For more information, see Ghana and the IMF
April 14, 1999
Dear Mr. Camdessus:
1. The objectives of Ghana's program of economic and financial adjustment for the three-year period 1999-2001 are set out in the policy framework paper, dated April 14, 1999.
2. The attached memorandum of economic and financial policies, based on the policy framework paper referred to above, sets out the objectives and policies that the government of Ghana intends to pursue during 1999. In support of its 1999-2001 program of economic and financial adjustment, the government hereby requests a new three-year Enhanced Structural Adjustment Facility (ESAF) arrangement in an amount equivalent to SDR 155 million (42 percent of Ghana's quota under the Eleventh General Review of Quotas), to be disbursed in seven equal installments over the three-year commitment period.
3. The commitment period of the present three-year ESAF arrangement expires on June 29, 1999. Under the new rules approved by the Executive Board on November 20, 1998 amending the ESAF Instrument, this commitment period cannot be extended as it has already been extended by one year; furthermore, the remaining commitment period would not allow for the approval and disbursement of loans under a third annual arrangement. In view of the above, the government of Ghana requests that the period of the current extension be reduced to the time elapsed at the time of approval of the new three-year arrangement, to avoid any overlapping with the new arrangement.
4. The government of Ghana will provide the Fund with such information as the Fund requests in connection with the progress made in implementing the economic and financial policies and achieving the objectives of the program.
5. The government of Ghana believes that the policies and measures set out in the attached memorandum are adequate to achieve the objectives of its program; it will take any further measures that may become appropriate for this purpose. During the period of the three-year ESAF arrangement, the government will consult with the Managing Director on the adoption of any measures that could be appropriate, at the initiative of the Government or whenever the Managing Director requests such a consultation. Moreover, after the period of the three-year ESAF arrangement and while Ghana has outstanding financial obligations to the Fund arising from loans under the arrangement, the government will consult with the Fund from time to time, at the initiative of the government or whenever the Managing Director requests consultation on Ghana's economic and financial policies.
6. The government of Ghana will conduct with the Fund a review of the first annual program supported by the three-year ESAF arrangement, based on performance criteria for end-June 1999, not later than November 30, 1999. A second review will take place at the end of the program period.
7. The government of Ghana intends to make these understandings public and authorizes you to provide this letter and attached memorandum to all interested parties that so request. It also authorizes you to make available the documents related to this request, including this letter and attached memorandum, to any international organization providing aid to developing countries that might request it, solely for its own use.
8. The government is determined to fully implement the program and comply with the performance criteria. We hope that we can count on the continued support of the Fund.
Minister of Finance
Mr. Michel Camdessus
1. In January 1995, the President of Ghana presented to parliament "Ghana—Vision 2020 (The First Step: 1996-2000)," a coordinated program of economic and social development policies aimed at making Ghana a middle-income country within one generation.1 The program calls for sustained economic growth to be achieved through an open and liberal market economy, supported by measures to foster private investment, human development, and basic infrastructure, and a supportive legal and administrative environment. Rural and urban development issues are also emphasized to help sustain a rise in the standard of living of the population. This memorandum of economic and financial policies provides an overview of Ghana's performance in 1998, and sets out the government's objectives for 1999-2001 and the program for 1999, including quantitative and structural benchmarks to guide policy implementation during the year.
2. In June 1995, a three-year Enhanced Structural Adjustment Facility (ESAF) arrangement was approved by the Fund in support of the government's program. This arrangement focused on reducing macroeconomic imbalances and redirecting government efforts away from activities that could be provided more efficiently by the private sector. Despite temporary setbacks, the program has broadly achieved its objectives. The inflation rate was brought down from 71 percent at end-1995 to 16 percent at end-1998. Real growth averaged 4.5 percent per year in the period 1996-98, and the domestic primary surplus increased from 1.5 percent of GDP in 1995 to 3.6 percent of GDP. On the structural front, the farmers' share of the f.o.b. export price of cocoa was increased, private buyers were allowed to purchase cocoa from farmers, access of the national petroleum company to central bank credit was eliminated, and steps were taken to deregulate petroleum product marketing. Moreover, 16 medium-sized public enterprises and 34 small public enterprises were privatized or liquidated in the context of the ESAF-supported program and the World Bank private sector adjustment credit (July 1995-February 1998).
