Category: News

 

 

 Adnan Adams Mohammed

Commercial banks operating in the country have been advised to adopt innovative strategies as they wait for the Bank of Ghana to announce specific guidelines on the ‘new Coronavirus measures’ introduced.

 

The Central bank in March this year asked banks to reduce their interest rates and also announced a new reserve requirements to combat impacts of the COVID-19 pandemic. But, as to what percentage reduction the Central bank wants the commercial banks to effect, the actual levels of reserves required and the timelines are not known yet, leaving the banks indecisive.   

 

In the absence of these much awaited detailed guidelines, financial sector experts are admonishing banks need to capitalize on new opportunities and innovations to take decisions which guarantee their survival amid and beyond the pandemic.

 

“We are still not yet aware of how the whole impact is going to be, so we need to look at it in terms of how we prepare our banks to survive. How do we look at our operations to ensure that we are streamlining them to ensure we survive?”, Country Director for Deloitte Ghana, David Kwadwo Owusu, speaking in a live conversation on the Ghana’s Most Respected CEO’s Breakfast Series organised by the B&FT and held in Accra last week stressed, adding that, “they will have to consider liquidity management, risk management, and profitability strategies to survive the storm.”

 

Commenting on the theme ‘Bringing the Economy Back to Life: The Role of Banking and Finance’ he explained that, “Assurance comes with controls, risks and operational efficiencies. Now, we need to ensure we are looking at each of these aspects of our business, and that we are ensuring whichever decisions we take our banks and financial institutions will be able to survive this pandemic, and then deal with what is even ahead of us.”

 

Consequently, John Awuah, Deputy CEO of the Ghana Association of Bankers speaking at same event noted that, the association is urgently seeking the guidelines which are said to be in draft form and will be completed soon to give banks a better forecast.

 

“We are having discussions with the regulator and the guidelines are under preparation. Last time, the regulator said they are actually in draft and very soon we are going to have those guidelines. That will go to help us to operate, control and know that this is what we can do with the measures which the Governor has introduced,” Mr. Awuah said.

 

Explaining why the guidelines are urgent necessity, he added: “You know banks like to operate with certainty; and the measures, as good as they are, they were in a statement of ‘do this, do that, we have allowed this, we have allowed that’ but it didn’t come with any strict kind of confines – as in, ‘if you do this, this is the timeline before we analyse and take a decision’.

 

“We are expecting some guidelines as to what we can use the excess liquidity for. Yes, we are told that we can use it for lending, which is what banks have also taken on board; but we wanted to know the availability period. Let us say two years, or it is going to be available until such time we give you sufficient notice that it is no more going to be available? Additional guidelines would provide some more clarity around the funds,” he said.

 

The measures introduced by the central bank in March 2020 to reduce the negative impact of Coronavirus on the financial sector and economy include a reduction of the Primary Reserve Requirement from 10 percent to 8 percent, and reduction of the Capital Conservation Buffer (CCB) for banks from 3 percent to 1.5 percent.

 

Other measures include the reduction of provisions for loans in the ‘Other Loans Especially Mentioned’ (OLEM) category from 10 percent to 5 percent for all banks and SDIs, as a policy response to loans that may experience difficulty in repayments due to the slowdown in economic activity; and loan repayments that are past due for Microfinance Institutions for up to 30 days shall be considered as ‘Current’, as is the case for all other SDIs.

 

The Bank of Ghana also ordered banks and Specialised Deposit-Taking Institutions (SDIs) to suspend the declaration and payment of dividends or distribution of any reserves to shareholders, and for making any irrevocable commitments until further notice. Despite this directive, some banks have secured permission to pay dividends after making the case of holding enough reserves to support the economy when called upon.

  

 

Adnan Adams Mohammed

 

John Peter Amewu, Energy Minister has accused the erstwhile Mahama administration of signing a high priced Renewable Energy Power Purchasing Agreement (PPAs) of up to 2,265 Megawatts at an average price of 31 cents per kilowatt hour (kWh) between 2015 and 2016.

 

The Minister claimed the government was re-negotiating those PPAs. When speaking to section of pressmen in Parliament, he said, “Mahama administration was to be blame for the unnecessary imbalances in renewable energy independent power producers’ (IPPs) contracts, the current government had to intervene by re-negotiating those contracts to make sure tariffs become very competitive.”

 

This claim has pushed energy experts who served under the erstwhile administration to come out calling on the current energy minister to give specifics on the so-called ‘re-negotiating of renewable energy PPAs’.

 

“How many PPAs were? What were the key terms of these PPAs?”, Alex Mould, former GNPC and NPA CEO have asked demanding for details of the claims of Mr Amewu.

 

Also, the former Energy Minister, Emmanuel Armah Kofi Buah has described the Energy Minister’s comments on the re-negotiated renewable energy contracts as an “old story”, adding that the current government has made no investments in the sector.

 

He quizzed that; “How much investment has this government made in the area of renewable energy? That’s all the theory you heard and this theory about re-negotiation of PPAs, I’m sure you heard it from year one”.

 

Adding that, Mr Amewu could not pinpoint how much progress the current government had made from investing in renewable energy after the erstwhile NDC government passed the Renewable Energy Act in 2015.

 

“Basically, this government has aggressively failed to pursue this policy. And, so, you ask him a question, he is unable to come here to tell you how much investment they’ve made. Where we left off is where we are,” he said when commenting on the energy minister’s claim in parliament last week.

 

“The Renewable Energy Act has asked for us to establish the Renewable Energy Fund; where is it? The Renewable Energy Act has asked for us to establish the Renewable Energy Authority; where is it?” he queried.

 

The Renewable Energy Act was tabled to ensure that 10 percent of the power is produced from renewable energy sources.

