BUSINESS 2 hours agoAverage lending rate continues to remain in 20% range – BoG
Average lending rate continued to remain in the 20% range for almost the whole of this year, the Bank of Ghana’s Summary of Economic and Financial Data has revealed.
According to data from the Central Bank, it stood at 20.34 in October 2021, the second lowest so far this year.
For August 2021 and September 2021, average lending rate were pegged at 20.51% and 20.23% respectively. It began the year with cost of credit of 20.97% and 20.96% in January and February 2021 respectively.
Importantly, average cost of borrowing has remained slightly lower than what was recorded last year. It stood at a little above 21% for the entire of 2020, but far lower than the about 29% registered some five years ago.
The Bank of Ghana has been credited for some important policies that have driven cost of credit down significantly.
But the average lending rate varies among the banks. It also depend on the type of customer, the risk exposure and the sector the retail or institutional customer operates.
For instance, some banks might lend at a lower rate of about 16% to a customer considered as credit worthy, who will not default in repaying the loan.
Others might also offer rates far higher than the average rate because the client might be a first time borrower or considered highly risky.
In March 2020, average cost of credit was estimated at about 23%, but took a nose dive to about 21.95% in June 2020. It has since been declining.
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Government got a favouarble interest rate from the issuance of the 5-year domestic dollar denominated bond, a day after the announcement of the 2022 Budget and Economic Policy.
It mobilised $168.98 million from the debt instrument which was opened to both local and foreign investors, the auctioning results revealed.
The government accepted all the bids from the investors at a reasonable interest rate of 6%.
This is because it entered the market at a time investors were demanding higher rate on government’s treasury bonds.
The results may indicate that there is still interest in Government of Ghana securities despite the perceived risk in the economy, particularly the high debt and arrears.
Analysts believe the decision by the government to seek bilateral financing and syndication loans rather than going to the international capital market is paying results.
They also think the move by the government to raise revenue from electronic transactions and other payments announced in next year’s budget has also contributed to this relative good performance. Proceeds of the funds will be used to finance the budget.
In recent times, the government has been struggling to mobilise funds through the domestic market, as liquidity tightens.
Ghana to raise $750mfrom international sources in 2022
Ghana, West Africa’s second-largest economy, intends to raise as much as $750 million from international sources in 2022.
Finance Minister, Ken Ofori-Atta, said on Wednesday in the 2022 Budget Statement that the fiscal deficit including financial sector and energy sector legacy debts will hit 12.1% of Gross Domestic Product (GDP) in 2021. That’s up from the ministry’s revised target of 10.6%, Michael Kafe and Andreas Kolbe, emerging markets analysts at Barclays Bank Plc, told Bloomberg.
“While some risk remains, we believe the market has overreacted and see a buying opportunity,” they added.
The yield on Ghana’s longest-dated bonds, due in 2061, dropped 24 basis points to 11% after jumping 51 basis points yesterday.
Ghana is targeting a budget shortfall of 7.4% of GDP next year.
Finance Minister, Ken Ofori-Atta, has presented the government’s 2022 Budget Statement and Economic Policy to Parliament.
The delivery of the budget on Wednesday, November 17, 2021, was in accordance with Article 179 of the 1992 constitution.
In the presentation, he indicated that capital expenditure, funding of key government flagship programs, wage bill, and interest payments have been identified as key drivers of expenditure growth.
The Minister also announced new taxes and some other interventions to meet the domestic revenue target.
Here are a few highlights:
1. Government services to see at least 15% upward adjustment
One of the government’s policy measures is a “review of fees and charges with an average increase of at least 15 percent in 2022 and thereafter subject it to automatic annual adjustments by average inflation rate as published by the Ghana Statistical Service, but with the prior consent of the Minister for Finance. The fees and charges should, however, be subjected to general review every five years. The effective date of implementation is 1st January 2022”, Mr. Ofori-Atta disclosed.
2. Abolishment of tolls on all public roads in the country
“To address these challenges, the government has abolished all tolls on public roads and bridges. This takes effect immediately after the budget is approved,” the Minister announced.
3. A 1.75 percent charge on all electronic transactions has been introduced
“After considerable deliberations, the government has decided to place a levy on all electronic transactions to widen the tax net and rope in the informal sector. This shall be known as the “Electronic Transaction Levy or E-Levy”, Ken Ofori-Atta said.
He said part of the amount will go into entrepreneurship and job creation.
“The YouStart initiative which proposes to use GH¢1 billion each year to catalyze an ecosystem to create 1 million jobs and in partnership with the Finance Institutions and Development Partners, raise another 2 Billion cedis,” he said.
5. Revenue and Expenditure targets. The government has also targeted an overall (GDP) growth target for the year 2022 at 5.8%
The government targets to spend an estimate of GHS 137.5 billion, while the GHS 100.5 billion is to be raised as total revenue for 2022.
“Total Revenue & Grants and Total Expenditure, the 2022 fiscal operations will result in an overall fiscal deficit of GH¢37.0 12 billion, equivalent to 7.4 percent of GDP”, the Minister said.
