The Market Place with Daryl Kwawu on JoyNews (3-8-23)
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NewsTranscript
00:00 Hello everyone, welcome to the marketplace. Coming up this afternoon, first deputy governor of the Bank of Ghana, Dr.
00:06 Maxwell Opokuafai, questions sustainability of central banks' continuous financing of government's budget.
00:13 Meanwhile, minority takes on Bank of Ghana for writing off some debt owed by the government,
00:22 insisting there's no legal backing for such an action.
00:29 Also later, Ghana Union of Traders Association, GUTA, opposes implementation of new tariffs by the Ghana Post and Harbour Authority, calling for its suspension.
00:38 My name is Daryl Powell. Thanks for being with us. Details coming up.
00:58 [Music]
01:22 And first up, first deputy governor of the Bank of Ghana, Dr. Maxwell Opokuafai has said the central bank's financing of government's operations is not sustainable and must not be encouraged.
01:34 Dr. Opokuafai called for strong and aggressive domestic resource mobilization to support the economy. Here's more.
01:41 The first deputy governor of the Bank of Ghana was speaking at an event at Gomuafete in the central region on the topic, building public support towards mobilizing resources locally for development.
01:56 He added that recent happenings have shown that central bank financing approach is not workable.
02:03 Dr. Opokuafai says financing the deficit by central bank can indeed undermine its autonomy and its ability to even fight inflation.
02:11 He was however quick to add that one of the challenges that is affecting domestic resource mobilization is the lack of trust between the general public and policy makers.
02:22 Dr. Opokuafai was of the view that there is a need to deal with wasteful spending and ensure that there is value for money going forward. A move that can help to deal with this challenge.
02:34 The first deputy governor of the Bank of Ghana's comments are coming at a time where there have been push for strict enforcement of the zero financing of government's budget
02:44 to prevent the situation where Bank of Ghana has been pushed into negative equity as a result of the almost 61 billion Ghana cities lost for 2022.
02:57 The minority in parliament say Bank of Ghana acted illegally when it purported to write of some debt owed it by the government.
03:06 The central bank has written of more than 30 billion city debt of the government. Acting ranking member on the finance committee, Isaac Adongo, has been speaking to journalists.
03:16 A parliamentary correspondent joins me with more on this. And so what's the minority's argument? What has Mr. Adongo been saying?
03:26 Darryl, they say that if you look at the public financial management act, if you look at the Bank of Ghana Enabling Act itself, for the Bank of Ghana to purport to do what they have just done,
03:36 they need a resolution of a simple majority in parliament to be able to do so. And as far as they are concerned, that has not been done.
03:43 [inaudible]
04:04 We are having challenges with the connection there to Kwikwes, and we'll try and re-establish contact with him.
04:09 But as we've been reporting, the minority in parliament say the Bank of Ghana acted illegally when it purported to write of some debt owed it by the government.
04:20 Kwikwes, we just lost you briefly. Continue with the point you are making about the minority's argument.
04:29 Right, Darryl. So the point I was making is that a central part of the argument that is being advanced by the acting ranking member on the finance committee, Isaac Adongo,
04:36 that the Bank of Ghana is subject to its regulatory powers. The laws that set up the Bank of Ghana does not allow it to simply go ahead to write of debt.
04:47 You'll recall that the minority in particular have been making a lot of noise about government's printing of money at the central bank,
04:56 and they say that that is part of the reason why the country is facing such severe inflationary pressures.
05:02 And because of this, the Bank of Ghana, they say, had not listened to them. They were not aware that all this was going to come back and buy the central Bank of Ghana.
05:12 You do realize that the 61 billion Ghana civil losses that the Bank of Ghana has made in the year of review is mainly due to some of these debts that is owed them by the central government that they are purporting to write of.
05:25 According to Isaac Adongo, and according to the minority leader himself who yesterday spoke when he was wrapping up comments by the minority side on the media budget review,
05:35 the other side are going to use all the powers that are available to them within parliament and outside of it to demand accountability.
05:42 They say that if the Bank of Ghana government do not listen to them and they go ahead to do what they are purported to do,
05:48 a future NEC government will go back to that and there will be possible prosecutions on this.
05:53 And that's all that they intend to do about this? How far are they willing to go?
05:57 In fact, they were willing to trigger some parliamentary processes to be able to make this demand.
06:04 But as we know now, parliament is expected to go ahead today, which means that some of these parliamentary oversight powers that they have cannot kick in,
06:14 because parliament will be in brink up until about October when they return.