 

“In the last budget in 2019, the investment by the government of Ghana was zero. The only investment in our budget was from the African Development Bank and other external sources: the European Union and others. In fact, the only thing that was put in this budget was that they were going to ensure that the Flagstaff House will have solar panels. Even that they couldn’t achieve it.

 

“The reason why we failed to achieve universal access to electricity was clear: It was because remote communities that do not have access to the national grid can only have electricity through renewable energy sources”, Mr Buah explained.

 

However, Mr Amewu expressed that, government has taken steps to address the challenges it inherited in the Renewable Energy sector.

 

He identified the signed Renewable Energy Power Purchase Agreements (PPAs) to the tune of 2,265MW with an average price of cent19/KWh, which, he said, was far above what the electricity network could accommodate, as a major challenge.

 

Additionally, PPAs were signed for tariffs as high as cent31/KWh more than twice the average end user tariff.

 

Mr Amewu made the remark when he spoke to the media in Parliament after responding to a question by Mr Frank Annoh-Dompreh, Member of Parliament (MP) for Nsawam-Adoagyiri, on the floor of the House on what the Ministry of Energy had done by way of investment in renewable energy for the past one year.

 

He indicated that, government had reduced the capacities from 2,265MW to 515MW, which could be accommodated within the country’s electricity network. The Ministry had put a moratorium on new PPAs until the 515MW signed PPAs have been executed.

 

It has re-negotiated and reduced the Price/KWh from an average of cent19/19KWh to cent12/KWh; and further engagement with scheduled PPAs is ongoing to achieve tariffs below cent10/KWh, which is the Ministry’s ultimate goal and also developed a Renewable Energy Master Plan, which clearly provided the capacity and investment required on yearly basis.

 

He said the Government had introduced competitive bidding process for renewable energy projects with focus on Utility Scale Solar power plants.

 

Mr Amewu explained that, besides the investment by IPPs in the renewable energy sector, the Ministry was also facilitating investment by government in projects such as the construction of the first phase of 17MW Solar Park by VRA in Lawra and Kaleo in the Upper West Region at a cost of US$25.3 million.

 

The rest include the construction of the Pwalugu Multipurpose hybrid (50MW Solar and 60MW hydro) project as well as the construction of the first phase of 50MW Solar PV plant to be hybridised with the 400MW BPA hydro power plant, which had commenced at a cost of US$48.

 

He said 10MW of solar power was expected to be connected to the national grid by the end of this quarter and the remaining 40MW is expected to be completed in November 2020.

 

 

Adnan Adams Mohammed

 

The Ghana Export Import (GEXIM) Bank has supported two processing factories under the One-District-One-Factory (1D1F) initiative using sweet potatoes and pineapples in creating a combined job opportunities of about 1000 so far.

 

The Casa De Ropa, which uses sweet potatoes cultivated locally to produce pizza, bread, chips, cakes and other pastries and started commercial production six weeks ago is currently employing 154 direct factory and farm workers and about 360 farmers engaged by the company to cultivate its raw material, while Ekumfi Fruits and Juice Factory is currently employing 65 factory workers and over 400 farm workers.

 

GEXIM has so far disbursed about GHC24.5 million to the two factories located in the Central region. Casa De Ropa, located at Bewadze in the Gomoa West District, has received about GHC14.5 million while Ekumfi Fruits and Juice Factory, located at Ekumfi Nanaben in the Ekumfi District, has also received GHC10.0 million to cover for the entire value chain process, from raw material cultivation, processing plant and factory establishment.

 

“We are proud of what we are seeing today which are as a result of our decision to support these factories owned and operated by 100 percent wholly Ghanaians”, Frank Dan Enyimayew, GEXIM 1D1F Manager rejoiced during a media tour of the two facilities last week.

 

“We are motivated to support local industries under the 1D1F initiative to help provide Ghanaians with the needed capacity and financial support to create jobs for the youth while creating industries that produces what the country needs to contribute to reducing our import bills”, Richard Anane, GEXIM Media Manager shared in an interview with Economy Times during a tour organized by PRINPAG and GEXIM to the facilities.

 

Ebenezer Obeng Baffour, CEO of Casa De Ropa in his briefing noted that, currently, the firm has cultivated almost 700acres of Orange-Flesh Sweet Potatoes used as a substitute for white mill flour and sugar which is the raw material for about 10 varieties of pastries. He added that, the company has an off taker agreement with Don Limon partners in Hamburg and Satori B.V in Holland to export some excess unprocessed sweet potatoes as more commercial and private farms have started cultivating the sweet potatoes for onward purchasing by the Casa De Ropa company.

 

“We hope that over 1000 jobs to be created through the cultivation of potato as well as processing into bread, chips, biscuits, cakes by 2021 would employ 80% women and 20 men workers”, Mr Baffour intimated.

 

In the case of Ekumfi Fruits and Juice Factory, which currently has two varieties of natural juice drinks, Eku Pineapples Juice and Eku PineGinja Juice and expecting to add Eku PineTropical soon, has projected to cultivate about 5000 acres of pineapple annually which will create about 2000 jobs by 2021.

 

“We are in talks with Central Citrus Processing Factory at Asebu Kwaman Kesse for supply of citrus juice which will be used to produce the Eku PineTropical”, Director of Operations, Federick Kobbyna Acquaah told the media team. He added that, “Our products are 100% natural fruit juice without any additive, preservative and added sugar, making Eku juices the best and only 100% pure juice.”  

 

It is the expectation of GEXIM that, the projects will contribute to significant import substitution through the reduction in the volume of flour, sugar and fruit juices imported into the country.

 

GEXIM established by an Act of Parliament has a vision to become a strong financial institution that will be a key engine in the development of Ghana’s export trade, facilitate cross border trade and make Ghana a pillar in regional and continental trade. Also, among its objectives is to build Ghana’s capacity and competitiveness in the international market-place.