3. The government recognizes that, irrespective of the progress achieved since 1995, Ghana cannot afford a lapse in its adjustment effort. Therefore, the government will act resolutely to consolidate macroeconomic stability and strengthen its structural reforms, particularly in the cocoa and banking sectors, which are critical for raising real GDP growth rates toward poverty-reducing levels.
4. In 1998, real GDP grew by 4.6 percent, or by about 1 percentage point less than originally projected, as a result of the drought-related energy crisis early in the year. The inflation rate fell to 16 percent at end-1998 from 21 percent at end-1997. Most quantitative benchmarks for December 1998 were observed, except for those in the fiscal area. Total revenue was below its targeted level as taxpayers waited for the reintroduction of the value-added tax (VAT) before rebuilding their stocks. The domestic primary surplus fell short of its floor but still increased to 3.6 percent of GDP from 3.2 percent in 1997. Net domestic financing of the government exceeded its program benchmark, mainly because of higher-than-expected interest payments and road arrears payments. Deviations from fiscal targets did not cause reserve money and broad money to exceed their original targets, and net foreign assets of the Bank of Ghana comfortably exceeded their target level, helped by strong cocoa exports. The external current account deficit (including grants) fell by about 5 percentage points of GDP, narrowing the deficit to 3½ percent of GDP. The cedi depreciated by 4.3 percent against the U.S. dollar during 1998, an appreciation of 4.1 percent in real effective terms.
5. Objectives. The government's overall objective is to consolidate the gains achieved so far in stabilizing the macroeconomic environment, and to accelerate structural reforms. During the next three years, real GDP growth rate is projected at 5.5 percent in 1999 and at least 6 percent in 2000-01. The program aims at reducing the inflation rate to 9 percent in 1999 (end of period) and to not more than 5 percent in the following two years; and limiting the external current account deficit, including grants, to 2.9 percent of GDP in 1999 and 2½ percent in 2000/01. Meanwhile, the government will endeavor to increase net foreign assets of the central bank during 1999-2001 so as to attain gross official reserves of at least three months of imports by 2001.
6. Financial policies. The central objective of the government's medium-term fiscal policy is to move toward a balanced overall budget, achieving primary surpluses to reduce the interest burden. The government aims at maintaining the domestic primary surplus above 3½ percent of GDP while ensuring that the stock of domestic debt begins to decline by 2001. These fiscal objectives are expected to be achieved by increasing the total revenue-to-GDP ratio to about 19 percent by broadening the tax base and improving tax administration—notwithstanding the planned reduction of cocoa taxation and tariff reform—and by restraining the growth of expenditures. However, expenditures in health and education will be protected. Monetary policy will aim at reducing inflation to not more than 5 percent in 2001 by limiting monetary expansion to that consistent with nominal GDP growth.
7. Structural reforms. During 1999-2001, the government will accelerate the implementation of structural reforms so as to encourage private savings and investment, and to foster efficient resource allocation. It will transfer the purchase of the cocoa crop to private licensed marketing agents, while allowing them to begin exporting a significant share of the crop. The government will also increase farmers' income by reducing the taxation of cocoa and the Cocobod's (cocoa marketing board) share. To improve the allocation of financial savings, the government will foster the development of a sound and competitive banking system. It will take steps to complete the divestiture of its shares in financial institutions other than the Agricultural Development Bank.2 Banks that by end-September 1999 fail to meet the capital adequacy requirements of the Banking Law of 1989 will have their banking licenses withdrawn. Also, the government will be vigorously implementing a divestiture program, which will cover about 80 state-owned enterprises during the first two years of the ESAF arrangement. In so doing, it will enhance the transparency of the divestiture program through timely publication of audited financial statements of the Divestiture Implementation Committee. The government will continue to implement public sector reforms aimed at refocusing its priorities on core areas, in particular agriculture, the social sectors, and basic infrastructure. Finally, actions to overhaul the energy sector will remain crucial, was highlighted by the early 1998 crisis.
