analysisBy Masahudu Ankiilu Kunateh
In a similar vein, the Ghana Revenue Authority (GRA) also exceeded its 2011 revenue target by GH¢1,161.7 million, representing 15.4%, according to the Commissioner-General.
At the end of December 2011, the GRA had collected provisionally, GH¢8,706.39 million, exceeding the target by GH¢161.73 million.
In the 2011 Budget and Economic Policy Statement of the government, the GRA was given an overall collection target of GH¢7,208.97 million, excluding upstream petroleum revenue.
However, in May, 2011, the Ministry of Finance and Economic Planning revised the revenue target upwards by 4.7%, bringing the total revenue target for 2011 to GH¢7,544.64 million.
Breaking down the collection for 2011, the GRA recorded domestic taxes (direct) of GH¢3,733.94 million, showing an excess of GH¢603.60 million or 19.3%, as against a target of GH¢3,130.38 million.
The Authority mobilised GH¢1,367.64 million in domestic taxes (indirect) depicting an excess of GH¢21.85 million, or 1.6%, as against the GH¢1,345.76 million target.
Furthermore, the GRA recorded customs of GH¢3,604.82 million, representing an excess of GH¢536.30 or 17.5%, as against a target of GH¢3,068.49 million.
Amazingly, Ghana is also facing infrastructural development challenges, which should not be the case, if these resources and revenues were properly managed.
Banking Sector Developments
Total assets of the banking industry increased by almost 21 per cent on year-on-year basis to GHÂÂ¢23.2 billion in April 2012. The growth in assets was funded mainly by deposits (which went up by 29.1 per cent to GH¢16.9 billion), and net worth which recorded a 20.8 per cent growth to GHÂÂ¢3.1 billion. Of the total net worth, GH¢206 million was from banks recapitalisation.
The financial soundness indicators of the banking industry remained strong. The Capital Adequacy Ratio (CAR) was well above the 10 per cent threshold, but declined to 16.8 per cent at the end of April 2012, compared to 18.1 per cent in April 2011. The asset quality of the banking system improved, as the Non-Performing Loan (NPL) ratio declined to 14.1 per cent in April 2012, from 17.4 per cent in April 2011. Earnings performance also improved.
Total private sector credit expanded by 37.4 per cent on an annual basis to GH¢9.3 billion in April 2012, compared to a growth of 17.3 per cent in the same period of 2011. In real terms, private sector credit growth was 25.9 per cent.
Growth in broad money supply (M2+) slowed to 30.1 per cent in April 2012, compared to 41.5 per cent a year ago. The source of change in M2+ was a 51.5 per cent growth in the Net Domestic Assets (NDA) of the banking system.
Interest Rate Trends
Interest rates continued to trend upwards in the year to May 2012. Cumulatively over the first five months:
The 91-day Treasury bill rates increased to 19.4 per cent, while the 182-day Treasury bill rates went up to 20.2 per cent.
The average rates on the 1-year note went to 20.5 per cent, and the 2-year fixed notes to 21.2 per cent.
The rate on the 3-year fixed bond increased to 24 per cent, while the 5-year fixed bond rate was unchanged at 14.3 per cent.
The average savings deposit rates increased by 45 basis points to 5.5 per cent in May 2012, while average base rates of banks declined to 20.6 per cent, from 22.4 per cent in the same period. The average lending rate declined to 25.9 per cent in May 2012, from 27.5 per cent a year earlier. Similarly, the Annual Percentage Rates (APR) of banks declined by 47 basis points to 28 per cent in May 2012, relative to the same period a year earlier. The interbank overnight rate rose to 13.3 per cent in May, from 8.1 per cent in January 2012.
Balance of Payments and Exchange Rate Developments
Total merchandise exports were US$6.6 billion over the first five months of 2012, representing a year-on-year growth of 24.6 per cent. There were higher receipts from gold, cocoa beans and crude oil exports, as commodity prices increased during the period.