 

GEXIM is currently supporting 10 other commodity processing and manufacturing products such as; pharmaceuticals, cashew, poultry, cassava starch, oil palm, mango juice, cocoa butter, shea butter, garments and apparel and creative arts. 

 

 

Adnan Adams Mohammed

 

The Minority Caucus in Parliament are calling for the resignation or removal of the Finance Minister, Ken Ofori-Atta, from office for breaching provisions of the Fiscal Responsibility Act 2018.

 

According to Minority Leader Haruna Iddrisu, a request by the Finance Minister to suspend the fiscal responsibility rules would not be entertained by the House and wants the minister removed from office.

 

The Finance Minister has requested Parliament to allow him to spend beyond its means, to create a fiscal deficit more than the 5 percent limit set in the Act giving excuse to the COVID-19 unexpected but needed expenditure, which makes him liable to removal from office under the same Act. The Act says, the Minister should ensure that for every fiscal year, budget deficit is not more than 5% of GDP. Also, a positive primary balance should be maintained. But, if this cannot be met due to spelt out measure in the law which include public health epidemics, the Finance Minister must suspend the rules with Parliament’s approval to the reasons.

 

“We would not suspend the law. He will undergo the sanctions spelt out in the Fiscal Responsibility Act…” Haruna Iddrisu said, adding that, “there is nothing the House can do to save the Minister’s job.”

 

 

Unfortunately, the minority do not have the numbers to pass a vote of censure.

 

However, the Chairman of the Finance Committee in Parliament, Mark Assibey-Yeboah, has defended government’s decision to suspend the Fiscal Responsibility Act which requires the deficit to be kept at a maximum of 5 percent of GDP – citing the pandemic as a reason to do so.

 

In his submission during the debate on the mid-year budget that was presented to Parliament last week, the Member of Parliament reiterated the dire effects of COVID-19 on the economy, noting that but for the pandemic which hit global economies including Ghana’s, the government was on course to achieve its fiscal target of 4.7 percent.

 

“To ensure that there isn’t irreversibility and to avoid election-year slippages that we have come to know, the Finance Minister himself sponsored the Fiscal Responsibility Law, and we passed the law in this house in 2018. In Act 982 Section (2), there is a rule which says the overall fiscal balance on cash bases to a particular year cannot exceed a deficit of 5 percent of the gross domestic product for that year, and we projected to do 4.7 percent in 2020. Suddenly, the COVID-19 pandemic struck.

 

“The pandemic has shaken the whole world. It has fundamentally damaged the world’s economy, and so forecasts have been lowered everywhere. That is why the Finance Minister indicated he is going to suspend the Fiscal Responsibility rules, and it is within the minister’s power to come to the House to ask for suspension of the fiscal law,” Dr. Assibey-Yeboah said, referring to Act 982 Section (3) which allows suspension of the law due to certain circumstances, including a public health pandemic.

 

Finance Minister Ken Ofori-Atta in his mid-year budget presentation fortnight ago stated: “From developments thus far, it is clear that the fiscal rules of a deficit not exceeding 5 percent of GDP and a positive primary balance enshrined in the Fiscal Responsibility Act, 2018 (Act 982) are neither feasible nor attainable targets in this emergency period of the COVID-19 Pandemic.

 

“The scale of damage and macroeconomic distortions caused by the pandemic is unprecedented in our country’s history. It may take a while to return to the pre- COVID-19 fiscal path. According to our revised fiscal framework, the economy is not likely to return to the 5 percent fiscal deficit threshold set in the Fiscal Responsibility Law sooner than 2024.

 

“Consequently, as required by section 3(3) of the Fiscal Responsibility Law, the government will within 30 days present before this august House the necessary documentation that supports the suspension of the fiscal rules and targets for this year 2020,” the minister added.

 

According to him, provisional fiscal data for the first half of the year show that revenue mobilisation fell short of the target by 26 percent, resulting mainly from shortfalls in oil revenue, Customs receipts and non-oil tax revenues. Total revenue and grants for January to June 2020 amounted to GH¢22billion compared with a programmed target of GH¢29.7billion.

 

Non-oil tax revenue, comprising taxes on income and property, goods and services and international trade, amounted to GH¢16.7billion or 4.3 percent of GDP – 16.2 percent below the programmed target of GH¢19.9billion or 5.2 percent of GDP. Revenue from upstream oil and gas amounted to GH¢1.9billion (0.5% of GDP), 55.4 percent lower than the programmed target of GH¢4.4billion; mainly on account of lower volumes and a significant drop in crude oil prices on the international market.

 

 

Adnan Adams Mohammed

 

A new survey report from the Ghana Statistical Service (GSS) indicates that, about 45.6 percent of Ghana’s population (that is; almost one out every two Ghanaians) are currently in a state of multidimensional poverty.

 

The report disclosed that, the intensity of poverty, which reflects the share of deprivations each poor person experiences on average, is 51.7 percent. This means, the poor are disadvantaged in six or more of the following twelve indicators: electricity, water, housing, assets, overcrowding, cooking fuel, sanitation, school attendance, school attainment, school lag, nutrition, and health insurance.

 

Multidimensional Poverty Index (MPI) report, measures the rate at which ‘a person is deprived in at least one third of the weighted indicators as captured above. The indicators that contribute most to multidimensional poverty in Ghana are lack of health insurance coverage, undernutrition, school lag and households with members without any educational qualification. The MPI requires an individual to be deprived in multiple indicators at the same time. The current MPI, which is the product of the incidence and intensity of poverty, is 0.236.