06:19 But Isaac Adongo himself, in the past when he has spoken, has hinted that personally he's willing to take legal actions against the Bank of Ghana,
06:28 he's willing to go to court to demand that the right thing is done.
06:31 And that is what he's hoping on now.
06:33 And it seems to be a united minority front making this demand, because yesterday, we heard from the minority leader himself who made this demand.
06:40 They also have concerns about the auditors of the Bank of Ghana.
06:45 They say that the auditors should have satisfied themselves that the Bank of Ghana has the power to do what it's supposed to do before it should have signed up its auditors.
06:55 They say it did not do that.
06:56 And they seem to alert that the Lloyds and the group that did this auditing of the Bank of Ghana did not do such a good work.
07:03 But they do not want to waste a lot of time talking about these auditors when they can pick on the central bank itself, Dr Isaac Adesi.
07:11 In fact, they go ahead to make an allegation that Dr Isaac Adesi is already planning for his retirement, he's already ordering banks.
07:17 These are not allegations that he's been able to substantiate and be able to prove in terms of giving evidence to that.
07:23 But clearly they say that they are willing to use all the processes that are available to them in Parliament, in the courts, to demand that the right thing is done.
07:32 And Kweku, there have been fiery scenes and debate on the media budget review presented by the Finance Minister Ken Ufoyata.
07:39 Both sides have been going neck and neck at each other.
07:42 Right. In fact, that debate on all the comments on the media budget review concluded yesterday in Parliament.
07:52 In fact, it was concluded by the minority leader, Dr Kissela Tukfosi himself, as well as Alexander Akundo-Martin, who is the deputy majority leader.
08:01 The minority central argument that he's been making all throughout is that the Finance Minister cannot claim to have turned the corner.
08:08 And that indeed, the county is still facing acute economic distress.
08:13 And that there is a long way to be able to get out of this current economic challenge that the county is facing.
08:19 And so the Bank of Ghana, the Ministry of Finance, must be modest in some of the projections that they are putting out.
08:25 In fact, they also put aside some of the projections in the media budget review.
08:30 They talk about the projected GDP growth among others and say that you cannot be revising these growth levels to these low levels and be claiming that you've turned the corner.
08:40 In fact, Kwame Nkrumah also came in to say that if the Bank of Ghana governor or the Finance Minister were license-driving, then their license should be taken from them.
08:50 Because what they are doing is simply driving the county into a ditch.
08:54 So what next after the debate?
08:58 Well, because the Finance Minister did not ask for supplementary estimates, that is done now.
09:03 Because everything the Finance Minister presented to the House was by way of information.
09:09 And so they have just been carried across to MPs.
09:12 They're going to continue.
09:13 I mean, it's postulating the details.
09:15 There are no estimates to be approved by Parliament.
09:18 And so today, the House is expected to adjourn CND.
09:21 The minority leader has been making the point that he believes that this media budget review should have come by way of motion, so that certain approvals would have been done.
09:30 But because it came by way of statement, all MPs could do is to comment on the specific information, the information that has been provided by the Finance Minister and government, and leave it at that.
09:40 Parliamentary Affairs correspondent, Gokul Santi there.
09:43 Thank you so much for the update on Zoom with us.
09:46 It's Research Lead at GCB Capital, Karej Woti.
09:49 Good afternoon to you.
09:50 So first off, Karej, the first deputy governor of the Bank of Ghana is saying that the central bank's financing of government operations is not sustainable and must not be encouraged, obviously, in the face of losses incurred by the central bank in 2022.
10:05 Questions have been raised about the independence of the Bank of Ghana.
10:09 How can this be settled?
10:10 Well, it is true.
10:14 And it has always been that central bank financing of deficit is not sustainable.
10:20 And we can argue that in a period where we've lost access to the capital market and there was a need to consolidate as espoused eloquently by the IMF and many other dissenting Ghanaians really,
10:34 you saw the updated numbers for 2022 that they were the ones where we exceeded the fiscal target by large.
10:41 And the reality is that that was only possible because central bank was able to inject some sizable portion of that deficit for last year, 65 billion in total, about 55 billion from the local market.
10:57 And the central bank provided more than 50 percent of that domestic funding, really.
11:03 And it is no wonder that inflation soared to 54.1 percent last year.
11:10 And even when it's slowing down now, maybe the pace is a bit slower than we would envisage.
