FIFA stimulus package is for GFA not for clubs - Henry Asante Twum

Henry Asante Twum has shared that the $500,000 stimulus package from FIFA is meant for the Ghana Football Association (GFA) and for the clubs.

Following the suspension of football activities in the country due to the outbreak of coronavirus, clubs have called on the Football Association to come to their aid to help ease their burden.

However, the FA requested for a stimulus package from government which many condemned.

But on Friday, FIFA confirmed that all member associations will a sum of $500,000 as part of measures to help combat the effect of the coronavirus on football in the country.

However, the Communications Director of the Football Association, Asante Twum says the money is meant for operational cost at the FA and not for the clubs.

"The Ghana Football Association is yet to receive the $500,000 from FIFA," he told Asempa FM on the Ultimate Sports Show.

"The money will be used to cover operational costs at the Football Association and I can state categorically that the money FIFA is bringing is not for clubs.

"But if the Association in it's power decides to use some the money to support clubs then fine but ordinarily, the money is meant for the Football Association," he added.

Having just survived punishment for lending errors during normal times, it is most unlikely that they will willingly step up lending while the COVID-19 pandemic takes its toll on the fortunes of businesses, squeezing their cash flows and their profitability. After all, the risk free alternative to lending – investment in government’s cedi denominated domestic debt securities – is till available and indeed, government’s need for financing of an extraordinarily wide fiscal deficit this year, of 6.6 percent will ensure that those debt securities will be available in even bigger quantum than originally envisaged.

Besides, the recent two percent cut in lending rates on both existing and newly booked loans has reduced the risk premium banks can earn on lending to customers rather than to government, making the latter even more attractive, compared to the former.

This means that while the measures taken so far by the BoG are well intended and useful, they do not face the biggest constraint to bank lending currently and the IMF’s recommendations are simply more of the same.

What needs to be done now is to convince the banks to take lending risks which they are already financially capable of incurring but are reluctant to take on out of prudence.

Therefore the BoG needs to apply moral suasion to convince the banks to take on those risks. Instructively, in recent times the banks have listened to their regulator and followed its lead more than in the past. The BoG could back this up by assuring them of a more lenient regulatory stance on loans booked under the current inordinately risky dispensation.

The government itself also has a role to play. For one thing, it could offer fiscal incentives on new loans being granted.

Unfortunately, the potentially most effective measure available to the government itself is not practicable right now – a sharp reduction in the issuance of debt securities – because of its own sharply increased needs.

Therefore government needs to take on part of bank’s credit risks itself, by issuing debt securities and lending part of the proceeds to the banks for on-lending to customers under risk sharing terms.

This is risky for government itself. However without incurring that risk it will be left to manage an economy where the private sector cannot raise the financing it desperately needs to survive the effects of the COVID 19 outbreak. Averting a resultant deep recession is worth that risk.