 

“The incidence of multidimensional poverty in Ghana reduced by nine percentage points from 55 percent in 2011 to 46 percent in 2017. The intensity of poverty also reduced from 54.2 percent in 2011 to 51.7 percent in 2017, showing that the improvement is ‘pro-poor’”, Government Statistician, Prof. Kobina Annim stated in a trend analyses, indicating that, there has been substantial progress in multidimensional poverty reduction.

 

Also, based on the results, Prof. Kobina Annim said, it is paramount that resources are allocated to the Health Sector in terms of health insurance coverage and nutrition, and efforts coordinated to increase school attainment among the populace and reduce the number of school-age children that are not in school and their counterparts who are two or more years behind in school.”

 

“Complementary policies should also be adopted to reduce the co-occurrence of multidimensional and consumption expenditure poverty in the country. Going forward, the Ghana 2020 Population and Housing Census will engender MPI analyses at the district/municipal and locality levels to inform specific and efficient allocation of resources,” Prof. Annim recommended.

 

A further break-down of the report shows 86.8 percent of poor Ghanaians, irrespective of their poverty status, are deprived of sanitation; i.e., households which have no toilet facilities, use buckets or pans, public toilets, or share toilets outside the house. The next thing that poor Ghanaians are deprived of is health insurance, as the data says 64.6 percent of them are not covered by health insurance; rather surprisingly, as politicians always boast about the National Health Insurance Scheme covering a large number of the population.

 

Housing is next on the list, as the study shows 36.6 percent of the poor population use inadequate flooring or walls made with one or multiple of the following materials: earth, mud, palm-leaves, thatch made with grass or raffia.

 

Furthermore, the data shows 35.4 of poor households have, on average, more than three people per sleeping room. And again, 22.4 percent of the poor population drinks water from an unclean source – i.e., from tanker supply or vendor-provided; unprotected well; unprotected spring; river or stream; dugout, pond, lake, dam, canal or some other source; or a round-trip distance to collect water which takes 30 minutes or more.

 

The percentage of the population that is vulnerable to multidimensional poverty is 31 percent – and 21.4 percent of the population are considered to be in severe poverty. On geographical considerations, the report shows the levels of deprivation for all the indicators are higher in the savannah compared to the remaining two ecological zones.

 

Another important revelation in the report is the age groupings of multidimensionally poor people. The data surprisingly reveals multidimensional poverty is prevalent among children under 15 years – contrary to the previous belief that the risk of poverty is prevalent among the elderly. The results suggest that households without a child are likely to be less poor.

 

In prescribing solutions based on the data collected, the report advised policymakers to prioritise the use of resources in order to reduce the high deprivations in the indicators of wellbeing.

 

“Against the backdrop that the percentage of multidimensional poor individuals deprived in each of these indicators varies across ecological zones and administrative regions, it is important to prioritise and sequence policy actions as functions of the percentage of individuals and households facing each deprivation.

 

“Regarding child indicators, it is pertinent to mention that the government should continue working with the existing institutions on reducing deprivations in school attendance, school lag and child undernutrition.”

 

 

Adnan Adams Mohammed

 

After the finance minister, Mr  Ken Ofori-Atta’s presentation of the mid-year review budget to parliament fortnight ago, some Ghanaians expressed shock with the amount of GH¢54 million as announced by the government in the budget as expenditure incurred in providing food to the vulnerable during the three weeks lockdown.

 

Latest, to add his voice to the shocks expressed by Ghanaians is the Dean of Students’ Affairs of the University of Ghana, Professor Godfred Alufar Bopkin. He believes the manner in which government reached out to the vulnerable in the early stages of the COVID-19 crisis was inefficient.

 

The Minister in his presentation said that, some 470, 000 Ghanaian households benefited from the benevolence of government adding that the food distribution exercise was carried out in collaboration with faith-based organisations. This, according to Prof Bopkin, corruption is likely to have played a role. He said this whiles stating the possibility of government’s inability to properly account for every transaction made for the distributed meals.

 

“…If you look at the method that government chose with reaching out to the vulnerable, is very very inefficient. Once they chose that method, then you know that people will profit from the margin and I can tell you that government can always get away with it because if they tell you that the cost of preparing the meal is GH¢20, what are you going to say? But if we had chosen cash-based transfer, we can verify. I can tell you it is very difficult to conduct such a transaction.” The renowned Economist expressed in an interview.  

 

He added that, although the move was in good standing by government, its approach was not the best because “if the government decides to prepare the food itself and go and distribute then the chances are that it is very difficult to take yourself away from corruption…It’s just like a fish that is thirsty in the sea…when they are swimming can you tell whether the fish is drinking some of the water?”

 

However, the finance minister, last week, when responding to a question on the floor of parliament for clarification on the said expenditure said, there was a mistake in his presentation. He gave a clarification that, the GH¢54 million was for both cooked and uncooked foods distributed.  The government spent GH¢42.2 million on basic uncooked food items and GH¢12 million on cooked foods distributed to the vulnerable in parts of Greater Accra and Ashanti regions, making the total amount same as the GH¢54.2 million captured in the mid-year budget.

 

He said that: “It is truly unfortunate that an attempt has been made to politicise the issue of providing food for our brothers and sisters in need during the lockdown”, adding: “It is also unfortunate that the impression has been created that the total amount of GH¢54 million was used for hot meals over the three-week lockdown period.”

 

Mr Ofori-Atta explained that: “We estimated we would need an amount of approximately GH¢40 million to provide hot meals to the vulnerable at GH¢5 per pack during the lockdown period. However, we spent GH¢12 million on hot meals including the cost of distribution.”

 

He noted that the “government budgeted GH¢40.3 million for basic uncooked food items. We spent GH¢42.2 million”.

 

“It is this GH¢12 million spent on hot meals and the 42 million spent on uncooked food items that gave a total of GH¢54 million as stated in the mid-year review”.

