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FRIDAY MAY 29, 2020

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Covid-19 fiscal gap goes through the roof Year of Return boosted tourism receipts to US$3.3bn MORE ON PAGE 3 Finance Minister Ken Ofori-Atta is racing against time to find enough resources to plug the gap created by the pandemic

BY EUGENE DAVIS

The government still faces a residual Covid19-induced financing gap of GH¢17.9bn, despite receiving combined funding of US$1.57bn from the International Monetary Fund, World Bank and the Ghana Stabilisation Fund, Finance Minister Ken Ofori-Atta has told Parliament. To help finance the gap without crowding out the private sector, which itself is reeling from the coronavirus shock, the government has resorted to central bank financing via a GH¢10bn Covid-19 Relief Bond programme, out of which the bank released GH¢5.5bn to the finance ministry on May 15. Presenting a report to lawmakers in Accra on Thursday on government’s decision to seek extra funds to weather the pandemic, Mr. Ofori-Atta argued that the sustainability of the country’s macroeconomic growth coupled with shortfalls in revenues, additional emergency spending

Lower oil prices will curtail industry investment— Moody’s MORE ON PAGE 7

and tight financing conditions necessitated the bond programme. The emergency financing from the central bank is consistent with the provisions of Section 30 of the Bank of Ghana Act 2002, he noted. He said preliminary assessments—taking into consideration the revenue shortfall impact, direct health-related spending, additional expenditures including programmed expenditures for the Coronavirus Alleviation Programme, the payment of outstanding government claims to health-related sectors of the economy (National Insurance Trust Fund), and identified government intervention programmes—have put the pandemic-induced fiscal gap at about GH¢21.42bn. This is made up of a revenue shortfall impact of GH¢15.85bn in addition to COVID-19 related

West Blue and Ghana’s ports reform

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GHc 5.13*

INTERNATIONAL MARKET BRENT CRUDE $/BARREL

36.01

NATURAL GAS $/MILLION BTUS

1.79

GOLD $/TROY OUNCE

1,708.45

CORN $/BUSHEL

329.50

COCOA $/METRIC TON

2,394

COFFEE $/POUND:

+5.70 ($108.30)

COPPER USD/T OZ.

220.15

SILVER $/TROY OUNCE:

17.07

NEWS/EDITORIAL

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EDITORIAL

Wash your hands 2

Cover your cough 3

Year of Return was great, COVID-19 presents a new challenge Last year, the country attracted an increased number of visitors from all over the world as a result of the Year of Return campaign, which commemorated the 400th anniversary since the first documented slave ship from Africa landed in the United States of America. Officially launched in August 2018, the campaign saw several diasporans heed the call and make the journey to Ghana to experience the country’s rich culture, heritage, and hospitality. The main aims of the campaign included to increase the number of international arrivals to 1m visitors and brand Ghana as the gateway to Africa. Indeed, the Tourism Minister reckon that it boosted tourism receipts to US$3.3bn in 2019. “By the end of the year, international

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LIMITED Copyright @ 2020 Business24 Limited. All Rights Reserved. Editorial Team Dominic Andoh: Editor Eugene Kwabena Davis (Head of Parliamentary Business & Commodities) Benson Afful (Head of Energy & Education) Patrick Paintsil (Head of Maritime & Banking) Nii Annerquaye Abbey (Online Editor) Marketing Alexander Lartey Agyemang (Business Development Manager) Ruth Fosua Tetteh (Dept. Business Development Manager) Gifty Mensah (Marketing Manager) Irene Mottey (Sales Manager) Edna Eyram Swatson (Special Projects Manager ) Events Evelyn Kanyoke (Snr. Events Consultant) Finance/Administration Joseph Ackon Bissue (Accountant)

Despite the success of the Year of Return project, the coronavirus pandemic has eroded much of the gains made and we have to build from scratch again. Indeed, reviving our tourism sector requires a strong phoenix tourism marketing strategy, a committed implementation team and adequate funding. As a country, we need to grow our domestic tourism and diversify our tourism portfolio and not rely heavily on inbound European and American tourists. Again, the Africa Continental Free Trade Area prevents an opportunity to grow intra-Africa tourism. These are but a few of the things we ought to do to ensure we revive the tourism sector in the shortest possible time.

Covid-19 fiscal gap goes through the roof (…CONTINUED FROM COVER )

Wear a mask

arrivals reached 1.13m, from 956,372 in 2018, a 27 percent growth, which was above the global average of 5 percent. The average expenditure per tourist increased from US$2,708 in 2018 to US$2,931 in 2019. The receipts attributed to tourism is therefore US$3.3bn,” Barbara OtengGyasi told Parliament. She added that “in addition to the economic impact, social projects such as schools in Akosombo, Chorkor, Bortianor, boreholes in Akropong, and an ICT centre in Nyamebekyere have become legacies of the Year of Return.” Touching on the impact of the campaign on the hospitality industry, Mrs. Oteng-Gyasi said several hotels realised 100 percent capacity in the month of December 2019.

expenses of GH¢5.57bn. The coupon rate for the Covid-19 Relief Bond is pegged to the monetary policy rate, currently at 14.5 percent, and the bond has a 10-year tenor and a twoyear moratorium on both principal and interest payments. Mr. Ofori-Atta said government will introduce remedial measures to reduce its indebtedness to the central bank. These include revenue mobilisation enhancement measures, an expenditure rationalisation and prioritisation programme, and a strategy to broaden the investor base to access cheaper sources of financing. A further measure is a policy to revise the primary dealer guidelines and introduce a bond market specialist as a basis for developing the domestic debt market. Government has so far received a US$1bn IMF Rapid Credit Facility, US$350m World Bank support, and US$219m drawn from the Stabilisation Fund, all aimed at shoring up funds to cushion the economic impact of the virus since March this year. Work done by the finance ministry and Bank of Ghana on the initial potential impact of the pandemic on various sectors of the economy showed that 2020 real GDP growth will slow down from the projected 6.8 percent to 1.5 percent, with lingering effects on economic activity into 2021 and beyond, Mr. Ofori-Atta said. To address this, the ministry is developing a three-year Covid-19

Alleviation and Revitalisation of Enterprise Support Programme (The Ghana CARES Programme) to help stabilise and revitalise the economy. Bond amounts to breach of law Reacting to the Finance Minister’s report, Minority Leader in Parliament Haruna Iddrisu said the bond programme breached the Bank of Ghana Act, adding that

the focus of the Finance Minister should be ensuring a “Ghana beyond borrowing”. Ranking Member on the Finance Committee Ato Forson said the borrowing of GH¢10bn is unprecedented and requested that further details of the bond should be provided, as he stressed that the minority will continue to ask for accountability.

