Fund For Infrastructure, Smes Established

ministerThe government in its bid to accelerate the pace of infras-tructure development  and also boost the growth of Small and Meduim Scale Enterprises (SME) in the country has in the 2014 budget introduced two new funds.

The funds, the Ghana Infrastructure Fund (GIF) and SME Fund are expected to help the government to address the problems confronting the two sectors.

Mr. Seth Terkper, Minister of Finance, who announced this in Accra on Tuesday when he presented the 2014 budget to parliament said, the government proposed to set up the Ghana Infrastructure Fund (GIF) to deal with the huge infrastructure deficit and to focus on strategic infrastructure that would lead to job creation and the growth of the economy.

The GIF, the minister said would be a quasi-fiscal body that would be chaired by the Minister of Finance and, in due course, pursue its own ratings on the domestic and international financial and capital markets.

“Indeed, independent rating is a strategic move that government will encourage to enable these enterprises to borrow on their own balance sheets or records,” he said.

The GIF, he explained, would focus on strategic infrastructure in partnership with the private sector.

The minister said currently, Ghana‘s financial and capital markets were constrained with limited availability of long term finance, both local and international, to support both the public and private sector infrastructure projects.

“The GIF will partner the private sector through linkages that include financing project SPVs, PPPs, mortgage finance and finance leases. Additionally, the GIF will create investment opportunities for institutional investors including pension funds,” he said.

Mr. Terkper said the potential sources of funds for GIF included appropriations by Parliament, including the recent 2.5 per cent increase in VAT, as well as ABFA portion for amortisation and infrastructure development.

“Other sources include escrowed and on-lent funds from prior investments, private or public domestic and foreign funds from multilateral institutions and development banks, the capital markets including our stock exchange, pensions and mutual funds including social security and insurance funds and other funds,” he said.

The GIF with the assistance of the Bank of Ghana, the minister said, would set up and manage a debt service account (DSA) for designated domestic and foreign sovereign debt.

“The purpose of the latter is to utilize the flows of foreign exchange such as ABFA to spur confidence in the markets and minimise foreign exchange exposures,” he said.

The finance minister said the establishment of GIF would lead to a review of government’s exposure to risks from borrowing and issuing sovereign guarantees.

“It is our intention to minimise the use of sovereign guarantees that are currently treated, automatically, as public debt in our Debt Sustainability Analysis (DSA) band and not as contingent liabilities,” he said.

On the SME Fund the minister said funds created to address the limited access to financing and reducing the cost of borrowing for SMEs have not been sustainable.

“In this respect, the government is setting up a new SME fund to boost support for SMEs,” he said.

The activities of the fund, the minister said would be overseen by a Board of Trustees and a professional fund management company.

This management structure, he said, would improve the processes for credit appraisal and recoveries in order to make the fund a sustainable revolving fund.

The minister said the pilot scheme would mobilise and deploy about GH¢50 million from sources such as EDAIF as well as pipeline and new loans and grants including financing from development partners.

The Fund he said would have formal links with established domestic institutions such as Eximguaranty and the Venture Capital Trust Fund as well as rural banks and micro-finance companies.

“It will also collaborate with the National Board for Small Scale Industry (NBSSI) to facilitate the unification of several SME finance and capacity-building initiatives under one umbrella,” he said. By David Adadevoh

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