Tax cuts must drive exports to cushion cedi - Stanbic CEO

President of the Ghana Association of Bankers (GAB) and Chief Executive Officer of Stanbic Bank, Alhassan Andani, says the real impact of the recent tax cuts by government would be felt only if it will encourage domestic production and boost exports.

“The real impact of the tax cuts will depend on where the benefits will be felt most; I would like to see that go to the industry or services sectors where the country could generate more export revenue.

If the actors in these two sectors are able to leverage the tax reliefs to harness and add value to the abundant natural resources for export, then we can generate the much needed forex earnings,” he told journalists on the sidelines of the launch of the Stanbic Executive Banking in Accra.

He added: “For instance, if removing taxes on spare parts means those spare parts are going to be used on trucks that will go to the hinterlands to bring in agricultural products or move minerals such as bauxite, manganese that are meant for export, then that’s good.”

Parliament recently approved all four tax bills presented by the Finance Minister to enable the government to enforce tax cuts outlined in the 2017 budget statement.

The Income Tax (Amendment) Bill, 2017, Special Petroleum Tax (Amendment) Bill, 2017, Special Import Levy (Amendment) Bill, 2017 and Customs and Excise (Petroleum Taxes and Petroleum Related Levies) (Repeal) Bill, 2017 have been passed to give government the legal backing to implement its programmes enumerated in the budget.

The GAB boss emphasised that cushioning the cedi from depreciation and driving down interest rates go beyond curbing market speculations and the ability of the government to borrow externally to sell on the domestic market.

Rather, he advised the need for line by line measures that will help shore-up forex reserves including encouraging Ghanaians in the Diaspora, who are earning dollars, to increase remittances.

He further urged managers of the economy to judiciously manage the minimal supply of foreign exchange in the system so as not to create severe shortages that will lead to cash flow management issues.

“We cannot talk down or talk up interest rate as the demand for foreign exchange is very insatiable because we import food, clothing, cars, fuel, medicine et al; we pay dollars for all of these items and yet we do not produce enough dollars.

Let’s look at our rich culture; how do we harness and package them for export? I don’t see those arguments on the real sector to be able to generate more foreign exchange,” he noted.

The consistent shortage of foreign exchange is one key factor that accounts for the depreciation of the cedi against major trading currencies such as the US dollar, the euro and the Great British pounds sterling.

After a torrid performance by the local currency against the US dollar for a greater part of the first quarter of this year, the cedi has regained more than one percent of its lost value over the past week.

The cedi, as at March 10th, was trading at GH¢4.603 with the greenback on the interbank market, indicating a year-to-date depreciation of 8.6 percent -- the peak of the cedi’s troubled performance in the first quarter.

That same day, government issued a three-year one billion cedis bond to only domestic investors at a yield of 21.5 percent.

The sale of the bond proved a catalyst for the cedi’s turnaround; with the local currency regaining 1.3 percent of its value from March 10-17 to lower the year-to-date depreciation to about 7.4 percent.