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Year of Return boosted tourism receipts to US$3.3bn BY EUGENE DAVIS The Year of Return campaign introduced by government boosted tourism receipts to US$3.3bn in 2019, Tourism Minister Barbara Oteng-Gyasi has told Parliament. Last year, the country attracted an increased number of visitors from all over the world as a result of the campaign, which commemorated the 400th anniversary since the first documented slave ship from Africa landed in the United States of America. Officially launched in August 2018, the campaign saw several diasporans heed the call and make the journey to Ghana to experience the country’s rich culture, heritage, and hospitality. The main aims of the campaign included to increase the number of international arrivals to 1m visitors and brand Ghana as the gateway to Africa. Appearing before Parliament on Thursday to give an account of the celebration, the Tourism Minister described its local and global impact as “unimaginable”. “By the end of the year, international arrivals reached 1.13m,

Tourism Minister Barbara Oteng-Gyasi

from 956,372 in 2018, a 27 percent growth, which was above the global average of 5 percent. The average expenditure per tourist increased from US$2,708 in 2018 to US$2,931 in 2019. The receipts attributed to tourism is therefore US$3.3bn,” she said. Touching on the impact of the campaign on the hospitality industry, Mrs. Oteng-Gyasi said

several hotels realised 100 percent capacity in the month of December 2019. She also gave a breakdown of the expenditure areas—accommodation accounted for 41 percent, food and beverages (21 percent), shopping (14 percent), local transport (8 percent), entertainment (5 percent), and other spending (11 percent). “In addition to the economic

impact, social projects such as schools in Akosombo, Chorkor, Bortianor, boreholes in Akropong, and an ICT centre in Nyamebekyere have become legacies of the Year of Return.” On the mainstream media mileage of the event, the Tourism Minister told legislators that it accounted for several millions of dollars, with all the leading local and international media houses dedicating editorial space to the campaign. The campaign also benefitted from a lot of celebrity endorsements, with leading personalities like the Speaker of the US House of Representatives, Nancy Pelosi; the congressional black caucus; entertainer Steve Harvey; and actor Samuel L. Jackson all visiting the country. The Minister, who is also the MP for Prestea/Huni Valley in the Western Region, said the country will build further on the success of the Year of Return by introducing a 10-year project dubbed Beyond the Return: A Decade of African Renaissance 2020-2030 to grow Ghana’s tourism industry, showcase its investment potential, and consolidate its diasporan engagement.

Andani: Banks walking with private sector through pandemic BY PATRICK PAINTSIL Banks have rescheduled over GH¢1.6bn in existing loans in addition to significant reductions in interest rates to cushion the impact of the coronavirus shock on the private sector, president of the Ghana Association of Bankers Alhassan Andani has said. The loans were rescheduled to periods ranging from three months to one year, especially for clients in the services sector, Mr. Andani, who is also the Managing Director of Stanbic Bank, said. Speaking at a webinar organised by the Ghana National Chamber of Commerce and Industry (GNCCI) on Wednesday, he also indicated that a boost to banks’ capital and cash reserves has made them more liquid to support businesses get through the crisis. “At the moment, most of the banks are adequately capitalised with sufficient buffers to respond to the financing needs of the private sector and, to some extent, the public sector.”

Managing Director of Stanbic Bank Alhassan Andani says banks are well liquid to pull private businesses from the shocks of the pandemic

According to Mr. Andani, banks’ immediate response to the virus shock was to help private businesses which were adversely impacted by the lack of economic activity during the partial lockdown imposed on Accra and Kumasi from March 30-April 20 to limit the spread of the virus. “The banking sector has been very responsive and proactive to the needs of private sector businesses,”

he said. The second edition of the GNCCI’s webinar series, dubbed “Covid-19: strategies for business survival and growth”, was held on the theme, “Covid-19: Financing options to stimulate local production”. The webinar equipped members of the chamber and the business community at large with responsible knowledge on financing options that are critical for business survival and

growth amid the pandemic. “Finance is the lifeblood of any business enterprise as it facilitates access to all resources it requires in its operations,” president of the chamber Nana Appiagyei Dankawoso I said while urging businesses to consider the source, cost and risk of their financial options. He said it has become critical for businesses to identify financing options that can help them in managing their working capital and capital structure effectively. “Businesses must develop an intelligent working capital cycle to address issues of input supplies, production capacity, and employee management.” In the wake of the coronavirus shock, the Bank of Ghana announced measures to improve liquidity in the banking sector and relaxed loan classification guidelines to help manage an expected rise in nonperforming loans. Commercial banks have also set aside GH¢3bn to lend to businesses severely affected by the shock, especially those operating in the hospitality sector.

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GAB donates food packs to Zakat& Sadaqa Trust Fund BY BENSON AFFUL The Ghana Association of Bankers (GAB) has donated family food packs to be distributed to needy Muslim families through the Zakat & Sadaqa Trust Fund, an NGO based at Accra New Town. In all, 6,500 food packs worth GH¢1 million containing beans, gari, tomato paste, cooking oil, rice, salt, sugar, and canned fish, has been presented by the GAB through identifiable bodies to the needy. The food packs were presented to a delegation of the Trust Fund, comprising Mr. Mohammed H. Nyagsi, Dr. Zackaria Abraham and the Administrator, Hajia Azara Abukari-Haroun by the Managing Director/CEO of FBNBank Ghana Limited, Victor Yaw Asante on behalf of the GAB. Presenting the items, Mr. Asante said the donation forms part of the association’s corporate social responsibility to support efforts aimed at containing the spread of COVID-19 in Ghana.