 

“The GH¢12.1 million for hot meals served 150,000 people during the lockdown [period], including the cost of transportation and other operational cost.”

 

But, Prof Bopkin was of the view that the best way the country’s leaders could have alleviated the impact of the pandemic was through the collection of data in an appropriate social registry where government could access that information on those who were vulnerable and in need.

 

“So instead of cooking the meals for them…so if we had the data and knew the vulnerable, cash space transfer is more efficient. So if we determine that every household is getting GH¢50 and we have a data on the household, we send the GH¢50 to them through their mobile money and their bank account, then they themselves can decide to buy the rice and prepare it the way they want it.”

 

Subsequently, on the free water and electricity directive, He lauded government but pointed out that the subsidy may not work with the water utility rebate. He cited the less flow of water and the many illegalities involved in connections.

 

“…When it comes too water and electricity, the problem with water is that the subsidy doesn’t solve it. The water doesn’t flow. There are a lot of illegalities.

 

“All over the world, governments are reaching out to their citizens in an unprecedented manner and we cannot be an exception. Since we do not have a lot of money to do mobile money transfer to them, perhaps free water and free electricity for life line consumers will be a way government will show sympathy too their situation whiles we hope to get back the economy,” he concluded.

 

 

Adnan Adams Mohammed

A finance expert has expressed serious reservations about the relatively high rate of the country’s interest payment on debts accrued (debt-servicing), currently galloping at about four (4) times more than domestic-tax revenue mobilization growth over the past four years.

 

Alex Mould, former Executive Director at Standard Chartered Bank; and past CEO of GNPC and NPA, shared some insight on the mid-year review budget and overall economic outlook. He commented that, the country’s domestic-tax revenue mobilization has grown by only 39% in four (4) years but interest debt-service payment has grown by 144%.

 

Data made available by the expert as sourced from the Ministry of Finance indicates:

In 2016, domestic-tax revenue was GHC25.729 billion as against interest payment on Ghana’s public debt of GHC10.770 billion giving an interest payment on public debt to domestic-tax revenue ratio of 42%. Analysis of the data from MoF shows an upward trend of Interest debt-service payments to domestic-tax revenue collections with 2019 at 47% and 2020 at 62%.

 

In 2019, domestic-tax revenue was GHC42.775 billion as against interest payment on Ghana’s public debt of GHC19.769 billion giving a ratio of 47%. However, using projected 2020 full-year figures, domestic-tax revenue is expected to be GHC42.331 billion as against projected interest payment of GHC26.268 billion Ghana’s public debt, resulting in a staggering ratio of interest payment to domestic-tax revenue of 62%.

 

“We should be very concerned about Government’s ability to meet its interest payments from tax revenue which forms about 80% of our Total Domestic Revenue, which also forms about 97.5% of Total Government Revenue,” Mr. Mould emphasized.

 

Adding that, “Our domestic tax revenue has only grown 39% in 4 years but our interest debt service has grown by 144%.”

 

According to him, this confirms the many criticisms that, the government is only borrowing to meet its consumption expenditure and some manifesto promises.

 

“This attests to the fact that we are borrowing to meet our expenditure, which is mainly a combination of consumption and expenditure on some of the ill thought-out manifesto promises made by Nana Akuffo-Addo’s government. It would rather be more prudent to spend on the critically needed infrastructural investments which will have a multiplier effect and will produce dividends in the near future.

 

Already, the Institute of Economic Affairs Ghana (IEA Ghana) has called on the government needed to strengthen its tax mobilization, especially in the informal sector, in the wake of the COVID-19 pandemic. According to the institute, the informal sector contributed about 30 percent of the country’s Gross Domestic Product (GDP), adding that, stretching out the tax net to the sector had the potential of increasing revenue to fund government’s expenditure.

 

Dr John Kwabena Kwakye, the Director of Research of IEA Ghana has expressed worry about tax exemptions to certain persons and institutions constituted over GH¢5 billion and called on Parliament to expedite the passage of a tax exemption bill which would curtail the menace.

 

Dr Kwakye when speaking at the institute’s review of the government’s Mid-Year Budget policy statement presented to Parliament on July 23 said, “One key area of revenue mobilization which could facilitate government’s expenditure which is mostly overlooked is taxes from properties we term property tax.

 

“This could be assigned to the assemblies, which would, in turn, generate funds for development at the local level”.

 

He reiterated that Ghana’s tax efforts were low and called on the government to track revenue leakages to increase the tax to GDP ratio.

 

Also, in her comment, Dr Dede Amanor-Wilks, the Executive Director of IEA said, it was important for the government to be concerned about meeting revenue shortfalls to grow the economy.

 

She said strengthening revenue mobilization was critical to building a resilient economy and called on the government to increase its industrialization drive, adding that “industrialization is a pre-requisite for development.

 

 

Adnan Adams Mohammed

 

Official figures from the ministry of finance as presented to parliament now puts Ghana’s total public debt stock at GH¢255,727.1 million (equivalent of US$45,486.1 million). This is almost 66.4 percent of Gross Domestic Product (GDP).

 

Finance Minister, Ken Ofori-Atta delivering the 2020 mid-year budget review, last week, told Parliament that, consistent with the front-loading of the government’s fiscal operations, the financing needs of the government were also front-loaded.

 

The government is touting its ability to raise US$3 billion from the International Capital Market in the first 2 months of the year as well as the IMF’s US$1 billion rapid credit facility executed in April 2020, making the total external facility within first four month of the year US$4.0 billion. Unfornately, the government claims the accumulating of debts as a result of its ‘good leadership and international goodwill brought about by 18 efficient management of the economy’.

