The increasing financial difficulties at the Tema Oil Refinery pose a risk to the entire banking system, Central Bank Governor, Dr Paul Acquah said on Saturday.
Speaking at the annual dinner of the Chartered Institute of Bankers in Accra, Dr Acquah said the huge indebtedness of TOR called for a fundamental structural rationalisation of the oil industry as well as appropriate pricing of petroleum products.
The savings from such rationalization, he said, would be very significant in deepening the foreign exchange market. TOR is said to be indebted to the tune of about ?3.4 trillion.
According to him while TOR was accumulating huge financial losses through subsidies on fuel, distributors were pocketing their margins. Dr Paul Acquah said the debt situation should not be allowed to continue since it had to be ultimately borne by government budget and the taxpayer.
Touching on the idea for a single currency, the Governor said member countries of the West African Monetary Zone would need to take tough decisions, especially on public finances and structural reforms, if the idea was to succeed.
Dr Acquah said while the single currency idea was one that everybody would subscribe to, a lot of hard work was required to attain the desired goal. According to him, the policy changes and structural reforms in all the participating countries were necessary to underpin and deliver fiscal discipline in order to achieve convergence and to help integrate members into a single economic and financial space.
Countries in the Zone in November in a communiqu? after a meeting in Conakry agreed to push the period for adoption of a single currency from January 2003 to July 2005, after most member countries had failed to meet the convergence criteria.
The criteria included a single digit inflation rate by the year 2000 and of five per cent by 2003, Budget deficit (excluding grants) to GDP ratio of not more than five per cent by 2000 and four per cent by 2002. The others were, Central Bank financing of budget deficit to be limited to 10 per cent of previous year's tax revenue and Gross external reserves to cover at least three months of imports by end-2000 and six months by end 2003.
Dr Acquah expressed regret that while the process of a monetary integration was on a fast track, that of economic integration in the sub-region had generally been slow, saying that the gains of ECOWAS Trade Liberalization Scheme were yet to be realized by businessmen and traders within the sub-region.
He said there was the need to remove the barriers that inhibited the movement of goods and people across the sub-region to give meaning to the numerous protocols signed on immigration, trade and communications by ECOWAS member countries.
"It is important that countries implement these protocols otherwise the benefits of integration will be elusive. Trade barriers among member countries will need to be reduced and tariffs also harmonized within a multilateral framework," Dr Acquah emphasized.