From left to right: John Awuah, Ghana Association of Bankers, Victor Yaw Asante, Managing Director, FBNBank Ghana & Mohammed H. Nyagsi, Member of Zakat & Sadaqa Trust Fund

He added that the GH¢10 million put together by banks through the GAB has resulted in the umbrella body of banks making donations to

Municipal Hospital, Korle Bu Teaching Hospital, Noguchi Memorial Institute for Medical Research, Ghana Association of Doctors in Residency and the Community Water & Sanitation Agency (CWSA). He also mentioned that individual banks have so far spent another GH¢10 million in COVID-19 interventions directly. Receiving the items, Hajia Azara Abukari-Haroun expressed appreciation to the Ghana Association of Bankers and gave the assurance that the family food packs will be distributed to the intended beneficiaries. She indicated that Zakat & Sadaqa Trust Fund of Ghana is an initiative of the Muslim Caucus and Staff of Parliament established in 2010 to enable Muslims working in both the public and private sectors of Ghana to observe the third pillar of Islam (Zakat) in fulfillment of their faith in Allah.

various institutions involved in the testing, isolation, treatment and provision of intensive care. These include: the Ga East

Time to structurally transform Ghana’s Economy is now—Dr. Dankawoso I BY KWASI ANKU Nana Dr. Appiagyei Dankawoso I, President of the Ghana National Chamber of Commerce and Industry (GNCCI) has said the appropriate time to structurally transform Ghana’s economy is now. He said this would require a collaborative effort between government and the private sector to enhance local production for import substitution and export. Dr. Dankawoso I, speaking as a panelist in the second in the series of GNCCI organised webinars said it is unquestionable that finance was the lifeblood of any business enterprise and facilitates access to all the resources required in every business operation. The event, which was on the theme: “Financing Options to Stimulate Local Production” sought to equip members of the Chamber and the entire business community with the requisite knowledge on financing options critical for their business survival and growth in this COVID-19 period. Government has launched the Coronavirus Alleviation Programme (CAP) Business Support Scheme as part of measures to effectively manage social and economic recovery with GH¢600 million stimulus package for Micro, Small and Medium Enterprises (MSMEs). He said in essence, a successful business enterprise was one that has an efficient management of its finances by considering the source, cost and risk of all financial decisions.

The President said in this regard, it has become critical for businesses to identify, which financing options would be appropriate to enable them efficiently manage their finances. “Businesses must therefore develop an intelligent working capital cycle to address issues of input supplies, production capacity and employee management,” he added. He said gvernment must focus on developing industry-specific stimulus packages to complement the efforts of businesses in their bid to survive and grow. Dr. Dankawoso I said this would help ultimately to achieve impact, resilience, and sustainability of the entire industrial value chains, given the disruptions caused by COVID-19. He said “I am also aware that plans have been made to activate the GH¢3 billion syndicated loan for the large enterprises which is welcoming.” He commended the government and its institutions and agencies for their proactive measures taken to curb the spread of COVID-19. He said in spite of the hardships inflicted on the Ghanaian economy by the COVID-19 pandemic and its associated restrictions, it also presented a unique opportunity to address the structure of the economy from an import-dependent to an export-led economy. Dr Dankawoso I said the current merchandised export structure, dominated by raw and unprocessed commodities would not give the country the sustainable and

inclusive economy required to move Ghana from a lower to upper middle-income economy. “The appropriate time to structurally transform Ghana’s economy through industrialization is now,” he added. The President said this would require a collaborative effort between government and the private sector to enhance local production for import substitution and export. Mrs. Kosi A. Yankey-Ayeh, Executive Director, National Board for Small Scale Industries, (NBSSI) explaining the CAP said MSMEs, which qualified for the CAP Business Support Scheme were micro enterprises with one to five employees, small enterprises with six 29 employees and medium enterprises with 30 to 99 employees. She said the two products designed under the Scheme was the Adom loans and Anidasuo loans and it was to bring hope to MSMEs in times like this when the Coronavirus Pandemic caused an economic downturn. She

said the moratorium still remains up to one year and during the application process, MSMEs have the option to select a moratorium that would work best for them; indicating that that repayment of loans remain two to three years; this was taken into consideration based on MSMEs needs assessment. Mrs Yankey-Ayeh called on business owners to input the right information to enable the system to the right assessment of the data. She said NBSSI has decided to waive the registration fee for all applicants in the wake of fraudsters parading themselves as officials of the Board and taking monies from unsuspecting business owners. Mr Alhassan Andani, Managing Director, Stanbic Bank Ghana Limited said in the wake of the pandemic, business owners had to work closely with the banks to identify the right financing options available to them. “We want to see a lot of collaborations with trade business associations in areas of trade financing among others,” he said.

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Lower oil prices will curtail industry investment—Moody’s BY BENSON AFFUL Moody’s, the ratings agency, has said the coronavirus pandemic is hastening a structural change in collective demand for oil, reducing the industry’s need to develop higher-cost reserves for reinvestment to support production levels and growth in the next three to five years. Moody’s said it has reduced its medium-term oil price assumptions to US$45-$65/barrel (bbl), down from US$50-$70/ bbl. “The price range reflects our view that oil prices will remain highly volatile, with periods outside the top or bottom ends of the range. Geopolitical issues or attempts to manage supply by the OPEC-plus group of oil-producing nations will also lead to price fluctuations from time to time,” it said. According to Moody’s, government measures to reduce the spread of the coronavirus have restricted oilintensive activities such as domestic and international air travel, which

will recover more slowly than overall GDP. High inventories of both oil and fuels globally will further slow the pace of recovery in oil demand and prices, it added. In Ghana the government has predicted significant oil revenue losses due to the oil price collapse. Finance Minister Ken Ofori-Atta told Parliament in March that at an average crude oil price of US$30 per barrel this year, the government will register a shortfall in oil receipts amounting to GH¢5.7bn. The shortfall will lead to a reduction in the annual budget funding amount from petroleum revenues. It will also trigger a fall in transfers to the Ghana National Petroleum Corporation (GNPC) by GH¢642m, according to finance ministry estimates, which is nearly 40 percent of the national oil company’s original budgetary allocation of GH¢1.7bn. Experts have predicted that the company may be compelled to seek external funds to shore up its revenue and finance key

Oil companies like Tullow and Aker Energy have announced plans to scale down on their planned investment for this year

investments. International oil companies in Ghana, such as Irish major Tullow Oil, have announced cuts to capital expenditure for 2020 in the wake of the oil price decline. In response to the exceptional decline in demand, Moody’s said the global oil industry has mobilised to implement significant production cuts—about 10 percent from December 2019 levels.

