Ghana: Govt to Establish National Devt Bank

14 November 2019

The government is to establish a National Development Bank (NDB) next year to provide long term funding and credit to private sector players and the Small and Medium Scale Enterprises space to finance their businesses.

The Minister of Finance, Ken Ofori-Atta, disclosed this in Accra yesterday when he presented the 2020 Budget Statement and Economic Policy to Parliament.

He said the move formed part of the industrialisation agenda of the government.

Mr Ofori-Atta disclosed that government had secured US$250.0 million from the World Bank as initial capitalisation to kick-start the operations of the NDB and an interim board was set-up, adding that otherDonors such as DFID, KFW, AfDB were expected to provide additional capitalisation for the Bank once it became operational in 2020.

Under the theme "Nkabom and Nkosuo Budget," literally meaning "Development and Unity," the next year's budget would among others focus on macro-economic stability, job creation and infrastructure development.

Mr Ofori-Atta said the feasibility study for the establishment of the NDB specifying the rationale, mandate, business model, legal and regulatory framework, ownership, governance and sustainability of the Bank had been completed.

"The NDB as envisioned will refinance credit to industry and agriculture as a wholesale bank; and also provide guarantee instruments to encourage universal banks to lend to these specific sectors of the economy," he said, adding that NDB would be an independent institution with strong corporate governance framework; and would be globally rated to enable it leverage foreign private capital for industrial and agriculture development in the country.

He disclosed that governmentwould provide periodic dedicated funds for intervention in key areas of the economy such as large scale agro processing, housing, through various schemes and funds as needed for economic and social development and jobs.

"It is expected that the National Development Bank will provide cheaper and long term funding for the growth and expansion of key companies operating in the agriculture and industry sectors. The development bank will also lend through specialised banks to key anchor industries at the Metropolitan, Metropolis and District Assemblies level to support the Governments IDIF initiative," Mr Ofori-Atta said.

The Finance Minister hinted that government wasalso working with the Banking Community to launch a GH¢2 billion credit and guarantee scheme in 2020 in a bid to help reduce interest rates or the private sector.

"This initiative will be structured to incentivise banks to lend to private sector at discounted lending rates. The scheme which will start in the first quarter of 2020 will be targeted at specific industries such as agri-business, manufacturing, hospitality and tourism and the tech-sector amongst others," Mr Ofori-Atta said.

He opined that government had worked very hard to reverse the deteriorating macroeconomic environment it inherited, reduced inflation and interest rates, stabilised the exchange rate, restored sanity in the financial sector, and undertook large scale social intervention programmes in education, smallholder agricultural initiatives such as planting and rearing for food and jobs, among others which are prerequisites for private sector led growth and job creation.

The Finance Minister said although government needed more revenue to finance key developmental projects and government priority projects,and the country's tax to GDP wasbelowthe average of its middle-income country peers of 18 to 20 percent, government had not sought to increase taxes in next year's budget but found innovative means to increase government revenue.

The strategies, he mentioned include expanding the tax net through digitisation to improve identification of tax payers and efficient collection of both tax and non-tax sources of revenue.

He also said government was transforming and strengthening the capacity of Ghana Revenue Authority (GRA) to an organisation that combined efficient revenue collection with excellent customer orientation to efficiently collect and report non-tax revenues.

Touching on the banking sector clean up, Mr Ofori-Atta disclosed that government has so far spent GH¢33 billion in sanitising the sector and clearing of legacy debts.

He said the bankingsector clean up was necessary to save the industry and economy from collapse, stressing that about 4.3 million customers would have lost all their deposits if the government had not intervene in the banking crisis.

On the 2019 macro-economic performance, Mr Ofori-Atta said the overall Gross Domestic Product (GDP) as at September, stood at 6.2 percent, non-oil GDP growth of 5.2 percent and inflation rate as at September stood at 7.6 percent, primary balance as September at 0.5 percent and Gross International Reserves (GIR) of 4.1 months of import cover.

The Finance Minister who highlighted on the 2020macro-economic outlook, said overall GDP growth was projectedat 6.8 per-cent, non-oil GDP growth rate of 6.7 per-cent, end period inflation of 8 per-cent, fiscal deficit of 4.7 per-cent of GDP, primary surplus of 0.8 per-cent of GDP and GIR of not less than 3.5 months of import cover.

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