Presentation to Investors

1. Republic of Ghana Presentation to Investors September 2014

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3. Presentation Team Hon. Seth Terkper Honourable Minister of Finance Governor Henry Wampah Governor, Bank of Ghana Hon. Kweku Ricketts Hagan Hon. Deputy Minister for Trade and Industry Dep. Governor MillisonNarh Deputy Governor, Bank of Ghana Dr. Samuel Ameyaw Director, Debt Management Division, Ministry of Finance Dr. AlhassanIddrisu Director, Economic Research and Forecasting, Ministry of Finance

4. Contents Introduction Economic and Policy Update Foundations Remain Strong Financing for Growth Conclusion

5. 1. Introduction

6. Introduction 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 6

7. Understanding Ghana’s Short Term Outlook Ghana faces short term challenges on the back of fiscal imbalance and underperformance combined with macroeconomic pressures Structural adjustments lead to fiscal challenges • 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 Causes of fiscal overruns (deviations from budget) Source: Ministry of Finance, Government of Ghana, Ghana Statistical Services

8. 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 • 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 External pressures build as commodity prices collapse Cedi depreciation fuels inflation and exacerbates expenses Current account balance deteriorates • 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 Source: Ministry of Finance, Bloomberg

9. The 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 Ghana is Implementing Robust Measures to Tackle Key Challenges Addressing Key Issues   External Pressures Fiscal Deficit  Cedi Depreciation and Inflation Increase • 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 • 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 • 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    Addressing donor concerns and monitoring disbursements Monetary policy tightened Broaden tax base and strengthen revenue collection    In-country Gas plant expected to feed power stations by Q4-2014 Greater oversight of the foreign exchange market Wage containment, curb on public expenditure    Expected oil production from TEN and Sankofa fields in 2016/17 Macro prudential measures Budget realignment and structural reforms    Oil production exceeds target and cocoa sales at higher prices Proactive public debt management Ghana not yet affected by Ebola Virus Disease but on high alert • Ghana has approached IMF for policy support and BoP funding

10. Previous Experience and Recommendations Have Shaped Current Policies A historical comparison indicates that Ghana’s current home grown measures are built on and conform to the IMF’s recommendations Timeline view of Ghana’s Historical Engagement with IMF IMF grants Ghana a US$209 million Enhanced Structural Adjustment (ESA) Facility Ghana becomes member of IMF US$258 million Poverty Reduction and Growth Facility Ghana implements and consults IMF on its “home-grown” programme Feb 2002 1983-1999 1957 1999-2002 2003-2006 2009-2012 2014 2013-2017 Ghana requests initiation programme discussion with IMF Economic Reform and Structural Adjustment Programmes (ERP/SAP) with IMF IMF grants Ghana a US$581.28 million Extended Credit Facility HIPC Decision Point

11. 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 Timelines • 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 2014 • 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 Expected Impact Ghana’s Commitment • 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

12. Ghana’s Medium-Term Prospects Remain Bright Despite current challenges, Ghana’s robust fundamentals will support continued inclusive development and high growth 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 • 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 Rising Middle Class Advantage A Beacon for Democracy • 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 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) *TEN- Tweneboa-Enyera-Ntomme *FPSO- Floating production, storage and offloading vessel

13. Ghana’s Oil Sector to Boost Future Growth New discoveries in 2013 adds up to a total of 28 new fields discovered. Gas also coming on-line in Q1-2015 World-class partners helping to deliver key projects • TEN Project: Recoverable reserves of 245 mmbls of oil and 365 bcf gas. First oil expected in 2016/ 2017 • Sankofa – GyeNyame 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 Snapshot of current reserves Post-Jubilee discoveries being developed with world-class partners Source: GNPC *TEN- Tweneboa-Enyera-Ntomme

14. 2. Economic and Policy Update

15. Growth Steady but Macro Challenges Persist 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

16. Curbing Fiscal Deficit is a Key Focus for Ghana Revenue pressures and Cedi depreciation effect on expenditure figures compounded the fiscal and current account deficits Targeted action improved Ghana’s fiscal situation with signs of improvement seen in H1 2014 Fiscal deficit (% of GDP) Key pressure points identified Source: Ministry of Finance, 2014 Mid-Year Budget Review Statement

17. Focused Action to Reduce Fiscal Deficit in 2014 2014 Budget introduced a number of policy initiatives, which have been implemented, to control the deficit  • VAT increase of 2.5 percentage points and a broadening of the VAT base • Withholding tax on commercial rent now 15% from 8% Tax Reform Broaden tax base and remove inefficiencies  • 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) Realign Expenditures Curb and streamline public expenditures  • 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 service Wage Measures Aggressively manage public sector wage bill  Exemption Reduction • 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 Stricter programme-based budgeting process and fiscal decentralization being adopted Source: A Policy Statement on the Ghanaian Economy, April 1, 2014

18. Pay Policy - Key Deficit Driver is Being Tackled 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 Wage bill overshoot has been one of the key drivers of the deficit Source: 2014 Budget Statement, 2014 Mid-Year Budget Review Statement