The OPEC-plus group of oilproducing nations has agreed to cut oil production for two years by about 7m barrels per day (bbl/day) from February 2020 levels, starting in May 2020. The International Energy Association (IEA) estimates that by late 2020, world oil demand will return to levels some 6.5m bbl/day, or 6 percent, below pre-crisis levels.

Ghanaian entrepreneur wins UK grant for engineering innovation to fight covid-19 across Africa Eight entrepreneurs from across sub-Saharan Africa, including Young at Heart Ghana’s Josephine Marie Godwyll, have been awarded funding to harness the engineering and business skills of their organisation’s to help tackle the spread of COVID-19. With UK government funding through the Department for Business, Energy and Industrial Strategy (BEIS), Project CARE (COVID Africa Rapid Entrepreneurs) was initiated by the Royal Academy of Engineering in early April as the virulence and rapid transmission of COVID-19 gripped countries around the world. The Academy already works extensively with engineers across sub-Saharan Africa, and this new initiative is an extension of this partnership supporting small and medium engineering businesses to re-focus their work to help address the challenges of COVID-19. The Project CARE initiative means that Young at Heart Ghana, run by Josephine Marie Godwyll and her team, are able to support children across Ghana to continue to learn remotely and safely despite COVID-19. Commenting on Josephine’s success, British High Commissioner to Ghana Iain Walker said: “Project CARE has rightly recognised the agile and important contribution Josephine and her team at Young at Heart Ghana have made to the country’s education system. “Their innovative work supplements the efforts of the Ministry of Education, to ensure that children across Ghana continue to access quality and vital

education despite the restrictions and difficulties caused by the coronavirus pandemic.” More than 50 people applied for funding through Project CORE, and only eight were chosen to receive funding including entrepreneurs from Kenya, Nigeria and South Africa as well as Ghana. Each of the successful candidates received £5,000 to support them in scaling up their COVID response. Talking about her work, Josephine Marie Godwyll said: “Remote learning platforms have never been more essential. The benefits of e-learning have been further illuminated not only as an alternative but a necessity due to the disruptions in traditional

approaches to learning in these atypical times. Ananse At Home, is a homeschooling program based on the ‘Ananse The Teacher’ e-learning platform, which uses stories and games to explore learning modules in STEM, Art and literacy, through hands-on activities conducted with everyday materials found at home. “Designed with a full awareness of the constraints associated to access, the app can be deployed on both phones and computers through both online and offline engagement. We believe this program, which is part of the Lab and Library on Wheels project, is the kind of disruptive innovation that is needed especially in such a disruptive time.” Josephine’s team have created the

Ananse The Teacher App, which has been adapted into a homeschooling program called Ananse@Home. The free app provides a range of home-learning modules for children aged 8 – 14. These modules focus on science, technology, engineering and mathematics (STEM), as well as literacy and art. Participants receive module instructions and activities every week. The program also enables parents, who are having to act as teachers, to access a network of teachers and mentors who can provide extra support and answer questions. Project CARE continues to work with manufacturers and other partners to provide innovative answers to the challenge of COVID-19.

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The Church and money laundering BY RICHIESON GYENI-BOATENG, ACAMS, FCCA, MBA, BSC When we talk about money laundering, all attention is placed on the financial institutions as being the most vulnerable to this practice or activity. As the world keeps evolving, there has been so many vulnerable avenues to launder money and religious bodies (churches and mosques) are no exception. Money laundering involves taking criminal proceeds and disguising their illegal source in anticipation of ultimately using the criminal proceeds to perform legal and illegal activities. The United Nations 2000 Convention Against Transnational Organized Crime, also known as the “Palermo Convention,” defines money laundering as: The conversion or transfer of property, knowing it is derived from a criminal offense, for the purpose of concealing or disguising its illicit origin or of assisting any person who is involved in the commission of the crime to evade the legal consequences of his actions. The concealment or disguising of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property knowing that it is derived from a criminal offense. The acquisition, possession or use of property, knowing at the time of its receipt that it was derived from a criminal offense or from participation in a crime. One important concept in the definition of money laundering is “knowledge.” In all three definitions above, we see the phrase “… knowing that it is derived from a criminal offense.” Generally, a broad explanation of “knowledge” is used for the definition of money laundering. Simply put, money laundering is the process of making dirty money look clean. We should note that for Money Laundering to exist and/or carried out, there should be a crime or a predicate offense. Money laundering activities go through three major stages which are the placement, layering and integration stages. The placement stage is the stage where money sourced from illegal activities is first “placed” into the financial system to be used as clean money. At this stage, the church can be used to advance the course of Money Laundering as Christians and/or church goers who have engaged in criminal activities can give offerings, pledges, tithes, building project contribution, seed sowing and special offerings with the illegally acquired funds. These illegal funds received by the churches will be co-mingled with genuine fund and deposited into the bank account of the church as normal church activity money.