11:15 And there are a lot of other shocks from the sides to it, really.
11:19 The question about raising revenue cannot be overemphasized.
11:22 But the question again is, how do we go about it?
11:25 Is it about increasing the already high corporate tax rates or personal income tax rates or increasing VAT, which is already high, or increasing the other existing rates that are all high?
11:37 I guess the solution doesn't lie in there.
11:40 It will bring fatigue to the taxpayer and may encourage tax evasion and tax avoidance and all of that.
11:48 The age old argument has been, how do we find ways of expanding without necessarily overburdening the existing taxpayer?
11:58 I mean, through the many other channels of informal sector players and how we group them in through things like your property rate collection and the many other areas that we have emphasized.
12:09 I do not say the solution is easy or straightforward, but we have to actively look at those sides of the argument, really.
12:16 If we must win our dependence on the central bank.
12:19 That's the stance now.
12:20 The central bank was dominated in 2022, and that is why you saw the kind of monetization that we saw.
12:29 Has it been independent all this while?
12:33 Yes, the law says so.
12:35 But then in reality, I think it has been evidence far and in between that there are years where when there are lapses or where there are issues, you tend to see the central bank's independence questioned.
12:47 And 2022 is an example of such years.
12:50 I mean, there have been such experiences also in the past.
12:52 So when times are good, we are not under any pressure.
12:55 We can on paper talk about central bank independence.
12:59 But in 2022, the evidence suggests that the independence is under question.
13:04 And we are just hearing the minority taking on the Bank of Ghana for writing off some debt ordered by the government.
13:10 30 billion cities, we are told, insisting there is no legal backing for such an action.
13:14 Again, you can't blame the central bank, are you?
13:18 Well, due process must be followed if there are laid down processes that they must go through to.
13:26 I've always argued that central bank, I mean, the Ministry of Finance is their big brothers.
13:34 In fact, so conversations between them can be a bit more cordial compared to maybe your
13:40 negotiation with an organized labor or some other civil society groups, really.
13:44 So some of those things can happen.
13:47 But then it must follow due process.
13:50 I mean, if Bank of Ghana won't write off debt owed to government of Ghana, then who will?
13:56 But then the right processes must be followed.
14:00 And to the extent that they are not followed, I think we need to add demand accountability for that.
14:06 But then Bank of Ghana also much owed so much of both marketable and non-marketable debt of the government of Ghana, really.
14:14 I think at the last count in the IMF report, they were quoting about 77 billion in non-marketable debt, really.
14:24 And the question is, how do we deal with that?
14:26 I guess part of that is what is being written off.
14:29 But don't forget, Bank of Ghana also holds government of Ghana regular debt, which they may have restructured in the earlier phase already.
14:36 So I guess these things are bound to happen.
14:39 It just must follow due process and the right approvals must be sought.
14:43 To the extent they are not, I think it is in place that we demand accountability of the Bank of Ghana.
14:49 So if the loss is incurred in 2022, the central bank will need to assess its current operations
14:55 and policies to prevent it from happening again in future.
14:59 We've heard the Bank of Ghana talk about retaining, as part of measures, retaining profit to build
15:05 a capital backup, optimising investment portfolio, assessing the need for capitalisation support
15:11 from government in the medium term, ETC.
15:14 What do you make of such measures?
15:18 I mean, if the regulator who is holding the stick for the companies or institutions or the industry regulate to be of good behaviour,
15:30 and they themselves are showing quite bad books, I mean, reason justified or not, the books are bad.
15:37 And the solvency of the institution is coming into question.
15:41 I'm not sure it's a good reputation for the regulator, really.
15:45 So whatever must be done to restore capital is actually necessary.
15:49 And we need that for Bank of Ghana to function as the lender of last resort.
15:54 How much profit can we build up in the next maybe one, two, three years to make up for the 60 billion loss?
16:01 I mean, I cannot say for certain.
16:03 And so there will be need for some recapitalisation here and there, which I believe was an issue the IMF raised in their technical notes as part of the programme approval, really.
16:15 And so we need to explore the channels.
16:16 It comes back to the same government to capitalise the Bank of Ghana.
16:20 It comes back to maybe the other partners that could do this, really.
16:24 But this government is the same entity that is maybe having liquidity challenges now.
16:30 And by extension, every other bank related to government somehow, call it your consolidated bank, Ghana, your ADB, your NIB,
16:38 are all at their lowest ebb now looking for liquidity support from the majority shareholder in government of Ghana, really.