 

“Taking into consideration all these developments, the provisional debt stock as of end-June 2020 stood at GH¢255,727.1 million (US$45,486.1 million), representing 66.36 per cent of GDP”, he informed Parliament.

 

The increase, he said, “was mainly as a result of a Eurobond issuance of US$3.0 billion in February 2020, exchange rate depreciation, frontloading of expenditures and the COVID-19 effect which increased the cedi equivalent of the outstanding debt stock”.

 

The total debt stock was made up of GH¢134,888.9 million (US$23,992.6 million) and GH¢120,838.3 million (US$21,493.4 million) of external and domestic debt accounting for approximately 52.7 per cent and 47.3 per cent of the total public debt stock, respectively.

 

As a percentage of GDP, external and domestic debt represented 35.00 per cent and 31.36 per cent, respectively.

 

Mr Ofori-Atta reported to the house that “as you may recall, the government obtained the approval of this august House in December last year to raise up to US$3.0 billion to finance growth-oriented expenditures in the 2020 budget (including restructuring the energy sector) and also to conduct liability management operations”.

 

“Based on the approval, Ghana became the first-ever country on the African continent to issue a 41-year bond and a second tri-tranche bond in the history of the country. Ghana successfully raised US$3 billion in the international capital markets in three tranches of 6-year, 14-year and 41-year Eurobonds of US$1.25 billion, U$1.0 billion and US$750.00 million, respectively on 4th February 2020. The 6-year, 14-year, and 41-year bonds were priced at 6.375 per cent, 7.875 per cent and 8.750 per cent, respectively”.

 

“Mr. Speaker, this transaction was a landmark achievement in many respects as the bond came with the lowest ever coupon rate for Ghana and first 41-year bond tenure in Africa. In fact, despite the initial concerns over the COVID-19 pandemic, and its potential adverse impact on market conditions for Emerging Markets, the order book was five times oversubscribed”, the minister noted.

 

This translated into a peak order book, in excess of US$15 billion and came on the heels of the 7 times oversubscription for the 2019 Eurobond, he added, noting: “Mr. Speaker, in line with the use of proceeds approved by Parliament, an amount of US$2.00 billion was earmarked to finance growth-oriented expenditures, US$1.0 billion for restructuring the energy sector in the 2020 budget and the remaining US$1.00 billion for liability management operations. Already, a buyback of US$523.05 million of the maturing 2023 Eurobond has been carried out”.

 

Read below the other components of the government’s macroeconomic performance from Jan – June 2020 as presented by the finance minister:

 

I now report on the macroeconomic performance for the first half of 2020. Mr. Speaker, the following macroeconomic targets were set for 2020: • Overall real GDP growth rate of 6.8 per cent; • Non-Oil Real GDP growth rate of 6.7 per cent; • End-period Inflation rate of 8.0 per cent; • Overall fiscal deficit of 4.7 per cent of GDP; • Primary surplus of 0.7 per cent of GDP; and • Gross international reserves to cover at least 3.5 months of imports of goods and services.

 

Economic growth

Mr. Speaker, provisional estimates released by the Ghana Statistical Service (GSS) shows that overall real GDP growth was 4.9 percent in the first quarter 2020 compared to 6.7 per cent over the same period in 2019. Growth in the non-oil sector was 4.9 per cent compared to 6.0 per cent in the corresponding period of 2019. 14 61. The Agriculture Sector recorded a growth of 2.8 per cent in the first quarter of 2020 compared to 2.2 percent during the same period in 2019. Industry Sector recorded a growth of 1.5 percent in the first quarter of 2020 compared to 8.4 percent during the same period in 2019. Growth in the Services Sector was strong at 9.5 percent in the first quarter of 2020 compared to 7.2 percent recorded during the same period in 2019.

 

Inflation

Mr. Speaker, headline inflation remained flat at 7.8 percent from January until March 2020. Inflation, however, rose to 10.6 percent in April and further to 11.3 percent in May, reflecting the panic-buying that preceded the market fumigation exercises across the country and the partial lockdown in the two largest cities, Accra and Kumasi. Inflation has declined marginally to 11.2 percent in June as pressure on food prices begin to decline due to the easing the restriction.

 

Monetary Aggregates

 

Mr. Speaker, from the beginning of the year to May 2020, growth in broad money supply (M2+) has slowed down, increasing by 6.0 percent, compared with a 7.0 percent increase over the corresponding period in 2019. Credit advanced by banks to public and private institutions also decreased for the first five months of the year, as demand and supply for loans have dropped due mainly to the uncertainties created by the COVID-19 pandemic and decline in aggregate demand.

 

Interest rates

 

Mr. Speaker, the Monetary Policy Committee of Bank of Ghana reduced the Monetary Policy Rate (MPR) by 150 basis points to 14.50 percent in March 2020 as part of broad measures to reinvigorate economic activity. The interbank rate declined from 15.2 percent in December 2019 to 13.8 percent in June 2020, reflecting the reduction in the MPR in March, 2020 and improved liquidity conditions in the banking sector. Similarly, interest rate on the 91-day Treasury instruments declined to 13.97 percent in June 2020, from 14.69 percent in December 2019. Average lending rate also decreased to 21.95 percent from 23.59 percent over the same comparative period, reflecting improved liquidity conditions in the banking sector and constrained demand for loanable funds.

 

Balance of Payments

 

Mr. Speaker, the current account recorded a surplus of US$199.88 million (0.3 percent of GDP) in the first quarter of 2020, up by 12.4 percent from US$177.76 million (0.3 pe

rcent of GDP) during the same period in 2019. The increase in the current account surplus was influenced largely by improvements in the trade balance as well as current transfers. The trade balance recorded a surplus of US$1,043.29 million compared to a surplus of US$1,178.26 million in the corresponding period of 2019, mainly on account of a sharp decline in import growth, which more than outweighed the fall in exports. As a result of developments in the external sector, the overall balance of payments recorded a surplus of US$1,476.46 million compared to a surplus of US$2,997.31 million recorded in the first quarter of 2019.