Some pastors or church leaders can easily add their illegally acquired money to the donations and other offerings from church members and deposit the money in their bank accounts. When asked by their “curious” bank because of the unusual huge deposit, they will then say the money is from special offerings from the church. The church leader would have used the church as a means to launder the money. At the layering stage, the illegally acquired money is separated from their source by layers of financial transactions intended to conceal the origin of the proceeds. This second stage involves converting the proceeds of the crime into another form and creating complex layers of financial transactions to disguise the audit trail, source and ownership of funds. The integration stage is where apparent legitimacy is given to illicit wealth through the re-entry of the funds into the economy in what appears to be normal business or personal transaction. This stage entails using laundered proceeds in seemingly normal transactions to create the perception of legitimacy. The launderer, for instance, might choose to invest the funds in real estate, financial ventures or luxury assets. By the integration stage, it is exceedingly difficult to distinguish between legal and illegal wealth. Money laundering possess serious negative effects on the economy of a country, businesses (including religious organizations) and individuals. It can have potentially devastating economic, security and social consequences and these includes: High rate of crime and corruption. When the world perceives a country as a haven for money laundering, it attracts criminals and terrorist financiers into the country. It also breeds bribery and corruption to enable the criminals to carry on

criminal activities. High reputational risk. A country perceived to be as a money laundering haven could cause negative effects for development and economic growth in that country which could block direct investment in the country. Also if a church is perceived to be encouraging the activities of money laundering, nobody, including financial institution will want to do business with it. There will be weakening financial institutions as the soundness of the financial sector would be affected. Indeed, criminal activities have been associated with a number of bank failures around the globe, including the failure of the first Internet bank, the European Union Bank, as well as Riggs Bank. Loss of tax revenue. Tax evasion is a criminal activities which contribute to revenue loss to the country. It also diminishes government tax revenue and, therefore, indirectly harms honest taxpayers. Criminals can outbid legitimate purchasers for formerly stateowned enterprises because they have the funds. Furthermore, while privatization initiatives are often economically beneficial, they can also serve as a vehicle (washing machines) to launder funds. Some church leaders are using the church to acquire worth for themselves without paying any taxes to the government. Some church leaders are have reality shows and move around the world to delivery motivational and inspirational messages, all in the name of church activity, and avoid the payment of taxation. But professionals who delivery the same motivational and inspirational messages are taxed by the government. Another way the church could be used for money laundering activities is when the criminal who is a church member gives a loan to the church for the construction of a

church building. The church then pays off the loan by issuing a cheque to the church member. The cheque will then find itself in the financial system as clean money. Churches with international affiliation could also fuel the money laundering activities. Funds acquired through illegal means could be smuggled across borders to other countries where they have sister churches. The foreign church will either transfer the money back through their bank to the local church or use the funds in its country. When this happens the money has been washed to look clean. The church can help fight the money laundering menace by doing a “KYC” on their members. That is, the church should be able to know the job their members do, how they get their money and also try to visit their members at their homes and offices. This will help build a close relationship among their members. Also the church should encourage church members to use electronic means or cheque to pay for their pledges, tithes, building project contribution, seed sowing and special offerings. In short the church should discourage the use of physical cash. From time to time, the church authorities should engage the services of an expert in Money Laundering matters to create the awareness on the subject matter for the church members. Money Laundering and Terrorist Financing are now becoming a serious problem for countries especially countries from the African and Caribbean region, as the lending of grants and loans to these countries are subject to the implementation of the FATF (Financial Action Task Force) 40 recommendations. So we all have stake in the fight of money laundering and terrorist financing.

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BoG May 2020 MPC Statement PART 1: is deficit financing back: BoG 2020 budget deficit support at 53%? SETH E. TERKPER FORMER MINISTER FOR FINANCE 1. Introduction It seems the Bank of Ghana (BOG) May 2020 Monetary Policy Committee (MPC) Report cites the US Fed and US Treasury to prepare our minds for a significant shift its past conservative fiscal stance to an aggressive one. COVID-19 is a dangerous health and economic hazard but the change in BOG’s fiscal stance is stunning, given its record in recent economic crisis. The Statement includes some bold assertions in Paragraphs 13 to 15: “Preliminary assessments show that the financing gap that was estimated at the time of applying for the IMF RCF in March (2020) has widened significantly, resulting in a large residual financing gap”. IMF’s RCF Report shows the COVID-19 fiscal gap as part of a widening 2020 Budget gap. The Minister went to Parliament in March and May 2020 on COVID-19 but did not present a Supplementary Budget to differentiate the two gaps. Nonetheless, the Statement is clear: “Current market conditions in the wake of the pandemic, will not allow the financing of the gap from domestic debt capital markets without significantly increasing interest rates”. BOG’s justification is a difficult domestic debt capital market condition and significant increase in interest rates. This is curious and difficult to justify since, as shown in Table 1 later, GOG’s borrowing from the World Bank, IMF and other sources and its Stabilization Fund draw-down fully cover the extra COVID-19 expenditures. “Under the circumstances and in line with Section 30 of the BOG Act, 2002 (Act 612), as amended, the BOG has triggered the emergency financing provisions, which permits the Bank to increase the limit of BOG’s purchases of government securities in the event of any emergency to help finance the residual financing gap”. The fact that BOG had to invoke its 2nd level emergency powers to support the Budget implies that MOF has used its 1st level liquidity access to 5 percent of prior year’s tax revenues (note: the Minister asked Parliament to raise to 10 percent). “Today, under the BOG’s Asset Purchase Programme (APP), the Bank has purchased a GOG