19. Budget On-Track for H12014 but Risks Remain Tighter 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 Jan – June 2014 Revenues largely in line with budget Total revenues and grants lower than expected signalling that risks persists Slower than expected growth and macro headwinds affected income taxes Jan – June 2014 Expenditure lower than forecast, despite overruns in interest payments Compensation to employees below forecast Reduced expenditure to other government unitsand social benefits Slower utilisation of capital budget due to grant shortfalls and revenue constraints Source: 2014 Mid-Year Budget Review Statement

20. Tight Policy Stance to Deal with Rising Inflation 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 stance Evolution of inflation (%) through 2013 reveals key drivers are non-food-related elements 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 BoG used the Monetary Policy Rate (MPR) as a tool to address inflationary pressures BoG has raised MPR by 300bps since Dec 2013 Source: Bank of Ghana Inflation Outlook Report, February 2014, Bank of Ghana 20

21. Reining-In Cedi Depreciation 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 Cedi has depreciated rapidly over the last 12 months Rate of depreciation is now expected to slow following targeted action from BoG BoG deployed multiple measures to restore exchange rate stability • 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 Source: Bank of Ghana, Bloomberg (Jan 2014- Aug 2014)

22. 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 • 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) Medium Term Goals 2014 Revised Targets  Real GDP Growth: 7.1% from 8.0% • 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  End Period Inflation: 13.0% (+/-2%) from 9.5% • 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  Gross International Reserves: Unchanged at 3x months of import cover • 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 Fiscal Deficit: 8.8% of GDP from 8.5% of GDP  Source: 2014 Mid-Year Budget Review Statement

23. 3. Foundations Remain Strong

24. A Beacon of Democracy in Africa 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 Consistently Ranks in Top 10 for African Governance (Mo Ibrahim Index 2013) Ghana’s business environment achieves scores close to those for the highest performers Ghana Continues to Outrank Peers Across All Measures of Governance Ghana Distance to Frontier* Source: Mo Ibrahim Index 2013, World Bank 2013 Ease of doing business survey, World Bank Governance Indicators 2013 Sub-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

25. Strong and Consistent Growth Profile Robust and Consistent Nominal GDP Growth • 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) Well Balanced Sectoral Contributions to GDP with a Leading Services Sector Growth continues to surpass sub-Saharan regional averages Real GDP Growth (%) 2009 2013 Source: Ghana Statistical Services, Ministry of Finance

26. Strong Record of Poverty Reduction and Development Ghana’s large middle class is evidence of successful poverty reduction via an inclusive growth agenda and bodes well for future development • 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 Steady income growth has propelled Ghana to 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 Source: Ghana Statistical Service, AFDB Middle Class Index, UN Human Development Index

27. Viable External Position FDI and portfolio inflows which moderated trade deficit effects can still be improved Prudent reserves management in face of macro challenges and seasonal FX inflows Portfolio flows (US$ millions) (months) (US$ mn) Trade gap remains a challenge but narrowed in H1 2014 Diversified and growing exports with gold, oil and agriculture as key contributors F.O.B Exports Value (USD millions) (USD 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

28. An Emerging Regional Leader in Commodities A diversified commodities endowment with traditional gold and cocoa, enhanced by rapidly developing hydrocarbon production provides a powerful foundation for future growth Rising crude oil production to be boosted by new wells Ghana’s oil reserves are comparable in size to other new producers on the continent Ghana is one of the top 10 gold producers globally 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

29. Oil Becoming Key Revenue Contributor Robust framework for managing oil wealth ensures that oil revenues are put to productive use Composition of Petroleum Receipts Distribution of Petroleum Receipts H1-2014 Distribution of Petroleum Receipts Ghana Petroleum Funds Balances (Jan-Sep 2013) Ghana Petroleum Funds Balances (H1 2014) Source: BOG Petroleum Funds Report, June 2013 and Petroleum Holding Fund & Ghana Petroleum Funds Report Jan-June 2014, Budget Statement 2014

30. Sound Banking System Well capitalized banks Non-performing loans have trended downwards despite macro challenges Regulatory Minimum of 10% Robust regulatory supervision of the banking sector • 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 Source: Bank of Ghana

31. 4. Financing for Growth

32. Overall Debt Profile Still Manageable but Domestic Interest Rates Remain High • Debt 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 • 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 Debt has increased steadily with an equal split between domestic and external debt External debt is 100% long term and largely concessional (March 2014) * There is a need to curtail interest expense by limiting domestic borrowing Domestic yields remain elevated GHS billions Source: Ministry of Finance * The External Debt from 2012 has been reclassified to reflect the facility type per creditor 32

33. 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 Interim Funding Plans - Why Issue Now? Projects Have Been Carefully Selected Why Now? • 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) 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     • Ghana is seeking to implement a number of critical projects for this fiscal year and also retire some high interest domestic short term debt

34. Proposed Transaction Terms

35. 5. Conclusion

36. Ghana’s Medium-Term Prospects Remain Bright Despite current challenges, Ghana’s robust fundamentals will support continued inclusive development and high growth 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 • 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 Rising Middle Class Advantage A Beacon for Democracy • 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 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) *TEN- Tweneboa-Enyera-Ntomme *FPSO- Floating production, storage and offloading vessel