STATE-OWNED ENTERPRISES TO BE WEANED OFF GOVERNMENT SUBVENTIONS-SETH TERKPER

State-owned Enterprises (SoEs) will be taken off government’s balance sheet, Ghana’s Finance Minister, Seth Emmanuel Terkper, has disclosed.

According to Mr Terkper, as institutions of profit-making for which reason they were called Enterprises, SoEs would have to undergo major restructuring to be able to have strong balance sheets and borrow to finance their activities, rather than continuing to depend on government subvention to survive.

The Finance Minister cited the example of the Ghana Airports Company, Ghana Cocoa Board and the Ghana Ports and Harbours Authority as viable SoEs with strong balance sheets which enabled them to access credit to finance their operations.

He was addressing about 100 heads of SoEs and institutional investors at a Roundtable session organized by the Ministry of Finance in Accra, yesterday.

He said for SoEs to become viable, the macro-economic fundamentals should be strong and the regulatory and legal frameworks adequate to facilitate good governance.

Mr Terkper disclosed that the three-year International Monetary Fund Extended Credit Facility (IMF ECF) policy framework, together with the homegrown policies, had contributed immensely to the gradual return to macroeconomic stability and the rebound of investor confidence in Ghana’s economy.

He drew attention to the international Credit Ratings Agency, Moody’s recent economic report on Ghana which defined the country’s economic outlook as positive, affirming the rating at B3, and expressed the hope that the recent revision of Ghana’s Long Term Bond Ratings from negative to stable would influence Ghana’s economic outlook.

Moody, in its recent economic report on Ghana, described the economic outlook as positive, citing significant fiscal deficit reduction and success in implementing structural reforms over the past year, as well as reduction in government liquidity risk on the external side as the basis.

Moody indicated that the proceeds of the US$750m Eurobond earmarked for debt repayments was part of the key drivers for the stabilization of the rating, adding that improved balance of payments dynamics, including improved Foreign Direct Investment (FDI) inflows and continued development of oil and gas resources.

In a statement, Mr Millison Narh, 1st Deputy Governor of the Bank of Ghana (BoG), described outlook for the banking sector as positive, based on plans to retire the Volta River Authority (VRA) debt, reduce bank exposure to Bulk Distribution Companies (BDCs), increase minimum paid-up capital of banks and revise the base rate formula for determining lending rates. “Presently, Government has finalized arrangements with banks to pay down the VRA debt over a five-year period from the Debt Service Account which will receive cash flow from the energy sector levy and debt service reserve,” Mr Narh said, adding that the first tranche of payment of GHC 250 million was made by government on September 1, 2016 to be shared among exposed banks.

He disclosed that key reforms were being undertaken in the banking sector with the objective of ensuring financial stability and soundness.

These, he said, included the passage of two new bills- the Specialized Deposit-taking Institutions and the Deposit Protection Bills -to help strengthen BoG’s supervisory role of the banking sector.

Mr Narh explained that the Specialized Deposit-taking Institutions legal framework aimed to address the gaps associated with consolidated supervision, bank resolution and others identified in the existing legal framework, while the Deposit Protection framework was expected to help protect depositor’s funds.

In addition, he said, BoG was seeking to exclude itself from the ownership structure of existing banks in order to establish an uncompromised supervisory system, based on the new laws that were to be enacted.

Furthermore, he said BoG had also proposed an increment to the minimum capital requirements base for all banks to improve their core function of financial intermediation.

In a presentation titled: ‘Consolidating the Turn-around Story,’ Mr Sam Arkurst, Ministry of Finance, said Ghana’s economy Ghana regained macro-economic stability with a stable exchange rate which, he said, was attributable to fiscal discipline, Public Financial Management (PFM)Reforms and Debt Management policies.

Source: Government of Ghana.