COVID-19 relief bond with a face value of Ghc5.5 billion at the Monetary Policy Rate with a 10-year tenor and a moratorium of two (2) years (principal and interest). The Bank stands ready to continue with its APP up to Ghc10 billion in line with the current estimates of the financing gap from the COVID-19 pandemic. Without a House approval of a Supplementary Budget and “terms and conditions”, BOG has already purchased “COVID-19 Relief Bonds”. Given its name, the new GOG bond gives direct access to “budget” cash, compare with buying existing bonds. Traditionally, central banks buy existing market instruments during financial crisis because it has a wider impact more holders such as banks and finance houses. On a wider note, the action raises questions on the authority to declare “emergencies”, even if financial: Parliament, Cabinet, MOF or BOG. 2. Overall versus COVID-19 fiscal gap BOG’s reversal of a conservative fiscal stance through 2nd level emergency powers seems unprecedented but does not differentiate between the 2020 Budget and COVID-19 fiscal gaps. The Minister informed Parliament that the COVID-19 gap was Ghc9.5 billion, which GOG can meet from its core COVID-19 inflows, as part of seems to be the approximately Ghc50 billion overall fiscal gap to which BOG appears to show comitment. Table 1 shows () the COVID-19 Ghc9.51 billion inflows; plus (b) 2020 Budget deficit of Ghc18.88 billion approved by Parliament; which (c) adds up to Ghc28.49 billion; being (d) far below the Ghc48.01 billion overall gap and total anticipated inflows. The question is if a major fiscal correction is underway to align GOG’s unorthodox fiscal accounting with that of the IMF and others on the “parallel” reporting saga. The total funding of gap of US$47.92 billion less Ghc28.49 billion of budget deficit [Ghc 18.88 billion] plus COVID-19 gap [Ghc9.51 billion]—which implies that the non-COVID correction of Ghc19.43 billion exceeds the official 2020 Budget deficit of Ghc18.888 billion. In his May 2020 Statement to Parliament, the Minister asked the House to approve a “recalibration” of the 2020 Budget to increase the overall fiscal deficit from Ghc18.9 billion (4.7 percent of GDP) to

Table 1: COVID-19 and other Budget support

Table 2: BOG’s 2020 Budget and COVID-19 fiscal gap measures

Ghc30.2 billion (7.8 percent of revised GDP). This level of correction will be consistent with the Fund’s differentiation of RCF (COVID-19) and overall fiscal gap as well as inclusion of bailout and energy sector costs above the line—which MOF must show explicitly in the Supplementary Budget, not hidden in budget footnotes and appendices. The “recalibration” of 2020 Budget deficit means an adjustment of tax and non-tax revenues, expenditures, arrears, and financing—a part of the Appropriation process under the Constitution PFMA. Parliament has approved the 2020 Budget already, hence the Minister must seek a House approval in a Supplementary Budget. It seems a lot of financing has started before the PFMA’s deadline of end-July for a 2020 Supplementary Budget or Certificate of Urgency. 3. BOG’s support and commitment Table 2 shows that the immediate BOG fiscal support of Ghc5.877 billion is 31 percent of fiscal balance of Ghc18.888 billion in the 2020 Budget, which increases to 53 percent with escalation BOG support to Ghc10 billion. Given (a) absence of Supplementary Budget; and (b) RCF, other loans and Stabilization Fund drawdown that

appear to cover the COVID-19 needs, BOG seems to take major decisions on fiscal management that belong to only Parliament. These include the Appropriation of Public Funds (including BOG funds, as delegated by its Act) that the Constitution (and PFMA) reserves for House under the Constitution and PFMA. 4. Conclusion The difference between “COVID-19” and “overall 2020 Budget” fiscal gaps is a source of concern for observers of Ghana’s fiscal scene. One GOG reputation is its accelerated and significant fiscal consolidation under an IMF ECF Program from 2017 to 2019. However, come time to draw on these savings, they seem to fizzle quickly and send GOG scrambling for loans and debt forgiveness, early in declaring COVID-19 a pandemic. The IMF’s backdates to revise fiscal balances and public debt figures in the Article IV (December 2019) and RCF (COVID-19) Board Reports became controversial, as “parallel” and non-transparent to a section of Ghanaians. Nonetheless, they have helped with a better view of the fiscal situation. This article highlights the central bank’s apparent role in the fiscal correction (with COVID-19 in the forefront), with the next one giving reasons for why we may be seeing a conservative stance change into an aggressive one.

FRIDAY MAY 29, 2020

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Regulating in a Pandemic BY HOWARD DAVIES The years after the 2007-09 global financial crisis were characterized by an orgy of rulemaking by financial regulators around the world to address the weaknesses exposed by the upheavals. Importantly, a renamed and reinforced Financial Stability Board (FSB), reporting to a series of G20 summits, oversaw the process of re-regulation. Despite the economic impact of the measures and the complexity of making rules to suit the needs of different financial systems, a remarkable degree of consistency was achieved. While the United States had never fully implemented the Basel 2 framework, Basel 3 – featuring, for example, higher reserve requirements – found its way, in more or less recognizable form, into the rulebooks of all the different US banking regulators. This time is different. Many regulatory changes have been introduced around the world in the last two months, understandably in haste, as national policymakers responded to the COVID-19 crisis with measures to keep credit flowing to affected economic sectors. Sadly, signs of international cooperation are few. There have been no emergency summits. Regulators have not converged on Switzerland for all-night röstifueled sessions to hammer out amendments to Basel Committee rules and guidance. Perhaps supervisors have been Zooming into each others’ spare bedrooms. We do not know. But the announced measures have certainly been piecemeal. Are the changes made so far broadly consistent from country to country, or is the international consensus forged by the FSB starting to unravel? For the most part, what we have seen is not another orgy of rulemaking, but rather a bonfire of controls. The Institute of International Finance has faithfully logged 312 initiatives, and is still counting. Most drop into one of three buckets: amendments to capital requirements, guidance on loan loss provisioning, and controls on dividends and other capital distributions like share buybacks. The changes to capital requirements have mainly affected the buffers imposed on banks since the last crisis under the general heading of macroprudential regulation. Many bankers had come to think that macroprudential supplements would only work in one direction: buffers imposed in credit upturns would be retained in the downturn. Faced with a sharp decline, economic regulators have shown welcome flexibility. Countercyclical buffers have been removed and banks have been

told it is acceptable to dip below their previous minimum capital requirement as loan losses mount. Ten of the OECD’s 37 countries have so far removed the countercyclical buffer. A number of others have adjusted national capital or liquidity buffers. Comparisons are complex, but the changes look broadly similar in effect. These changes are typically described as temporary. So, banks that may avail themselves of the current flexibility are keen to know when the buffers might be reimposed and how long they would then be given to meet them. The European Central Bank has said that eurozone banks would be given “ample” time to rebuild capital. The Bank of England has said the time would be “sufficient.” Academic linguists might debate which word implies a longer period. Unfortunately, lawyers will get involved if regulators do not say more clearly what they mean. Nonetheless, all this activity does look broadly compatible (at least before the tough timing decisions come to be made). So far, no national regulator has taken an axe to the trunk of the Basel requirements. There is one potential concern, however. Nicolas Véron of the Peterson Institute for International Economics has argued that the Federal Reserve’s changes to the supplementary leverage ratio amount to a serious breach of Basel

