Interview: Seth Terkper
How would you describe the role of the Ghana Infrastructure Investment Fund (GIIF)?
SETH TERKPER: The GIIF is a sovereign wealth fund that has been established as a corporate body with the aim of protecting the medium-term prospects of the Ghanaian economy and consolidating its middle-income status. The Petroleum Management Act allocates about 50-60% of the country’s annual oil revenues to the fund to scale-up infrastructure development by leveraging public and private sector resources for sustained growth. Many of the expenditures that are being shifted as the responsibilities of the GIIF were previously the responsibility of the government, and this led to the need to borrow or provide a guarantee for major infrastructure projects such as the gas pipeline. The GIIF was established as a profit-making entity, and we have appointed a board and a number of competent individuals from diverse backgrounds with private sector skills to make certain that it can fulfil this mandate.
What are the advantages of Ghana’s bond policy, and how will the newly issued $1.5bn eurobond fit into its overall growth strategy?
TERKPER: The first focus will be to shift away from using short-term debt instruments to finance the capital budget. The general use of short-term bonds for development projects means that you will owe payments in a much shorter time than it takes for the projects in question to yield financial benefits. 10 years is a far more sound time period to have to repay debts for capital projects than 90 days. More sustainable repayments can help foster national development. Additionally, there will also be the capacity to refinance short-term debts and upcoming sovereign bond debts, as well as the capacity to use the funds from this bond to pay the remaining principal of the eurobond that will mature in 2017. The fact that the World Bank will also be backing up to a $1bn (refinance component) of the new eurobond is a reassurance to the investment community that Ghanaian sovereign debt is a secure investment.
How can the government limit the impact of inflation on the most vulnerable populations?
TERKPER: One of the most overlooked sectors in relation to inflation is agriculture. The Consumer Price Index shows that the food index is the major component of inflation. For instance, during the dry season food prices go up, and the best way to control inflation is to store food and release supplies as necessary as the dry season carries on. In terms of macroeconomic policy, the Bank of Ghana is working on the one hand to manage exports more effectively and thus increase the inflow of foreign currency, and on the other hand to properly manage Ghana’s fuel stocks. Although the government cannot absolutely control the price of oil, it is possible to control how crude is managed and held in reserve. Ghana will be a net exporter of power in the medium term.
How has the expansion of the Tax Identification Number (TIN) impacted government revenue?
TERKPER: The TIN is the identification number issued to taxpayers for official transactions. Aside from the filing and processing of payments, Ghana is also shifting tax accounting onto an electronic platform. This new system will link domestic tax returns to import activities, and it will help to widen the tax base. By having an integrated platform, it will be easier to notice when an individual or company is under declaring revenues or not disclosing materials (or information) on their tax returns. A TIN will be required for import/export activities and to receive any government tenders.
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