First Round Table Discussion by the Policy Modelling Unit of the Department of Economics

Implications of the Recent Utility/Fuel Price Hikes on the Ghanaian Economy
Reflections on Recent Developments and Regulatory Directives in Microfinance

17th February 2016
Sasakawa Conference Centre

University of Cape CoastImplications of the Recent Utility/Fuel Price Hikes on the Ghanaian EconomyImplications

•       Government
–      Increase in Revenue for Development
–      Provisions and Availability of Utilities
–      Financial Sustainability of the Utility Sector
•       Households
–      Increase in cost  (Transportation,  Commodities etc)
–      Reduction in Real  Income (Spending)
–      Increased Unemployment
–      Decrease in Welfare
•       Industry
–      Increase in Cost of Production (labour and capital )
–      Low Productivity  and  Low Profits
–      Redundancy (lay-off  of workers) and Closure of firms

•       Revenue
–      Widening the tax base -  more of the informal sector
–      Block leakages and wastages ( wasteful activities and corruption)
•       Utilities
–      Key energy-intensive industrial firms must be encouraged to adopt newer technologies that help to reduce the energy-intensity
–      Review the current electricity tariff structure (reduction in subsidization  of non-productive sector
–      Reduction in distribution losses and improvement in efficiency

Reflections on Recent Developments and Regulatory Directives in Microfinance Developments

•       The microfinance sector at a crossroads (From Micro to Macro)
•       Landscape has changed considerably

–      More heterogeneous, Entry is confused , Regulation is Confused
–      Funding landscape has changed, MFIs Numbers have increased
–      Real Competition  is still missing
•       Results and Implications
–      Non-performing loans
–      Withdrawal of deposits as a result of panic and lost of confidence
–      Increase in default (delinquency)
–      Moral Hazard
–      Public Panic and Outcry
The way forward
•       Government Responsibility - Guarantee -  embedded in the regulation
–      Embargo on the Start-up of MFIs/Operations
–      Improvement Risk Management Systems
–      Improvement of Institutional/Governance Structures
–      Training and capacity building - standardized.
–      Improvement of Market infrastructure    
•       Credit referencing:
•       Consumer protection
•       Deposit protection
–      Rebuild Confidence in the Sub-Sector (educational campaigns, rating of institutions, credit bureaus)
–      Improving Financial Literacy
•       The hikes in the utility and fuel prices have negatively affected the welfare of the citizenry.
•       The recent developments in the Microfinance sector have negatively affected the finances of the clientele of the dubious Institutions
•       Government policies should always seek to maximize the welfare of the citizenry