3. The Fed has exempted banks’ holdings of Treasury bills from the calculation of their assets, which are explicitly part of the Basel definition. Véron warns that while the change in itself may not be of great consequence, “if the noncompliance trend is confirmed, the most damaging consequences may be to the United States itself.” The changes in the second bucket, provisions for loan losses, are harder to assess, partly because the US has not adopted International Accounting Standards, and International Financial Reporting Standard 9 is new and untested. Banks need some guidance on how to interpret it, especially in relation to government-guaranteed loans and loans subject to requested interest holidays. There will be a need to ensure that different national interpretations of IFRS 9 can be justified. It is too early to be confident of that. The third area, capital distributions, is the one where international divergence is more evident. Regulators in Europe have taken the rigorous view that dividends and buybacks should be suspended. The Fed and the Reserve Bank of Australia have left it to banks to decide whether it is safe to pay a dividend. Some explanations for this difference seem straightforward. For example, in the last year, 73% of US banks’ distributions have been

in the form of share buybacks, and only 27% as dividends, while in Europe 96% of distributions have been paid as dividends. US banks voluntarily undertook to suspend buybacks, which the Fed took into account when taking a more relaxed view on dividends. Nonetheless, decisions on each side of the Atlantic have attracted strong criticism. Senator Sherrod Brown of the Senate Banking Committee told the Fed that “you have been too eager to provide what you call ‘regulatory relief’ – and what the rest of us call favors for Wall Street.” Similarly, the Banking Policy Institute in Washington has maintained that there is “a good chance that the actions of UK and EU regulators have done significant long-term damage to their banks.” Who is right? It is too soon to say. But the Basel Committee will have a lot to discuss when it is next allowed to assemble. The priority should be to assess the changes that members have made during the crisis and to address those that have skewed the playing field. That will be a delicate exercise, but it is essential if the global financial architecture painfully rebuilt after the last crisis is to be sustained.

Howard Davies is Chairman of the Royal Bank of Scotland.Copyright: Project Syndicate, 2020. www.project-syndicate.org

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How to protect refugees in a pandemic BY AGNES IGOYE

Perhaps the most effective health interventions in the battle against COVID-19 so far have been behavioral: social distancing and improved hygiene, especially handwashing. For the world’s 70 million displaced people – especially the millions living in cramped camps and informal settlements – such habits can be virtually impossible. Add to that limited access to healthcare services, a lack of reliable information about the virus, and governments’ focus on protecting their own citizens, and the risks of devastating COVID-19 outbreaks among displaced populations are rising fast. Refugees International recently sounded the alarm about these risks, and offered sensible recommendations to help mitigate them, such as reducing overcrowding and improving hygiene in refugee camps, halting the deportation of asylum-seekers, and improving communication. To achieve these objectives, governments would do well to draw lessons from Uganda, a global leader in refugee protection. Uganda, a landlocked country of 43 million people, has taken in 1.36 million refugees, making it the world’s third-largest host country. Most fled from conflicts in neighboring countries, especially in South Sudan and the Democratic Republic of the Congo. Asylumseekers from both countries – totaling 985,512 from the former, and 271,967 from the latter so far – are granted refugee status in Uganda on a prima facie basis. Asylum-seekers from other countries, including Burundi (36,677 refugees), undergo statusdetermination interviews. Nearly 71,000 refugees – from Ethiopia, Eritrea, Rwanda, Somalia, and Sudan – have lived in exile in Uganda for three decades. Despite its large refugee population, none of Uganda’s 139 confirmed cases of COVID-19 (as of May 14, 2020) occurred within refugee settlements. This is a testament to the country’s humane, sustainable, and forward-looking refugee policy, which gives displaced people the resources and support they need to make a home and a living. Uganda’s success begins with favorable legal and policy frameworks. Its 2006 Refugee Act and the 2010 Refugees Regulations guarantee essential rights to refugees, including the rights to move freely, work and start a business, own property, and access public services like education and health care. The Comprehensive Refugee Response Framework, launched in 2017, provides a blueprint for

upholding those rights globally. From emergency response to ongoing needs and self-reliance, the CRRF covers every step of a refugee’s experience from the time of displacement until a durable solution (local integration, resettlement, or voluntary repatriation) is found. It thus aligns its approach with the New York Declaration for Refugees and Migrants, adopted by the United Nations General Assembly in 2016. A key component in implementing the CRRF is the Refugee and Host Population Empowerment (ReHoPE) Strategic Framework, which focuses on promoting resilience and selfreliance among refugees and host communities through livelihood initiatives, durable institutions, and investment in skills development. To avoid redundancy and ensure adequate funding, ReHoPE emphasizes coordination among strategic actors, including the UN, the World Bank, and several crosssectoral partners. In Uganda, refugees have been integrated into the country’s development agenda at all levels. Uganda’s National Development Plan II, launched in 2015, includes the Settlement Transformation Agenda, which promotes socioeconomic development in areas hosting refugees and provides the basis of a non-encampment policy for refugees. Whereas refugees in Bangladesh, Greece, and Syria typically live in overcrowded camps, which rank among the world’s most densely populated areas, refugees in Uganda receive a plot of land for housing and cultivation near local communities. About 92% of Uganda’s refugees live in settlements alongside native

