As the coronavirus pandemic continues to wreak havoc on the economy and put much pressure on the health system, with many calling for increased spending on health-related expenditure to curb the disease, government has indicated in the 2021 first quarter budget economy that it will use part of the cash allotted to fight the pandemic as seed capital for the yet to be established development bank.
A critical look at the 2021 first quarter budget presented by Finance Minister Designate Ken Ofori-Atta in October 2020 clearly shows as part of the GH¢4.7billion allotted for COVID-19 related expenditure, more than GH¢312million has been earmarked as seed funds to establish the development bank this year. Of this amount, GH¢78.2million will be released in the first quarter.
The finance minister-designate, who is currently a minister-designate for the same sector, indicated last week during a speech read on his behalf in the 72nd Annual New Year School that GH¢50million has been released for the project. He further stated the government will look to both domestic and foreign sources through the issuance of bonds, diasporan instruments and direct borrowings from international financial institutions and capital markets to support the bank’s establishment.
The World Bank, in October last year, also approved US$250million to support the establishment of the development bank. Mr. Ofori-Atta said he expects about US$558million from international institutions to provide funding for the establishment of the bank that is expected to be capitalised with US$1billion.
The bank is to focus on supporting the transformation of industry, agriculture, agro-processing, and housing over the medium- to long-term.
Terkper questions its relevance
However, without doubting the role development banks play in the growth of economies, former Finance Minister Seth Terkper has raised questions about the relevance of using part of the money meant to fight the deadly pandemic to set up a development bank; especially at a time when the number of cases is rising and pressure has mounted on government to procure vaccines to fight the disease.
“One would ask at this point that if we are facing a spike in cases and countries are prioritizing health-related expenditure, why would the government be taking COVID resources to set up a bank at this material moment? Why would we be taking money from this source for a bank instead of prioritizing health infrastructure and equipment which are in short supply, or even procuring the vaccine?
“I have said time and again that the COVID loan was not on account of COVID, and this seems to confirm what I have been saying all this while. It vindicates our position that the request for a COVID loan is not exclusively for COVID. There was a budget gap that had nothing to do with COVID,” he said in an interview with the B&FT.
Mr. Terkper further added that with the already-existing National Investment Bank (NIB) and Agriculture Development Bank (ADB), setting up another development bank seems to be a duplication of efforts.
“The establishment of a development bank, as the name implies, helps in the development of infrastructure, industry and the private sector. So there is everything positive about going for a development bank, and many countries have development banks.
“But the National Investment Bank was established as a development bank, and the Agriculture Development Bank is also one but tilted more to supporting agriculture. So establishing another development bank looks like a parallel,” he said.
So far, with data available to the public, the International Monetary Fund (IMF) has given the government a loan of US$1 billion; the World Bank has also provided US$100million support, and the African Development Bank (AfDB) provided a US$69million grant – not forgetting the Private Sector Fund established by the government, all to be used in meeting COVID-related expenditure.
Meanwhile, active cases of the deadly pandemic have crossed 2,400 as at the time this story was being filed, with the number of deaths hitting 361. Calls have been made by many for government to use the COVID cash to carry out free testing, as the GH¢350 currently charged at public health facilities for testing is considered exorbitant and an impediment to fighting against the pandemic.