 

International Reserves

 

Mr. Speaker, the country’s Gross International Reserves stood at US$9,171.36 million at the end of June 2020 from a stock position of US$8,418.08 million as at the end of December 2019. This was sufficient to provide 4.3 months of imports cover compared to 4.0 months of imports cover as at December 2019.

 

Exchange Rate

 

Mr. Speaker, the Ghana cedi started the year strongly, appreciating by 4.5 percent on a year-to date basis by the end of February 2020 on the back of the US$3billion sovereign bond issue, strong macroeconomic fundamentals, and BOG’s forward auction sales, among others. However, the deterioration in financial market risk sentiment due to the spread of COVID-19 as well as the seasonal demand pressures from the energy and corporate sectors weighed heavily on the cedi. On a year to date basis, the cedi depreciated by 2.4 percent against the dollar and the euro in June 2020 but appreciated by 4.5 percent against the Pound Sterling, compared to a depreciation of 8.3, 7.9 and 7.6 percent against the dollar, the Euro and the Pound Sterling respectively over the same period in 2019. This is the lowest depreciation of the currency in an election year and especially remarkable in these COVID times. We thank God for the foresight in issuing and an Eurobond in February.

 

Fiscal Performance

 

Mr. Speaker, the implementation of the government’s fiscal policy for 2020 has been greatly impacted by the outbreak of the COVID-19 pandemic. Provisional fiscal data for the first half of the year show that revenue mobilisation fell short of target by 26.0 percent, 16 resulting mainly from shortfalls in oil revenue, customs receipts and non-oil Non-Tax revenues. Let me however congratulate GRAs leadership and tax division for exceeding their tax target by GHC 600 million. Expenditure execution, on the other hand, was faster than programmed due to the emergency spending on the various

 

COVID-19-related programmes.

 

Mr. Speaker, these developments pushed our financing requirements above the programmed limits for the period to enable us address these emergency expenditure pressures. Consequently, the fiscal deficit for the period widened from a programmed target of 3.1 percent of GDP to 6.3 percent of GDP. The corresponding primary balance for the period was in deficit of 3.3 percent of GDP, compared with a targeted primary deficit of 0.0 percent of GDP.

 

Revenue Performance

 

Mr. Speaker, Total Revenue and Grants for January to June 2020 amounted to GH¢22,007 million compared with a programmed target of GH¢29,759.1 million resulting in a shortfall of 26.0 percent or a performance rate of 74 percent. This represents a nominal decline of 6.8 percent over the corresponding period in 2019. 71. Mr. Speaker, non-oil tax revenue, comprising taxes on Income and Property, Goods and Services and International Trade, amounted to GH¢16,733 million or 4.3 percent of GDP, 16.2 percent below the programmed target of GH¢19,952 million or 5.2 percent of GDP. The lower than programmed performance in non-oil tax revenue was driven by the underperformance of non-oil tax handles such as Domestic VAT, Petroleum Excise taxes, Domestic National Health Insurance Levy, and GETFund Levy. However, personal income tax and Communication Services Tax both out-performed their respective targets for the period.

 

Mr. Speaker, Revenue from upstream Oil and Gas amounted to GH¢1,993 million (0.5% of GDP), 55.4 percent lower than the programmed target of GH¢4,468 million. This was mainly on account of lower volumes and significant drop in crude oil prices on the international market.

 

Expenditure Performance

 

Mr. Speaker, Total Expenditures (including arrears clearance) for the period amounted to GH¢46,352 million or 12.0 percent of GDP compared with the programme target of GH¢41,554 million or 10.8 percent of GDP.

 

Mr. Speaker, with the exception of interest payments and Grants to Other Government Units which were below their respective targets, compensation of employees, goods and services and capital expenditure were above target, due to the additional spending requirements in relation to the COVID-19 pandemic.

 

Overall Budget Balance and Financing

 

Mr. Speaker, the result of Government’s fiscal operations resulted in a cash basis deficit of GH¢24,345 million, or 6.3 percent of GDP, compared with the programmed target of GH¢11,794 million, or 3.1 percent of GDP for January to June.

 

Mr. Speaker, the Overall Budget Balance was financed from both domestic and external sources. Total Domestic Financing amounted to GH¢21,786 million, equivalent to 5.7 percent of GDP, and constituted 89.5 percent of the total financing. Foreign financing amounted to GH¢2,560 million, some 0.7 percent of GDP, against a target of GH¢15,100 million or 3.9 percent of GDP.

 

Mr. Speaker, the Primary Balance recorded a deficit equivalent to 3.3 percent of GDP, higher than the programmed deficit of 0.9 percent of GDP mainly due to lower-than programmed revenues and faster execution of expenditures.

 

 

Adnan Adams Mohammed

 

The government is preparing to roll out a three-and-a-half-year recovery and revitalisation programme to ensure the country do not only survive the havoc caused by the COVID-19 pandemic but also recover and thrive.

 

The Coronavirus Alleviation & Revitalisation of Enterprises Support (CARES) programme is expected to allow the government ‘recreate our economy and set it on a course that we yearn for’. “It will involve an investment of GHH¢100 billion from 2021 to 2023, of which GH¢70 billion will come from the private sector”, the finance minister has said during the mid-year budget review.

 

The government is touting the CARES programme as ‘ground-breaking’ as it requires radical reforms in government, particularly in revenue generation and a radical improvement in doing business for the private sector. It also adopts a whole-of-government implementation approach and fosters closer collaboration with the private sector to give a sustainable future to Ghanaians, as captured earlier”.

