EXIM Bank to start Q1 next year
The Ministry of Finance is pushing for the passage of legislations to establish the Export and Import (EXIM) Bank as well as the Ghana Infrastructure Investment Fund (GIIF) by the first quarter of next year.
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“Cabinet has considered the MoF follow-up proposals with the bill and the concept note which will go with the memorandum and would be included in the bill. The expectation is that the EXIM Bank and the Ghana Infrastructure Investment bills will be submitted to Parliament in its next sitting,” the Minister of Finance, Mr Seth Terkper, said.
Mr Terkper said although bills in parliament would be subject to parliamentary time schedules, they had worked expeditiously on some previous bills the ministry submitted to them. He was hopeful they would work with the leadership of Parliament to have the bills passed, “so that we can have the Exim Bank preferably by early next year”.
The finance minister said this when he interacted with a section of the media on the state of the economy in Accra last Thursday September 3 as part of a quarterly briefing to sensitise the public to latest developments in the economy.
Mr Terkper said the government would continue to pursue both short-term and long-term measures to stabilise the economy and move it on to higher growth.
The finance minister said the measures (which are anchored on home-grown policies that were sanctioned by the International Monetary Fund [IMF]) had yielded positive results, leading to the IMF approving the country’s second drawings under the Extended Credit Facility programme.
The positive results include an increase in total revenues by 5.4 per cent due to higher tax revenues. Coupled with cuts in expenditure, such as the freeze on new contracts and a gradual restructuring of the country’s debts, Mr Terkper said the deficit on cash basis settled at 2.3 per cent of Gross Domestic Product (GDP), against a projection of 3.4 per cent of GDP.
“This is also in context of which the IMF approved the first review. We have the second review coming up in October and we hope the trend continues,” he said.
It has become even more imperative for the Ghana Revenue Authority (GRA) to achieve its target, particularly with the fall in oil revenues.
“It is important that non-oil revenues have to go up, since revenues from oil and commodities are going down. So this shows clearly that the country is not broke. It is about prioritising our expenditures,” Mr Terkper stated.
He was hopeful about the medium-term prospects of the economy given that the Bank of Ghana was working on smoothening the seasonality associated with demand for foreign currencies, while actions were afoot to increase power generation.
Measures to diversify sources of foreign exchange
Some of the short-term measures include the Bank of Ghana’s efforts to smoothen seasonality, particularly with cocoa flows into the economy.
The country used to suffer foreign exchange losses and sudden demand for petroleum imports which made forex use unpredictable. But with the liberalisation of the petroleum sector, the government is hopeful that would be some forward planning with the use of forex.
In an apparent reference to the introduction of West Blue to assist Customs in valuation and classification of imports, Mr Terkper said “customs operations would be tightened, with regard to valuation and classification under the national single windows project, which has been reported to be smooth”.
The minister, however, declined to comment on what drastic transformation they were expecting with the coming of West Blue Ltd or whether they had given them targets that would increase revenue collection.
Medium to long-term measures
The finance ministry also intends to work with the Ministry of Trade and Industry to strengthen the tariff advisory board so as to manage import waivers and other tax incentives better. This would be an addition to measures by the Bank of Ghana to curb supply side challenges.
Plans to diversify the economy towards export-led growth were also on course, he stated. Much of the country’s growth had come from foreign direct investments and investments in oil and gas and services. However, these are the same factors that trigger the high demand for foreign currency for the purposes of repatriating capital gains and dividend.
“But what we expect to see from the diversification is a boost to exports from processed gas. We want to do more than local content and value addition to exporting some finished products,” Mr Terkper stated.
Macroeconomics
Inflation rose up slightly to 17.9 per cent in July this year, having started the year at 16.4 per cent in January.
But the finance minister said based on forthcoming developments such good rains and improvement in the power situation, the rate of inflation was expected to tapper in the coming months up to the end of the year.
This would be buoyed by inflows from the expected cocoa syndicated loan to be signed next week as well as the Eurobond that the government intends to issue before the close of the year. The roadshow comes off in weeks.
Mr Terkper stated that while the government was making efforts to increase revenue generation, it had cut expenditure and prioritising its spending, explaining that the economic challenges facing the economy was not as dire as was being presented in certain circles.
Developments in energy sector
The government is critically monitoring the softening of commodity prices which affects the economy in two ways. While it exports some primary commodities such as gold, cocoa and crude oil, it is also a net importer of the latter.
For the budget, the government initially used US$99 per barrel for the budget, and was revised mid-year (July) to US$57 per barrel, due to a fall in the price of the product on the world market. However, the crude oil price has further fallen to US$45.7, with predictions pointing to further declines.
This means that the governments expected inflows from the Jubilee Field would fall short of budgeted amount, hence affecting the country’s fiscal plans.
Mr Terkper pointed out that the government would not be in a hurry to tweak the numbers again, but would manage expenditure prudently based on prioritisation. Unless the situation moves extremely out of gear, the finance minister said the best bet would be to incorporate any new indicative pricing formula into next year’s budget.
“We will do our projection guided by the outlook for commodities in doing the budget. We will continue to monitor the situation,” he said.
The energy situation has seen some remarkable improvements over the past month. The World Bank has approved its budgetary support as well as some guarantees to facilitate investments in the Sankofa Gas Field, which would improve gas supply and hence electricity generation to fill a yawning gap.
