Ken Ofori-Atta
Finance Minister Ken Ofori-Atta has spelt out plans by government to build a strong and efficient financial sector to wean Ghana off foreign aid.
Presenting the 2018 Budget Statement christened ‘Adwuma budget’ to Parlimanet yesterday in Accra, Mr Ofori-Atta said such move would require innovative and long-term financing instruments to support economic development for high productivity, jobs and inclusive growth.
To help achieve the foregoing, he said government would launch a national development bank next year with the capacity to mobilize private capital towards agricultural and industrial transformation, among others.
Government, he added, has set up a taskforce to develop a roadmap for its establishment.
The Minister noted that government would restructure the Ghana Infrastructure Investment Fund (GIIF) with the capability to mobilise foreign private capital for critical infrastructure development using a private sector model
Government, he added, plans to enhance the capacity of Ghana EXIM Bank to support agriculture and industrialisation for export.
Analysis
“Mr Speaker, the financial sector of our country remains heavily dominated by banks. The total banking sector assets to GDP ratio as at September 2017 is 50 percent. This compares unfavourably with the total market capitalization of the Ghana Stock Exchange (GSE) to GDP ratio of 30 percent, as well as the total corporate debt to GDP ratio of 0.36 percent on the Ghana Fixed Income Market (GFIM), for the same period.
“Access to long-term funds by the private sector is not sufficient to drive accelerated economic growth of the country. To address this challenge, government will strengthen the pensions, insurance and securities industries which are the key agents of providing long term capital for the economy.”
Reforms
According to him, government would initiate reforms to the investment guidelines of pensions, insurance and collective investment schemes to enable them support capital market growth, adding that such reform would encourage banks to issue fixed income securities through the capital market instead of private placement in fixed deposits.
“Additionally, pensions and insurance firms will be encouraged to invest in private equity, Real Estates Investment Trusts (REITs).”
Informal Sector Pension Scheme
Makign reference to the Cocoa Board Law, 1984 (section 26), which enjoined the Board of Directors of the Ghana Cocoa Board to establish a contributory pension scheme for the nation’s cocoa, coffee and sheanut farmers, he said, government has started a process of setting up a broader Informal Sector Pension Scheme under the third tier of the National Pension Scheme to cover cocoa farmers, among others.
The framework to operationalise the scheme would be developed in 2018, he said.
“Mr Speaker, this scheme will complement the effort of private sector corporate trustees, provide social protection for a large segment of Ghanaians who are in the informal sector especially our hardworking cocoa farmers.
Agriculture Commodities Exchange
Touching on this, he said government’s priority was to operationalise the Commodities Exchange in 2018 to support agriculture transformation, including the ‘Planting for Food and Jobs’ initiative.
Mortgage finance industry development
The Finance Minister also stated that government would support private sector efforts in expanding access to housing, adding that his outfit would partner with banks, pension trustees and securities market players to start a process of developing and deepening the local mortgage and housing finance market to offer affordable mortgages at subsidized interest rate beginning with public sector workers.
“The policy objective is to reduce the cost of local currency mortgage offered by banks and to encourage the use of technology to lower the cost of housing by the private sector. This is expected to contribute to the reduction of Ghana’s housing deficit which currently stands at about 1.7 million.”
Regional financial services hub
“Positioning Ghana as an international financial services centre is intended to make it the preferred headquarters for all international banks operating in the sub-region. Ghana is also billed to become the hub for the financial technology and payment systems for the region. The hub is also intended to host the international private equity and venture capital firms to support entrepreneurship and access to long-term capital by the private sector in the sub-region.”
To achieve this, he said a special taskforce would be set up to provide government with a strategy and framework for making Ghana the regional financial services hub.
By Samuel Boadi