Random thoughts of a rural farmer – part 18 ; Citizen or Spectator: How can I shut up?

Bank liquidity management(Part I): Defying the 2:1 current ratio in accounting
Photo: Francis Owusu-Achampong,

Quite a few people have expressed surprise about my grandma’s child (abrewa nana) demeanor and find it hard to juxtapose the sometimes, tough stance I exude on certain subjects. Some describe me as a gentle Vandal which strangely makes me wonder whether I should consider that as a compliment or simply a variant of a verbal abuse.

I am thrown into wondering whether Vandals are supposed to be some imaginary monsters with horns protruding through their ears, or just behaving like some jolly rabbits roaming the grasslands of Gbawe in Accra some decades ago.

Yes, I choose to be cool until unjustifiably provoked or disturbed, while still remembering what constitutes emotional intelligence.  The Akans say that “se nsuo mene aponkyerene a, ogye woo” to wit, “when excess water gets into a frog’s throat, it blurts out with a bang”

So, I find myself blurting out with a bang over my apparently shattered dreams of an economically and socially developed Ghana as a mature student struggling to pass quantitative methods at the then School of Administration in the late 1980s.

Now in retirement, I find myself asking unceasingly, “how can I shut up over the missed opportunities for growth in my motherland?” Times were when many organisations recruited would- be graduates on university campuses, even before our final examinations in our then 3 -year undergraduate programmes.  Little did we foresee that a time would come when thousands of graduates could remain unemployed even five years after graduation.

Consciously or otherwise, we have created a massive army of frustrated, easily provoked unemployed graduates, posing even security challenges if the dire situation continues unchecked.

For as long as I continue to pay my fair share of direct and indirect taxes, I cannot help voicing my feelings about Ghana’s stunted growth, given the potentials we have always acknowledged.

How can I shut up when the National Stabilization levy that was initially intended as a fiscal bridging scheme for two years has now become a permanent feature in our fiscal space with no end in sight?

As a finance student, and a past Assets and Liability Committee member of a large multinational bank in Ghana, I admit there will always be mismatches between government revenue and expenditures, just like banks’ funds flows. But when consistently, GETFUND, Road Fund, NHIS and specific levies are in arrears for more than two quarters, then I must be worried. My delegated mandate has been applied by past and present governments who promised they could meet my economic and political aspirations, but have failed miserably and remorselessly, choosing only to blame each other and external forces interminably.

How can I shut up when withholding taxes erode my consultancy fees; when corporate executives and successful private entrepreneurs are now going to sweat over 35% personal income taxes?

Only God knows the extreme stress they go through with unattainable/killer targets imposed on them by their respective board of directors, financiers and other stakeholders in such an unfavourable economic environment!

How can I shut up when the Produce Buying Company continues to delay payment for my cocoa sales for weeks on end when I have pre-financed all the expenses covering the same output from my own pocket? And worse still, when I am aware that Cocobod usually obtains syndicated financing upfront before the cocoa season begins?

How can I shut up when my phone is constantly buzzing from agitated investors calling me for explanations on what is happening to their investments with mutual fund and allied companies regarding their bond holdings?

What happens to banks’ profitability and liquidity when their marketable assets portfolio is suddenly going to be hit hard over unprecedented hair cuts that do not affect interest alone but also principal investments? How are the Pension Fund managers and Insurance companies going to manage their long- term investments?

Have we thought hard over how this move is already destabilizing the investment space and the fortunes of institutions operating under the licence of the Securities and Exchange Commission?

Risk -free instruments?

In the same way as I analyse balance sheets with measured skepticism, ever since my undergraduate days, I have always scoffed at the idea of what the textbooks consider as risk -free instruments in contemporary banking and finance space.

I wonder why we continue to teach students to think that these instruments, like any investment vehicles, can be risk- free. Perhaps we need to be blunt in describing such instruments as less risky, compared to other finance products. Risk-free sounds to me to be like calling a sheep an elephant, just because the former appears well fed.