Ugandans, while the remaining 8% live in urban centers. At the 2016 Leaders’ Summit on Refugees, Uganda committed to upholding its settlement approach, and expanding refugees’ access to education, employment, and social services. It has since made significant progress toward fulfilling its promises. Because most refugees are concentrated in 12 of Uganda’s 121 districts, total service capacity has been increased in some areas. In 2018, the Ministry of Education launched an Education Response Plan – a three-year initiative to ensure sufficient school capacity. Integrated response plans for health, water, and the environment soon followed. Thanks to this long-term planning, refugees and local communities alike already had access to health facilities and clean water when the COVID-19 pandemic began. As a result, even those who live in more densely populated – and thus higher-risk – settings had the tools they needed to follow hygiene recommendations from the start. Border controls during the pandemic mean that Uganda’s open-door policy for asylumseekers has been suspended. Having spent over a decade as a border guard – including on the Kenyan frontier when violence erupted over that country’s 2007 election – I know how difficult it can be to ensure safety at the border. The government’s decision to close Uganda’s frontiers reflects its commitment to protecting the entire population, including refugees. To be sure, Uganda’s refugee management is not free of controversy, including allegations

of corruption and fraud. But the authorities are cooperating with the UN High Commissioner for Refugees and the World Food Programme to investigate concerns about the accuracy and reliability of data used for refugee programming, fundraising, and assistance. In 2018, Uganda’s government began to verify refugees using UNHCR’s biometric systems. Displaced populations are often thought to represent a dilemma, with governments forced to choose between protecting their own populations and protecting refugees and asylum-seekers. Uganda has shown that this is a false choice. With long-term planning and a multisectoral approach, governments can ensure that refugees and their host communities coexist peacefully, prosperously, and in good health.

Agnes Igoye, a senior Aspen New Voices Fellow, is Uganda’s Deputy National Coordinator for the Prevention of Trafficking in Persons and Head of the Ugandan Immigration Training Academy. Copyright: Project Syndicate, 2020. www.project-syndicate.org

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West Blue and Ghana’s ports reform

est Blue Consulting, a world-class business and IT-consulting, and technology firm has since its arrival in Ghana transformed the country’s port, making it easy for importers and exporters to do business, thereby increasing government’s revenue substantially. The company which supported Customs in taking over its core functions from the Destination Inspections Companies (DICs) in 2015, launched the Ghana National Single Window (GNSW) programme in partnership with the Customs Division of the Ghana Revenue Authority and port related stakeholders. The GNSW built on the ongoing gains of Ghana Community Network GCNET. It is also imperative to note that West Blue launched Ghana’s first ever Trade Facilitation Strategic Action Plan - Blueprint and Roadmap as well as Ghana’s first Import and Export Process Manual (Trade Bible) in close partnership with GCNET, private sector trade participants, Customs and its trade regulatory agency partners and media partners. This arrangement was the basis for all modules rolled out in the programme. The discontinuation of the Destination Inspection Scheme in Ghana, aligned Ghana with international best practices as per the World Trade Organization (WTO) and the World Customs Organization (WCO) guidelines. West Blue was also instrumental in establishing the Legal Framework for a Single Window in Ghana Custom’s Act in 2016 and Ghana’s

ratification of the WTO Trade Facilitation Agreement in 2016. The Single Window Programme brought a remarkable change to the way import and export clearance transactions were done at Ghana’s land, sea and air ports to the admiration of all stakeholders. Under the Single Window Programme, West blue introduced several innovative products to make trade easier and efficient at the port. Among the products the company introduced were the Pre-Arrival Assessment Reporting Systems (PAARS) which helps secure governments agenda in the area of Security, Revenue Mobilization and Trade Facilitation while ensuring a balance with the view to boost investor confidence; and Ghana’s Trade Hub (GTH) information portal, with its complimenting Mobile App which provides a single platform where all trade-related information is collected and made readily available for local and international investors, thereby saving time and expense for the trading community. The company also introduced the Joint Inspection Management Information Systems ( JIMIS), which resulted in the reduction of 16 physical examination agencies to 3, thereby streamlining intrusive cargo examinations; National Integrated Risk Management System (NIRMS), the Customs House Management System (CHAMS), Bay Allocation Management system (BAMS), Used Vehicle Application and Courier Application. Under the Single Window Programme, clearance transactions at Ghana’s Ports reduced from

two weeks to 48 hours and in the case of some compliant cargoes 2hours, significantly improving the government’s revenue collections at the ports. The company also launched the Ghana National Single Window (GNSW) e-Zone centres at KIA and Tema. Achievements: Global Rankings With the introduction of the Single Window, Ghana’s global ranking increased substantially In 2017, Ghana improved in its Trading Across Border by 13 places moving from 167 in 2016 to 154 in 2017 and also moved up its rankings in the sub-Saharan region by moving from 37 in 2016 to 29 in 2017. In 2018 the country improved its ranking to 114 out of 190 economies, in the World Bank Ease of Doing Business Report, moving up six places from 120 on the league of progressive economies that institute measures to facilitate businesses. Improvements were also registered in the World Bank Logistics Performance Index (LPI) as Ghana’s ranking, rose from 12 places from 100th in 2014 to 88th in 2016 out of 160 countries. This is the largest year on year increase in Ghana’s global LPI ranking history since the survey was first undertaken in 2007. Paperless Port The Vice-President, Alhaji Dr. Mahamudu Bawumia, 2017 introduced the Paperless Port to

build on the Ghana National Single Window which was being run by West Blue in close collaboration with GCNet and other relevant stakeholders. The Paperless Port contributed further to the ease of doing business at the port by removing trade barriers among other things. Under the Paperless Ports Programme, the number of Port inspection agencies were cut from 16 agencies to 3 (GRA-Customs Division, GSA, FDA) to reduce clearing time. The Paperless Port Programme has also saved Ghana US$500 million since its implementation in 2017, as reported by the University of Ghana Business School (UGBS) and increased government’s revenue to a 56% increase in the first year of its implementation. Payment in demurrage decreased by 17.5% in 2017, according to Ghana Shippers Authority. Internal customs barriers on all the transit corridors were removed and human interventions in port transactions and the Long Room. West Blue made all these remarkable achievements with the support of all stakeholders especially the Ghana Revenue Authority- Customs Division, Ghana Ports and Harbors (GPHA) Authority, Meridian Port Services, Ghana Community Network (GCNet) and the media fraternity.

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