The Minister of Finance, Seth Terkper is optimistic that the establishment of an Exim Bank to finance and guarantee exports, will diversify Ghana’s export base and reduce the recurrent shocks from Ghana’s dependence on commodities.
An Exim Bank Bill is currently before parliament.
Ghana has lost more than $3 billion in revenues as a result of fall in commodity prices on the world market, according to Dr. Henry Kofi Wampah, the Governor of the Bank of Ghana.
“Ghana’s economy has indeed been hit hard by the falling commodity prices,” he told an IMF meeting in Peru.
Three commodities form 80 per cent of Ghana’s exports; these are gold, cocoa, and oil, and the price shocks have had a significant effect on the country’s reserves and accelerated volatility in some cases, he said.
He indicated that between 2012 and now, gold shocks have led to a loss of more than $2 billion in revenue, while shocks in cocoa prices have resulted in more than $1 billion in revenue.
Mr. Tekper said though there have been attempts in the past to diversify the export base, as well as existing measures such as the Export Trade, Agricultural and Industrial Development Fund (EDAIF) and the Exim Guarantee, these measures do not have the full means to succeed, necessitating the establishment of an exim bank.
“Has it been successful in other countries? It has and the evidence is there for us to see. China Exim gives us loans, US Exim gives us loans, Turkish Exim gives us loans, Korea Exim gives us loans. I can count them,” he said.
The minister told journalists in Accra on Monday that if Ghana starts “gingerly” as a middle income country, supporting small and medium enterprises in agro processing to export, the sources of earning forex will be expanded much better from other agricultural exports complementing cocoa.
On borrowing and debt, Mr Seth Terkper noted that this was not the first time Ghana’s debt had assumed such high proportions, alluding to Ghana’s debt levels just before the IMF Structural Adjustment Programme and the HIPC programme.
The Finance Minister expressed optimism with the current debt management strategy, and said Ghana’s debt as a percentage of GDP, is plateauing at around 68 to 70 per cent even though GDP is not growing.
He maintained that borrowing is necessary for development and government will continue to implement its debt management strategy of making commercial projects refinance their loans, in addition to withdrawing subsidies, and amortising loans instead of bullet repayments.
Mr Terkper explained that the $1 billion Eurobond which will take off a three-year bond and part of a 90-day treasury bill, is part of the strategy as it will replace the 90-day and 3-year bullet bonds which would have been financed from the local market, with 15 years.
“We are replacing 90 days and three years with 15 years so if we begin paying for these over 15 years, which is the reason particularly for capital projects – we borrow from the World Bank and from African Development Bank for 25 years or 14 years so that we can have room to pay – we are converting these bullet bonds into long term loans so that we can take our time and pay”, Seth Terkper said.
The Finance Minister said the Eurobond, solely for refinancing of maturing debt, will replace debt, rather than increase the debt stock as was sometimes erroneously portrayed by some.
“It is going to replace existing debt. It is not going to increase the debt level. I’ve heard it said that if you add it to the existing stock, then we’ll be at 90 per cent [of GDP] by the end of the year”, he said.
By Emmanuel Odonkor