Export receipts from gold amounted to US$2.7 billion, cocoa beans US$1.6 billion, while crude oil was US$1.2 billion during the period. Other exports, including nontraditional, amounted to US$768.2 million.
Total merchandise imports were US$7.5 billion during the five months, indicating a growth of 27.9 per cent on a year-on-year basis. Oil imports were US$1.5 billion, compared with US$1.2 billion in the same period of 2011. Of this, crude oil amounted to US$483.4 million while refined oil products were US$967.9 million. Gas imports through the West Africa Gas Pipeline are estimated at US$73.5 million.
Total non-oil imports, categorised by the Broad Economic Classification (BEC), amounted to US$6 billion, compared with US$4.7 billion recorded in the corresponding period in 2011. Of this, capital imports was estimated at US$1.3 billion, intermediate imports US$2.9 billion, consumption goods US$1.3 billion, and other imports US$439 million.
The balance on the trade account therefore, registered a deficit of US$937.3 million by end May 2012, compared with a deficit of US$597.2 million recorded in the same period a year ago.
For the first quarter of 2012, the Balance of Payments recorded a deficit of US$1.3 billion, compared to a deficit of only US$154.2 million in the same period of 2011. The widening balance of payments is attributable to the deterioration in both the current account and the financial and capital accounts.
The Gross International Reserves of the Bank of Ghana declined to US$4.3 billion as at June 8, 2012, from U$5.4 billion in December 2011. This is equivalent to 2.5 months imports cover of goods and services.
Cumulative inward remittances through the banking system were US$5.9 billion at the end of April 2012, representing a year-on-year growth of 7.5 per cent. Of this, US$622.3 million accrued to individuals, recording a growth of 6.6 per cent over the same period in 2011.
During the first five months, the cedi depreciated cumulatively by 15.1 per cent against the US dollar, compared to 1.9 per cent depreciation in the same period of 2011. In recent weeks however, the pace of depreciation of the cedi has moderated as a result of the measures introduced to restore stability. The real effective exchange rate depreciated by 6.8 per cent in January - April 2012, compared with a real appreciation of 5.9 per cent in the same period of 2011.
Dollarisation of the economy and depreciation
Ghana recently announced intentions to curtail the free fall of the local currency, the Cedi. The government was nursing plan to stop residents of the West African nation from holding foreign accounts.
If the intention was to go on, individuals and companies would not hold bank accounts either in US dollars, pounds or euros in Ghana.
If the measure is implemented, the existing foreign accounts would be converted into cedi accounts.
Also, the measure, when implemented, will augment processes of mitigating the high levels of dollarisation in the country.
Dollarisation is when individuals and companies use foreign currencies like the dollar for financial transactions and quotations of goods and services. Examples are the purchase of cars, payment of school fees, mortgage loans, rental payments, airline tickets etc. The service providers quote exchange rates that are significantly off-market. The fringe exchange rates trickle down into the market and become benchmark rates, unduly influencing market rates.
Meanwhile, it appears the cedi is somewhat stabilising against the dollar on the interbank market. Analysts, however, attribute this to inflows from the recent bond issue and the rise in interest on cedi investments, rather than the Bank of Ghana's intervention measures.
If you are in Ghana, you would need GH¢1.95 to buy the dollar on the Forex Market, while you will need GH¢1.89 on the interbank market, while you need GH¢2.90 to purchase a Pound Sterling and GH¢2.30 to get a Euro on the forex market.
Ghana's laws allow both residents and non-residents to operate foreign exchange accounts.
Any individual or corporate body that operates such an account can easily convert cedis to dollars and pay these monies into the foreign account. Many people have built huge dollar deposits in bank accounts. The share of foreign currency deposits to total deposits in our banking system has increased from 27.9 per cent in April 2010 to 28.2 per cent in April 2011, and further to 31.8 per cent in April this year. Some banks have more foreign currency deposits than domestic currency in their total deposit.
However, analysts say if care is not taken to address the free fall of the cedi, as well as inflation risks, the country's economy may lose its bearings.