6. Less than 10 percent of Ghana’s 30.8 million population pay direct taxes
7. Common platform for property rate administration to enhance property rate collection introduced
“Government, through the Ghana Revenue Authority, will from January 2022, assist the MMDAs to implement a common platform for property rate administration to enhance Property rate collections and its accountability,” Ken Ofori-Atta outlined.
8. COVID-19 increased public debt “The situation was made worse by the big drop in revenue collections last year. Total revenues in 2020 fell by GHȼ11.93 billion, equivalent to 3.1 percent of GDP, while total expenditures increased by GHȼ14.08 billion, equivalent to 3.7 percent of GDP.”
9. Review of Benchmark values
“After two and a half years of operation, the temporary benchmark (discount) policy on imports introduced as a stop-gap measure has been reviewed to make it more efficient and better targeted. This is consistent with Government policy to promote local industry and improve foreign exchange earnings”, the Minister stressed.
10. Development Bank Ghana acquires license from Central Bank
“Mr. Speaker, Government is happy to announce the successful set-up and operationalization of the Development Bank Ghana (DBG). The DBG has received its operational license from the Bank of Ghana. The central bank has also conducted its due diligence and approved DBG’s Governing Board and key Management Personnel. DBG will support the private sector to ease the constraints of long-term credit for growth and expansion”, he announced.
11. Reduction of withholding tax on sale of unprocessed gold
” For small-scale gold mining, reduce the 3.0 percent withholding tax on sale of unprocessed gold by small-scale miners to 1.5 percent with effect from 1st January 2022″, the Minister mentioned.
12. Modified taxation regime in the Income Tax Act
“Implement a modified taxation regime in the Income Tax Act by raising the current threshold on turnover from GHȼ200,000 to GHȼ500,000 for business income of self-employed individual persons”, he announced.
13. Review of the VAT Flat Rate System (VFRS)
“There will be a review of VRFS by applying the standard VAT rate to all firms except retailers with turnover threshold of between GH¢200,000-GH¢500,000 where the VFRS will apply. The rationale is to address the inequities that domestic producers of local substitutes face vis-à-vis importers of similar products”, the Minister indicated.
14. Reduction in power tariff
“Government has reached agreements with some IPPs to convert power plants to tolling structures, switch to natural gas, as well as reduce tariffs. This is expected to result in considerable savings to the government and the nation over the remaining lifespan of the PPAs. These savings are expected to come from a combination of reduced capacity and energy charges across the portfolio,” Ofori-Atta said.
15. Budget tagged “Agyenkwa Budget”
“We want to thank this august House for the continuous support we have been receiving over the years. We will count on you for approval and support to implement the budget for the transformation of our country. Mr. Speaker, I present to you the AGYENKWA Budget”, he announced.
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Recycle Up! Ghana organizes business development and ideation training for young entrepreneurs in Ghana
More than 30 young entrepreneurs in the Ashanti region have undergone business development and ideation training organised by Recycle Up! Ghana.
The 2-day event saw the budding entrepreneurs develop and pitch business ideas aimed at providing sustainable solutions to societal problems.
The business development and ideation hackathon is aimed at bringing together young Ghanaian entrepreneurs to develop eco-friendly solutions to societal challenges.
The event brought together small teams of young entrepreneurs including students from different parts of Ghana to undergo the training.
Executive Director at Recycle Up! Ghana, Abdulrahim Shaibu-Issah, indicated the participants after undergoing the exercise are expected to develop their own sustainable business ideas to solve societal problems.
“We took them through a series of business development and ideation processes to dig deeper into the exact problems they are solving, which is essentially looking at the problems they are solving.
“They were also helped in identifying problem solution fits to develop a lean business into becoming a GrEEn business,” he said.
The participants were joined by seasoned industry experts, who shared their experiences in the business sector.
Ghana is set to miss a number of economic targets as the Finance Minister, Ken Ofori-Atta, presents the 2022 Budget tomorrow, with investors calling for reassurance of debt sustainability.
According to Bloomberg, the country will miss its fiscal deficit target of about 9.4% in 2021, due to revenue underperformance, whilst a 4-year high tax ratio target due to the impact of Covid-19 pandemic will also be missed.
The investors hope the financial plan for next year will show credible strategy to reduce the fiscal deficit, wasteful expenditure and debt.
Bloomberg again said investors are concerned about the country’s ability to service its loans as there is increasing cost of the country’s dollar bond. This is because the country’s debt has reached distressed levels. Presently, the country’s debt-to-Gross Domestic Product ratio is about 76%
Some of the international economists and institutions have called for a budget that will set out how the government plans to boost economic growth, whereas the fiscal economy is brought to stability.
“Rarely do countries sustain such high interest burdens for any length of time without a crisis, an International Monetary Fund rescue, or default/restructuring,” Stuart Culverhouse, head of sovereign and fixed income research at Tellimer Research told Bloomberg.
“Without any material expenditure compressions, our forecasts show the budget deficit improving only moderately to -11%, -9.4% and -7.7% in 2022, 2023 and 2024, respectively,” Deutsche Bank Economist Danelee Masia also told Bloomberg.
However, the Finance Minister, is expected to allay the fears of investor about t the nation’s debt sustainability and sluggish economic growth in his budget speech tomorrow, 17thNovember, 2021.
