, operate throughout the country

• Opportunities still exist to deepen the banking sector as only approximately 25% of the country's population has bank accounts

Robust regulatory supervision of the banking sector

2011 2012 2013 H1 2014*0%

5%

10%

15%

20%17.41%

18.56% 17.96%16.70%

Regulatory Minimum

of 10%

Source: Bank of Ghana

2011 2012 2013 H1 2014*0%

4%

8%

12%

16%14.15%

13.20% 12.70% 12.80%

5.86% 5.62%4.72%

5.46%

NPL Ratio NPL Excluding Loss Category

4. Financing for Growth

Overall Debt Profile Still Manageable but Domestic Interest Rates Remain HighDebt has risen due to fiscal overruns in recent years. However, Ghana needs to access more cost effective USD market funding in view of high domestic rates to better manage its interest expenses

39.3

9.7%9.9%

29.8%

12.0%Multilateral

Official Bilateral

Export/ Suppliers/ Buyer's Credit

Commercial

Other Concessional

Debt has increased steadily with an equal split between domestic and external debt

External debt is 100% long term and largely concessional (March 2014)

Source: Ministry of Finance

32

Domestic yields remain elevatedThere is a need to curtail interest

expense by limiting domestic borrowing

2009 2010 2011 2012 20130

1

2

3

4

5

0.8 1.1 1.31.9

3.8

0.30.3 0.3

0.6

0.6

1.01.4 1.6

2.4

4.4

Domestic External

Selectively Tap External Markets

• Tap international bond markets to reduce reliance on short-term, high cost domestic debt

Financing CAPEX

• Long-term debt to finance CAPEX via extended domestic yield curve and selective use of the Eurobond markets

Liquidity Management

• Utilisation of short-term debt for liquidity management purposes and less for capex

On-Lending and Escrow Policies

• Ensure that cost of debt service is managed in commercially viable projects through implementation of matched on-lending and escrow account policy

Loans to Priority Projects

• National priority project registry developed to better identify high-impact projects

Ghana Infrastructure Investment Fund (GIIF)

• Channel a portion of petroleum funds directly into infrastructure development

• Strategic infrastructure development with private sector partnership

• Support debt sustainability by requiring commercially viable projects to be self-financing

Establishment of Sinking Fund

• To fund debt redemptions and enhance debt sustainability

GHS billions

2009 2010 2011 2012 2013 June-2014

0%

20%

40%

60%

19.6% 19.8% 19.8% 23.0% 26.6% 31.2%

16.8% 18.0% 19.9%25.1%

29.2% 24.8%36.3% 37.8% 39.7%48.1%

55.8% 56.0%

Gross External Debt/GDP Gross Domestic Debt/GDP

* The External Debt from 2012 has been reclassified to reflect the facility type per creditor

*

91

-Da

y

18

2-D

ay

1-Y

r

2-Y

r

3-Y

r

5-Y

r

7-Y

r

15%

17%

19%

21%

23%

25%

27%25.0%

26.4%

22.5%

23.0% 24.4%

19.0%18.0%

23.0% 22.9%

22.0%

22.0%

19.2%

23.0%

Jul-14 Jul-13

33

Interim Funding Plans - Why Issue Now?

A number of high-impact projects in Ghana remain in need of funding for 2014 and beyond– so while capital expenditure has been reined-in, there are a limited number of capital projects that need to be financed now

Ghana is seeking to implement a number of critical projects for this fiscal year and also retire some high interest domestic short term debt

• Many of these projects are high growth and postponing them would be harmful to economy

• The 2015 budget must be read in November, and any unfunded projects will be rolled over into next year –producing a drag on growth and distorting capital expenditure planning

• Funding these long term infrastructure projects with short term domestic debt is still prohibitively expensive

• IMF is already aware of the bond issue and an IMF programme does not prohibit us from external borrowing (example is the US$ 3billion CDB loan in 2011)

Why Now?Projects Have Been Carefully Selected

Projects that will help sustain high growth even during the period of fiscal consolidation

Focus on infrastructure projects that will form backbone of economy for next decade in sectors such as power, energy, roads, water, housing and transport

Selection of projects where funding unlocks counterparty funds with development partners, increasing the impact on the economy partners include the World Bank and the United States

34

Proposed Transaction Terms

Issuer The Republic of Ghana

Issuer Ratings Moody’s: B2 (Negative) / Fitch: B (Negative) / S&P: B (Negative)

Format 144A / Reg S

Status Senior Unsecured

Currency US Dollar

Size USD [] million

Tenor [] years

Expected Issuer Ratings Moody’s: B1 / S&P: B / Fitch: B

Use of ProceedsCapital expenditures to priority infrastructure projects and repayment of short term domestic debt

Listing Application to list at Irish Stock Exchange

Minimum Denominations US$200,000 + US$1

Governing Law English law

Joint Lead Managers Barclays Bank PLC, Deutsche Bank AG , Standard Chartered Bank

5. Conclusion

36

A Beacon for Democracy Rising Middle Class Advantage

Diverse Economy and Focused Approach to Address Challenges

Committed to fiscal reforms and development agency support to tackle short term pressures

Economic diversity supports the long-term outlook for Ghana, including moving into value-added sectors such as gas-processing

Ghana benefits from a relative diverse domestic economy with services sector which accounted for an estimated 49% of GDP in 2013

Robust framework for managing oil wealth ensures that oil revenues are put to productive use (Petroleum Revenue Management Act (PRMA) and Ghana Petroleum Funds)

Ghana’s Medium-Term Prospects Remain Bright

One of Africa’s emerging oil exporters

New hydrocarbon projects coming on-line (including second FPSO, TEN, Sankofa fields)

Gas production expected in Q4 2014

2nd largest producer of cocoa and among top 10 gold producers globally

Strong political stability and government effectiveness promotes growth

Improved regulatory quality and anti-corruption measures encourage investments

Large middle class at 47% of the total population

Outranks peers on most measures of human development

Evidence of successful poverty reduction

A Growth Outperformer An Emerging Commodities Powerhouse

One of the fastest growing countries globally with 13 consecutive years of robust growth above Sub-Saharan Africa average

Nominal GDP has more than doubled since 2006

Growth of over 7% in 2013 despite challenges

Despite current challenges, Ghana’s robust fundamentals will support continued inclusive development and high growth

*TEN- Tweneboa-Enyera-Ntomme*FPSO- Floating production, storage and offloading vessel