Government will pay state debts by improving liquidity for banks - Ofori-Atta
The Finance Minister says government would focus on improving liquidity for banks through the payment of State-Owned Enterprise (SOE) debts.
Ken Ofori-Atta said government would pay debts owed banks over the short to medium-term in line with its debt sustainability framework.
Presenting the 2017 maiden Budget Statement to Parliament Thursday, the Finance Minister said creating a strong private sector credit growth is needed to support the nation's medium-term GDP growth to increase productivity and create jobs.
The co-founder of Data Bank said government would "streamline the Energy Sector Levy Act, 2015 (Act 899,) (ESLA) to accommodate all the existing legacy debts for the banking and the private sector, which includes energy sector debt, Bulk Distribution Companies (BDCs), and other energy sector related debts."
Outlining some specific measures to be implemented in 2017 and in the medium term explained this would ensure that revenue streams from ESLA are properly used to ensure certainty of cash flow for the payments of all corresponding debts.
Also, Mr Ofori-Atta said government would "work with commercial banks to ensure that they are able to issue bonds on the back of the streamlined ESLA revenue for immediate liquidity."
To reduce systemic risks in the banking sector, he added that the Central Bank would collaborate with government to undertake a number of structural reforms in the banking sector.
According to him, there would be an increase in the banking industry’s minimum capital requirements which would strengthen the licensing and regulatory framework.
Government is also looking at introducing a risk capital requirements in addition to minimum capital requirements for banks, he disclosed.
The Akufo-Addo government would strengthen corporate governance by enforcing the term limits for Board Chairmen and Managing Directors of commercial banks in accordance with the Banking Act.
He explained this would also to enhance enforcement of single obligor limit for commercial banks as well as to support mobile money and mobile banking businesses to enhance and expand financial inclusion.
Capital Market Development
Addressing the challenges of Ghana's capital market which the Minister said has been impeded by lack of depth and liquidity, he said the implementation of decisive measures in the short to medium term to deepen the capital markets would increase liquidity and trading activities which would encourage more companies to list.
Some specific measures to be implemented to improve capital market performance in 2017 and the medium term include exempt from taxation, the gains from realization of securities listed on the Ghana Stock Exchange or publicly held securities approved by the Securities and Exchange Commission (SEC).
There would also be an exemption for the financial services industry from stamp duty for 2 years to enable the re-capitalization of the industry as per the new SEC law.
Mr Ofor-Atta said government would also encourage a capital market local content policy that enjoins companies operating in the energy, oil and gas, financial services, telecommunications, and mining sectors to list a minimum percentage of their shares on the Ghana Stock Exchange within 5 years of commencement of operations.
Furthermore, government is looking to divest its holdings in some SOEs with a view to ensuring efficiency, which would include the sale of government shares in some SOEs and companies via a listing on the Ghana Stock Exchange.
He indicated that they would work with the Securities and Exchange Commission (SEC) to develop the regulations governing Asset-backed instruments including Real Estate Investment Trusts (REIT) and mortgage-backed securities and enable the pensions industry to support the development of these assets classes and other alternative investment schemes.