Fitch Ratings had already projected that the country’s interest expense will increase to almost 47% of revenue next year, a situation many will described as worrying.
KPMG wants more from government to reduce debt
Accounting and auditing firm, KPMG, has already charged government to achieve a balance between reducing debt against stimulating the economy.
Answering a question from Joy Business on how the country can achieve a balance between reducing debt against stimulating the economy, Head of Advisory and Markets, Andy Akoto called for the channeling of borrowed funds into productive sectors of the economy, whilst streamlining revenue mobilization to shore up income.
GRA reverses 50% Benchmark Value policy on 32 categories of items Effective Monday, November 15, the removal of the 50% Benchmark Values on 32 categories of items at the ports will be begin.
The Ghana Revenue Authority (GRA) in a letter forwarded to the Finance Minister, Ken Ofori Atta, signed by the Commissioner General, Rev. Ammishaddai Owusu-Amoah, revealed that the move is informed by an agreement reached with the business community to, as it where, generate more revenue.
All items under the 32 categories currently enjoying port clearing discounts will no longer enjoy that special dispensation.
The items include, sugar, noodles, palm oil, roofing sheets, toilet paper, facial tissue and towel, chocolates, Portland cement, clinker and mosquito coil.
Other items also include vehicles, ceramic tiles, aluminum products, cartons, textiles, fruit juices, among others.
GUTA warns against reversal of policy
The President of the Ghana Union of Traders Association, Dr. Joseph Obeng, had earlier reiterated that any intention by the government to scrap the 50% Benchmark Value policy at the ports “will be suicidal”.
In a press statement, Dr. Obeng expressed that the policy has brought relief to the trading community, sanity into the system, and eased tension and agitations amid the impact of the coronavirus on cross-border trade.
“Any attempt to remove this good policy of the government that brought relief will be suicidal for the state because it will not only collapse business but also cause an unbearable rise in prices of goods and services beyond the reach of consumers, especially, low income earners and the unemployed,” he warned.
AGI’s advocacy for a review of the policy
The Association of Ghana Industries (AGI) hold the position that the reduction in the Benchmark Values by up to 50% had cheapened imports and dampened demand for local substitutes, resulting in a slowdown in growth in the manufacturing companies.
In a plea that had since been rejected forcefully by the umbrella body of the trading community, the advocacy body for manufacturers said the policy on benchmark value reduction must be reviewed downwards to safeguard manufacturing jobs and protect the fortunes of the sector from deteriorating further.
The Chief Executive Officer of the AGI, Seth Twum-Akwaboah, told Charles Ayitey on the Market Place that domestic processors of rice and edible oil were the worst hit, with big names such as the Avnash Industries Ghana Limited and the Wilmar Africa Limited shrinking operations and laying off workers, following the introduction of the policy two years ago.
He said following the drop in demand for their products, the local manufacturers have been forced to reduce acquisition of raw materials from local farmers “and that is having a supply chain effect.”
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Expectations of 2022 Budget: government charged to introduce comprehensive property tax system
Civil Society Organizations (CSOs) are calling on the government to introduce a comprehensive and efficient national property taxation system, to rake in more revenue for the country.
According to them, there is too much focus on indirect taxes in the country, hence the growing national debt.
Speaking at a forum, Fiscal Policy Analyst at Oxfam Ghana, Alex Ampaabeng, said government should provide a clear-cut strategy for tackling the growing public debt and a pathway to debt sustainability.
“The increment in the VAT is having a disproportionate impact on the poor, the very people the government is trying so hard to save from impact of some indirect taxes. It’s time for us to look at property taxation. I also recommend government must have a clear strategy for tackling growing public debt”.
Also speaking at the same meeting was the Policy Lead, Climate Change and Energy Transition at the Africa Centre for Energy Policy, Charles Gyamfi Ofori who indicated that government should abandon plans for the import of Liquefied Natural Gas (LNG) and optimise the utilisation of domestic gas.
He also called for a collaboration between the private sector and the public sector in the management of the energy sector institutions
“It is shown from research and analysis that given our gas reserves from domestic sources and also from export through the pipeline, Ghana does not need additional import of gas through LNG within the short-to-medium term. We are recommending that government should abandon the importation of LNG products into the country”
The CSOs budget forum comprises of civil society organisations in Ghana with interest on influencing the national budget.
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Cocoa regulator, Ghana Cocoa Board (COCOBOD), has agreed to continuously supply cocoa beans to cocoa processing company to meet its operational demand, despite its loss position.
It has also decided not to demand for repayments of amounts due to it in a manner that will jeopardize the operations of CPC.
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President Akuffo-Addo has said that developing countries are disappointed by the failure of the wealthy nations to honor their commitment of providing US $100 billion to assist in the fight against climate change.
The president made this statement at the 2021 COP26 Summit in Glasgow, Scotland on Tuesday November 2,2021
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Us president Joe Biden, Uk prime minister Boris Johnson, German Chancellor Angel Merkel, Canadian prime minister Justin Trudeau and Indian Prime Minister Narendra Modi are some of the world leaders attending the summit
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