Bitter experiences in Argentina, Zimbabwe and a few countries and now including, our own Ghana, calls for a review of what constitutes risk-free instruments. Perhaps that will assuage the shock waves pervading the investment space in the country now.

Hurray to a trade surplus!

According to statistics from Bank of Ghana, the country’s total balance of trade recorded a surplus of $1.87 billion in the first ten months of this year (2022), equivalent to 2.8 % of the country’s gross domestic product.

Simply explained, the country’s exports of physical goods exceeded the imports of similar goods by that margin over the period under consideration. While this should cheer us up, it is only a subset of the Balance of payments, or the tip of the iceberg. On a consolidated basis, this largely influences the exchange rate of the cedi vis-à-vis other foreign currencies used in the international trade arena. A focused import substitution strategy could reinforce the gains made in this area.

The balance on the current account, which includes the value of services exported against similar value of imported services, are then set against the capital account. The latter account usually is in the negative in view of the massive outflow of funds to pay for previous loans and related interest payments to other fund providers……. loans which we have not judiciously applied in the past and for which our children and their children will labour to pay.

The net result on the Balance of Payments, largely determine the supply of foreign exchange and therefore the forex-cedi exchange rates at any point in time. It is helpful to underscore the fact that Ghana’s cumulative debt profile is heavily foreign currency denominated. Attempts to liquidate such loans at scheduled intervals, have a heavy impact on the exchange rates, if we fail to improve our economic growth trajectory.

It remains to be seen how the new measures around hair cuts being contemplated, will affect capital flows in and out of the country.

It is strongly recommended that the Trade Ministry, in conjunction with the Ministries of Finance and Information will conduct joint educational outreaches to enable more of the citizenry to appreciate the nuances about exchange rates and their determinants.

This will, hopefully educate the masses, most of whom seem to think that foreign reserves are conjured by Bank of Ghana and that the current shortage of foreign currency and the depreciation of the cedi must be largely blamed on the Governor and his team, when the problem is essentially a demand and supply driven phenomenon.  GUTA members, especially among other importers, will perhaps benefit from such education to spare us some of the rhetoric on the airwaves.

The 2023 budget and matters arising

The 2023 budget has been read and awaiting debate on the floor of parliament, amidst the wranglings over the Minister of Finance’s continued headship of the Ministry of Finance.

My personal take-away from the highlights of the budget is that whether the Minister stays or not does not change my disappointment over the lack of any radical changes that will propel the wheels of this economy, especially the linkages between an agriculture-led industrialization drive and the prospects of the numerous hyped 1D 1F projects.

Cocoa output and related revenue continue to decline, on account of expensive inputs, galamsey and inclement weather. Envisaged expenditure cuts in the budget appear too cosmetic with no real paradigm shifts capable of addressing the yawning budget deficits. Current tax- payers appear to be the same group of contributors who are rather expected to cough out more income taxes.

Why the government failed to heed to mass calls to reduce the e- levy to 0.5 % and cap the maximum transfers that attract the tax, defies comprehension.

Some of us fail to see any radical innovations that have been suggested to rope in the large informal sector into the tax-paying bracket.  Not much appears to have been seen on how we are going to accelerate an export led economy and which products or services to be targeted for sustained growth. No serious revisions are contemplated in the budget regarding the so-called flagship programmes which have not exhibited any credible signs of success. It is unclear which visible voter fortunes were attributable to these programmes in the last elections.

Only ambiguous references appear to have been made to the tax exemptions policy or how to review those previously granted, but which have not fundamentally benefitted the nation.

One would have expected some serious attempts to tackle the Article 71 personnel who everyone now agrees, are draining the national coffers. Disappointingly, nothing has been set aside for constitutional amendments that will conserve some funds from the bloated governmental machinery in a bold attempt to dispense with some of the not too desirable governmental structures. So, how can I shut up as a citizen or a spectator?

The writer is a Fellow of the Chartered Institute of Bankers, an adjunct Lecturer at the National Banking College and the Chartered Institute of Bankers, a farmer and the author of “Risk Management in Banking” textbook.

Email; [email protected]  Tel. 0244 324181

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