Terkper touts EXIM Bank’s role in trade finance
The Finance Minister, Mr Seth Terkper, is confident the Ghana Export-Import (EXIM) Bank will provide the country with the relevant window of opportunity to properly exploit export potentials under international trade agreements.
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Some of the trade arrangements are the Africa Growth and Opportunity Act (AGOA) and the Economic Partnership Agreements (EPAs), which local businesses are struggling to utilise due to the lack of patient capital to expand and meet the necessary requirements.
The availability of long term (patient) capital through the Ghana EXIM Bank should lead to the expansion of businesses, job creation and the strengthening of the country's export earnings, the minister said in Accra on June 27.
He explained that although signing onto those international agreements meant that new markets had been opened for exports by local companies, age-old challenges, such as lack of guarantees, credit and ability to meet standards, continued to make it impossible for the country to fully utilise those opportunities, a challenge the bank is now set to address.
The United States of America, with which Ghana and other African countries signed the AGOA, had earlier said that it was disappointed in the continent's inability to properly utilise the export opportunities under the agreement.
The Assistant Secretary of Commerce for Global Markets and Director of the US and Foreign Commercial Service, Mr Arun M. Kumar, had earlier said in Accra that USA felt “the potential under AGOA has not just been met.”
"It’s a common problem in Africa and we would like to see a lot more businesses taking advantage of those opportunities,” he said this on his last visit to the country in September, last year.
The finance minister, however, explained that it was some of these missed opportunities that the EXIM Bank would be seeking to address.
“The focus is to export more because we currently import a lot. Normally, companies willing to export more find it difficult to get guarantees, to get credit and to meet standards. These are the key things that you need to be able to reach an export market.
“For example, when AGOA came or now that we are moving towards an EPA with the EU, those markets will be opened but we must position ourselves to take advantage of them,” Mr Terkper said on Accra-based radio station, Peace FM.
“So how will it be done? Because when you export, you earn foreign currency, it is possible, just like the Ghana Cocoa Board, where there is cocoa, it is possible for the Ghana EXIM Bank to ring-fence part of the earnings that accrues in forex. Therefore, once the repayment of the loans is done in forex, the EXIM Bank will be in a position to use that as a base for borrowing at lower interest rates globally to support domestic businesses,” he explained.
State of EXIM Bank
The minister's upbeat about the impact of the EXIM Bank on the country's drive towards an export-led economy come on the back of frantic efforts aimed at realising a national objective that has been elusive for decades now.
Although successive governments had mentioned the need to establish a losing term financial institution that would support manufacturing businesses, not much had been done to realise that goal.
The faintest of such efforts was the establishment of the Export Trade, Agricultural and Industrial Development Fund (EDAIF) in 2000 to help provide financial resources for the development and promotion of export trade.
While the coming into being of EDAIF has been commendable, it has not been able to properly address the funding gaps facing the export community, a challenge that necessitated moves to set up of the EXIM.
The Chairman of the Technical Committee coordinating the establishment of the bank, Dr Sam Mensah, told the Graphic Business on June 30, that his outfit was now awaiting the appointment of a board after which the necessary structures would be finalised for the bank to take off.
“The board should be announced anytime soon. After that, the board will then select the transaction advisor to start with the processes of merging the three institutions,” he said this in reference to plans to collapse the EDAIF, the Export Finance Company Limited (EFCL) and the Eximguaranty Company Ghana Limited (ECL) into the new bank.
How EXIM will solve export challenges
Using fruit processing companies as example, the finance minister said on the radio station that companies that exported to the EU could open euro account with the EXIM Bank, which could then be consolidated into savings to enable companies borrow not just cedis but in foreign currencies, using low interest rates.
“Many countries have done this but for them to be effective, they do not necessarily, when they progress, give you the loan; if you have your money, they can actually give to a guarantee, which you can use against with the person you are selling,” he said.
"For it to work, we must also work with the Ghana Standards Authority (GSA) so that we can know all the standards for all commodities,” he added.
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The finance minister said the government would liaise with the authority to ensure that exporters were conversant with the necessary export measures to help avoid incidence of lack of compliance.
Although the EDAIF law, which focused more on agricultural investments, has been repealed, the minister said the agric investment arm of the fund had been maintained to ensure that agriculture financing is not disturbed.
Beyond agro-processing, the minister explained that the EXIM Bank would also benefit companies interested in light industries, especially those in the petrochemical sector, which the commercial production of oil is giving a boost to.