 

“Mr. Speaker, as you can see, every aspect of the lives of Ghanaians would be dramatically impacted with the implementation of this program; ranging from what we eat, to where we live, to where we work”, The Finance Minister disclosed to parliament last week. 

 

Mr Ofori-Atta noted that, government will vigorously promote the consumption of locally produced goods and services in order to support local businesses and generate employment. To this end, MDAs and MMDAs will be required to prioritise the procurement of local goods and services and our Public Procurement Authority and Central Tender Review Committee shall be so instructed. The aim is to generate local demand and consumption with the full force of government’s procurement capacity to ensure that most of government procurement will be sourced locally.

 

“We are in extraordinary times which call for extraordinary leadership. Accordingly, on behalf of the President of the Republic, I have presented to you an extraordinary Mid-Year Fiscal Policy Review that seeks to reorganise our public finances to protect lives, secure incomes, revitalise businesses and focus our energies on driving the economy back on track to building a Ghana Beyond Aid. It involves a recognition that the 43 solutions to Ghana’s problems lie with Ghanaians and that, with inspiring leadership, Ghanaians can find a way to address their own challenges”, the minister emphasized.

 

Mr Ofori-Atta presented the revitalization plan for the next three-and-a-half years as follow:

 

(i) An unprecedented GH¢100 billion Ghana Cares Obaatanpa Programme to transform and modernise our society

 

(ii) For the next 6 months:

a. Reduce CST from 9% to 5%;

b. Establish a GH¢2 billion Guarantee Facility to support all sectors of business and job retention;

c. Establish an Unemployment Insurance Scheme;

d. Create a GH¢100 Fund for Labour and Faith-based organisations for retraining and skills development; e. Increase the CapBuss Programme by GH¢150 million to, among others, facilitate credit of GH¢50 million to support the Creative Arts, the Media and the Conference of Independent Universities;

f. Retain provision of free water for the next three months; and

g. Retain free electricity for all life-line customers for the rest of the year.

 

Adnan Adams Mohammed

 

Finance Minister, Ken Ofori-Atta is seeking to increase the government’s total appropriation to almost GH¢110 billion for the year 2020as it is seeking Parliamentary approval to spend about GH¢12billion more in the supplementary budget presented to Parliament last week.

 

In the 2020 budget and economic policies statement of the government presented in November 2019, the government presented a total appropriation of GH¢98.0 billion, the unexpected global pandemic has pushed up government’s expenditure beyond initial estimations prompting the request for additional GH¢12.0 billion in appropriation. 

 

The government, through the Finance Minister, explained that the virus has not only plundered government’s revenues but has taken a heavy toll on businesses with some requiring assistance to stay afloat. Should the extra funds being requested by the Finance Minister be granted, it would bring the 2020 the total Appropriation to GH¢109.9bn.

 

“Ghana has been hit with a double shock: a health pandemic and a global economic recession. These have resulted in revenue shortfall of GH¢13.6 billion and unanticipated but necessary expenditures of approximately GH¢11.7 billion”, Mr Ofori-Atta told Parliament, adding that, “Whiles this pandemic requires us to exceed the limits imposed by the Fiscal Responsibility Act, we have had to make these major expenditures to protect the lives and livelihoods of Ghanaians and sustain businesses.

 

The Minister further explained that, the supplementary budget would go into areas such as utility tariffs reliefs for consumers, soft loans for businesses, special allowance for front line workers, governance and security, among others.

 

Ghana’s fiscal deficit is projected to hit 11.4% of GDP as a result of a GH¢13.6 billion revenue shortfall occasion by the COVID-19 pandemic and its attendant global economic downturn. This is above the 5% limit as stated in the Fiscal Responsibility Act, 2018 (Act 982).

 

According to the Finance Minister, revenue mobilised in the first half of the year was GH¢22billion which was 26 percent lower than the estimated GH¢29.7bn for the period. Over the past five years, government has struggled to raise enough domestic revenue despite its tax-to-GDP already behind peers in the sub-region.

 

However, government’s total expenditure for the period, GH¢46.3bn, was 11.5 percent more than what was projected in the 2020 budget presented last year.

 

“Mr Speaker, Ghana is not unique in this regard. The pandemic has caused other countries including the 26 countries in the EU, Brazil, Jamaica, Costa Rica, etc. to suspend their fiscal rules in 2020 in light of their sharply increased fiscal deficits.

 

“Mr. Speaker, given our history of fiscal rectitude, it is with great difficulty that we have to suspend our fiscal rule due to exogenous factors. We intend to return to compliance with the FRA in the shortest possible time”, the minister said.

 

Apparently, Mr Cassiel Ato Forson, Ranking Member on Parliament’s Finance Committee, has described as empty, the Government’s Mid-Year Budget Review presented by Finance Minister, Ken Ofori-Atta on Thursday.

 

“There’s nothing in it for Ghanaians to be happy about,” Mr Forson said, after the Minister had presented the budget review to the nation through Parliament, in Accra.

 

He said government claimed to have spent GH¢11.1 billion to address challenges brought about by the COVID-19 pandemic without giving breakdown of expenditure.

 

“This is sad and unacceptable,” Mr Forson added, saying “we thought the Minister would have used this golden opportunity to provide us with some breakdown on what the GH¢11.1 billion was used for; unfortunately it is all Bible quotations and nothing in the mid-year budget statement.”

 

According to Mr Forson, in the 2020 budget, the Government informed the nation that it would borrow an additional GH¢18 billion, and wondered why that figure had shot up to GH¢44 billion this year.

 

This, the Ranking Member and former Deputy Finance Minister, said meant that by the end of 2020, Ghana’s public debt would be approximately GH¢280 billion from the GH¢120 billion they inherited, representing over 72 per cent of GDP.