16:45 And so it's not an issue of Bank of Ghana alone.
16:49 I think it's an issue of all the state-owned banks, really, that need to be looked at holistically at this point.
16:55 But there is no over...
16:57 We cannot overemphasise that Bank of Ghana as the regulator need to be in good financial health to be able to carry out its role as a lender of last resort.
17:08 And much of the losses we've seen was as a result of the DDP.
17:12 And now an economist, Dr Patrick Esumé, is predicting that commercial banks will struggle to recapitalise due to the impact of the domestic debt exchange programme on the financial sector.
17:22 And his comment coming at a time that rating agency Fitch has warned that the huge losses imposed on bondholders under the programme has significantly weakened the banking sector's capitalisation plans.
17:35 I want you to listen to what he said yesterday on Business Live, then we'll talk about it.
17:39 I think that, you know, if there's any immediate increment in the capital requirement, there will be a bit of struggle for some of the banks.
17:49 There's no twist that the domestic debt exchange has weakened the banks in some sense.
17:57 But also, you know, it's not just what was closed in... the exchange that was closed back in February.
18:04 We know that new debt exchanges have been muted by the government.
18:10 And you get a sense that all of this will bring further weaknesses within the banking system.
18:15 When the Bank of Ghana released the data in relation to the last MPC meeting, we do see that credit growth to the private sector has more than about halved compared to the previous year.
18:30 So we've already seen that that impact on credit to the private sector is being manifested within the economy already.
18:37 And again, we've seen the Bank of Ghana itself make losses of about 60 billion cities.
18:43 What will be the effect on the central bank lending to commercial banks going forward?
18:50 I don't really think that that particular loss will significantly impact its ability to manage the financial system, whether through overnight lending or not.
19:04 I think, you know, we have to understand where this loss has come from.
19:10 It is because, you know, the central bank had to absorb a lot more deeper losses from the domestic debt exchange, as the bank has explained,
19:23 whereas the ordinary Ghanians and other institutions, they didn't really see a cut in their...
19:31 Do you share in Dr. Esumé's thoughts, Karej?
19:38 Well, I don't think the need is for minimum capital to be raised.
19:44 I think the need is that you have a weakened capital base because of the valuations you place on your assets and stuff like that out of GDP.
19:57 In one hand, some of these things can self-correct.
20:02 Banks will not just impair the funds that were under the initial GDP.
20:08 The risk is associated with the obligor, in this case, government of Ghana.
20:13 So every other debt associated with government of Ghana or related entity would have been impaired.
20:19 So this second leg of GDP, call it the domestic dollar bond, call it the cocoa bills, which is a quasi-government institution,
20:28 and now the pension sector and all of that.
20:32 These are things, I believe, that countering treatment in 2022 that yielded those impairments would have taken into account.
20:39 So they will not just impair the portions detained, they will impair every other thing associated with the government of Ghana, really.
20:46 So I think these exercises going on now, yes, they will have consequences on their financials, but not as much.
20:53 It doesn't take away the fact that there is a need for recapitalization and for the investment climate we have now.
20:59 You know, our local market is not that deep to absorb a lot, really.
21:04 And so if all 23 banks have to recapitalize and are looking for funding from the local market, that is likely going to be a challenge.
21:12 I think GCB Bank is looking at one billion.
21:14 Tau Bank is looking about 600 million.
21:17 A number of others are looking at figures in that region.
21:19 Those are not flows the local market can supply.
21:23 And given the economic context now, the risk to the investment climate, really,
21:29 you may not be able to attract some foreign investors into the economy to participate in this.
21:35 That is why it's an immediate challenge.
21:38 But I guess that is why the financial sector stabilization fund plays a role.
21:44 That is why the multinational banks like your Stambeck, like your Abscess and the likes can look at their parent banks for capitalization like Stambeck has done.
21:54 And then your local banks like your GCB, your Cal, your Fidelity and the likes, who probably do not have external partners or if you like owners elsewhere,
22:05 may have to look at the local market and some strategic funding sources to make up for the capital.
22:11 So for now and for the next maybe three or so years, they have the forbearance supporting them.
22:19 And so they have some space to maneuver and then raise capital and revaluation gains.
22:25 If government comes good on coupon payment in this August and probably in February,
22:30 would even bring back, restore some of their capital and then maybe some retained earnings as financials are looking,
22:38 beginning to improve and profitability is beginning to improve since the health year and going.
