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Ghana
Receives Top Reforming African Country Award, amidst major
financial reforms
Gideon Sackitey, Accra
Accra, October 14, Ghanadot.com - For the first time in her
history, Ghana has been awarded the top reforming African
country award. The Minister of Finance and Economic
Planning, Mr Kwadwo Baah-Wiredu received the award on
our behalf in London over the weekend.
The award, in a form of a glass shield is given to the best
reforming economic system in Africa, a statement from the
Ghana High Commission in London received in Accra on Sunday
said.
Mr Baah-Wiredu shares this year's honour jointly with the
Finance Minister of Kenya, Mr Amos Kimunya and Finance
Minister of Mauritius, Mr Ali Mansoor all of whom were
present at the Unilever headquarters in London to receive
the awards.
The ceremony was part of a day's seminar of "Doing Business
2008", organised by the World Bank, the U.K. Department of
International Development (DFID), BusinessActionforAfrica
with the support of Unilever.
It was attended by leading World Bank officials and over 100
chief executives of transnational corporations.
Mr Michael U. Klein who gave out the awards praised Mr Bah-Wiredu
and the two others for steering their economies and business
environments from rough roads to greater reform and growth.
Mr Baah-Wiredu, with his award in right hand and the flag of
Ghana in the left, said the reforms in Ghana had not only
led to strategic legislations in the financial and
procurement areas but also to general checks and balances in
overall administration.
"The reforms", he said, "accounted partly for the growth in
the economy but there was still much to be done even with
over 60 per cent of targeted reforms already carried out.
"It is not a one day business" he said.
Mr Baah-Wiredu had kind words for the World Bank and other
development partners who helped steer the eform efforts.
"The Doing Business" reviews, upon which the awards are
given and for which Ghana previously placed as the ninth
best country to do business, look at 10 areas of everyday
business measurements: starting a business, dealing with
licenses, employing workers, registering property, getting
credit, protecting investors, paying taxes, trading across
borders, enforcing contracts and closing a business.
The indicators are used to analyze reforms and business
regulation, identifying which countries are improving their
business environment the most and which ones slip.
They are also used to check economic outcomes and identify
what reforms have worked, where and why.
Ghana, it must be noted has not has done a lot in the area
of reform ever since the then PNDC government launched the
Economic Reform Programme (ERP) in 1983 by the then Finance
Minister Dr Kwesi Botchwey.
Indeed, throughout the 1980s, when most African countries
adopted an IMF/World Bank supported Structural Adjustment
Programme (SAP), financial sector reforms was a major
aspect.
It involved institutional restructuring, enhancement of the
legal and regulatory framework for banking operations, and
liberalizing interest rates.
The period 1983-1988 was an era of crisis in the financial
system in Ghana. High default rates had rendered most bank
assets non-performing, the high rates of inflation had wiped
out the capital base of most banks, and the weakened
confidence in the financial system had adversely affected
bank deposits.
These affected the ability of the banks to perform their
intermediation function properly. This also affected the
recovery effort initiated under the ERP. Thus, in 1988, a
comprehensive Financial Sector Adjustment Programme (FINSAP)
was launched. The FINSAP was financed with an adjustment
credit from the World Bank, with co-financing from Japan and
Switzerland.
It is obvious here that interestingly, the financial sector
reform had more to do with the formal system than with the
informal sector activity. This was so despite the fact that
the Ghanaian economy is 90 per cent informal.
In a paper titled financial reforms in Ghana by Nii Kwei
Sowa of the Centre for Policy Analysis CEPA, policy reform
by way of interest rate liberalization affected the formal
sector directly and any impact on the informal financial
activity was only secondary.
Arguably, a credible transmission channel for the reforms to
reach the poor will be through institutional and regulatory
reforms via quasi-informal market.
He said after independence, the pressure to develop
economically led to fiscal pressures, which put severe
strain on the financial sector with the interest rates fixed
at ridiculously low levels most governments borrowed cheap
from the financial system and there by crowded out the
private sector.
As the economies of African countries run into more
macroeconomic problems, the financial sector became more and
more distressed. For instance, the high inflation rates
experienced in some countries together with the devaluations
that were introduced to correct the imbalances left most
banks with negative net worth.
Then in 1988, a comprehensive Financial Sector Adjustment
Programme (FINSAP) was launched. The FINSAP was financed
with an adjustment credit from the World Bank, with
co-financing from Japan and Switzerland. The Government of
Ghana also contributed by converting its loans to the banks
into equity and by paying government guaranteed loans to the
state-owned-enterprises.
FINSAP had various wings. The major objectives were: (1) to
review the legal and regulatory environment and amend the
existing Banking Acts and Laws; (2) restructuring the
banking sector to make the banks viable and efficient; and
(3) revitalize the financial sector by creating new
institutions. FINSAP-2 and 3 were to continue with the
restructuring of the financial sector.
But today with the passage of the procurement law, financial
administration law and the anti-money laundering law among
others, the country's financial sector and thus the economy
has a huge potential and is nothing but a babe born in a
hospital under healthy condition. It is up to its parents
(financial managers) to ensure that it grows well to enjoy
all its benefits.
What many here say is that government should maintain its
stance on these matters and keep the economy growing.
Gideon Sackitey, October 15, 2007, Accra, Ghanadot.com
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