22:43 Maybe some retained earnings could also show up the capital position and then the need to inject fresh capital may not be as large as it appears now really.
22:53 So they are not bound to within 2023 raise capital.
22:57 I think they have some breathing space to do so.
23:00 And then the dynamics of how government comes good on coupon payment on the restructured debt could also influence what level of capital they need to restore their capital positions.
23:11 Thank you so much, Research Lead at GCB Capital College, Boteetha. Your insight helpful as always.
23:18 Now, the Ghana Union of Traders Association, GUTA, has opposed implementation of new tariffs by the Ghana Ports and Harbours Authority calling for a suspension.
23:27 GUTA says the astronomical increase comes as a surprise as members continue to struggle with the effects of many taxes introduced in recent time.
23:36 Dr. Joseph Obeng is president of the association.
23:40 Not surprising because we are having engagement with the Ghana Ports Authority and it is not conclusive.
23:50 We haven't got any consensus. And then they brought this on the black side of the secretive.
23:57 It doesn't show respect to it. We are not going to allow this.
24:00 Because the social coming the way that we allow them to make an increase only a year now.
24:09 So they cannot continue to increase the tariffs.
24:15 Especially at this time that we are all complaining that cost of doing business in this country is extremely high.
24:23 And that is collapsing businesses.
24:26 It is not good even for the Port Authority themselves.
24:30 Because barely four months ago they called us and complained that the port is not having the needed traffic that it used to be.
24:41 And that we should find a solution to it.
24:43 And we said that the problem has been the cost of doing business at that port.
24:47 It is not taking. Most of us are going to do our business through the lobby port.
24:53 Because the cost here is too much.
24:55 And when that happens, is it going to help the country?
24:59 It is not going to help us.
25:01 So they should be careful and mindful of the charges that they keep.
25:06 And when this happens, you know what also follows.
25:11 Then the shipping lines is also influenced to also increase their charges.
25:16 And it compounds the problem for us all the time.
25:23 Also in the news this afternoon, the National Petroleum Authority has shut down two fuel stations in the northern regional capital Tamale for operating illegally.
25:31 The two stations, belonging to the northern regional chairman of the MPP under the name Lily Gold, were cited for operating even though their licenses had been revoked.
25:40 The exercise was led by the regional manager.
25:42 And here's Martina Bugwe with more.
25:45 The National Petroleum Authority's activity today is to clamp down on operators of fuel stations who are operating illegally.
25:54 Speaking in an interview, the northern regional manager for NPA Rashid Dauda said Lily Gold's licenses were revoked last year and were not supposed to be operating.
26:04 Lily Gold Resources, Energy Resources Limited's license has been revoked since October 2022.
26:14 Hence, they cease to exist.
26:16 By law, the OMC is not supposed to be seen operating.
26:23 Neither are we supposed to see the logo or the branding Lily Gold.
26:27 For some time, this retail outlet here in Tamale and one other one at the industrial area, Namashivu, have been operating under the name Lily Gold.
26:43 We are here today to come and shut down the station and caution the general public not to do business with Lily Gold.
26:53 If you are operating something illegal, it's illegal.
26:59 And so action should be brought to make sure that this illegality is remedied.
27:06 We are not doing this because he's an MPP regional chairman.
27:11 If anybody at all should be found to be operating an illegal site, that will also be taken seriously and this kind of action will be brought on to that station.
27:26 The offense is clearly selling products to the unsuspecting public under the pretext of Lily Gold.
27:37 Now, since this is unlicensed, if you buy any products from such outlets, there is no remedial action whatsoever.
27:48 The authority cannot come to intervene on your behalf if something goes wrong.
27:54 Therefore, by law, since the National Petroleum Authority is in charge of the downstream industry, we have to ensure that such illegal outlets do not operate.
28:07 The idea that Lily Gold will also be flagged on the Enterprise Rational Management System platform, which has all the OMCs on board.
28:17 The outlets will be flagged on our EIDMS, where all OMCs are to take products and supply this to their retailers.
28:32 We will log you out of that system.
28:38 And that was Martina Bugui's report.
28:41 The story is trending on our website, myjournalline.com/business.
28:45 GNPC records $10.681 million profit in 2021, according to the 2022 Auditor General Report.
28:53 Read more on that, myjournalline.com/business.
28:57 My name is Darrell Powell. Thanks for watching. We'll be back same time tomorrow.
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