A. Financial Policies
8. Fiscal policy. The overall deficit in the 1999 budget, on a commitment basis, is projected at 5½ percent of GDP, a 2½ percentage point decline from 1998. The domestic primary balance is expected to show a surplus of at least 3½ percent of GDP in 1999. Revenue is projected to rise to almost 19 percent of GDP, driven by the curtailment of tax exemptions and improvements in administration, including the introduction of the VAT and the taxpayer identification system. Noninterest recurrent spending and domestically financed capital expenditure will be maintained broadly constant as a share of GDP, with spending on education and health increasing as a share of both total expenditure and GDP under the program. The net domestic financing of the budget will be limited to 2.8 percent of GDP in 1999, but it will be reduced to below 1½ percent of GDP in 2001 to help lower interest rates and avoid a crowding out of the private sector.
9. Domestic arrears. Road arrears amounting to 130 billion were outstanding at the end of 1998, owing to contracts that allowed road construction to be carried out even in the absence of full budgetary allocation. To resolve this situation, the government has decided to terminate a number of contracts, to scale down domestically financed road projects, and to revise procedures for initiating projects and awarding new road contracts in line with World Bank procurement procedures. Outstanding road arrears will be reduced by 60 billion in 1999 and will be eliminated by end-2000.
10. Tax measures. The VAT was successfully reintroduced in December 1998 as a first step in the government's strategy to increase the tax base and the efficiency and equity of the tax system. Other elements of this strategy include reductions in the cocoa export tax, implementation of a tariff structure that supports efficient production and competitiveness, significant reductions in tax and tariff exemptions, and steps to improve tax administration through closer collaboration among tax agencies.
11. Tariff reforms. The government will continue to review the tariff structure, with a view to enhancing the external competitiveness of local industry, harmonizing tariff rates with regional practices, and removing distortions. To prevent smuggling, the government will reduce the top tariff rate to the target set by the West African Economic and Monetary Union (20 percent) in the context of the 2000 budget. While taking steps to curtail exemptions, the government will gradually reduce the average tariff rate over the next three years to less than 10 percent. The special tax of 17.5 percent on certain imported goods was abolished in March 1999.
12. Monetary policy. The main goal of monetary policy in 1999 will be to reduce inflation to not more than 9 percent by the end of the year. Consistent with this objective and the expectation that real GDP will grow by 5½ percent, the Bank of Ghana will aim at limiting monetary growth to 14½ percent. The monetary growth target will be achieved by limiting reserve money growth to 11½ percent through the use of indirect monetary policy instruments, including repurchase agreements. The Bank of Ghana expects that price trends and the performance of the economy will allow interest rates to continue to fall during the year, but it will adjust its policies as needed to meet its monetary targets. Bank financing of the budget is projected to expand by no more than 210 billion, or the equivalent of about 1 percent of GDP, which would allow credit to the private sector to grow by 17½ percent in 1999, broadly in line with the growth of nominal GDP.
13. The exchange rate will continue to be determined by market forces. The Bank of Ghana's expectation is that the exchange rate will move in tandem with price trends in Ghana and in partner countries. Nevertheless, the Bank of Ghana's intervention policy will be directed at meeting the program target for net foreign assets of the central bank while smoothing short-term fluctuations. For 1999, the Bank of Ghana has targeted an accumulation of net foreign assets of US$77 million, which is expected to raise its gross international reserves to about 2.7 months of imports.
14. The Bank of Ghana will keep domestic and foreign exchange market developments under close review and will adjust policies as needed. It will continue to take steps to deepen its domestic and foreign exchange markets and has requested Fund assistance in this area. In this context, it will also assess the scope for future modification of the surrender requirements.
15. Balance of payments prospects. Ghana's external situation remains vulnerable. Exports in 1999 are forecast to expand only marginally, owing to an expected decline in the size of the cocoa crop and world price. Moreover, gold prices are expected to decline in 1999. Imports are also forecast to show modest growth, about 2 percent in value terms. However, given the expected decline in import prices (in particular oil prices) the volume of imports will still exceed growth in real GDP. The current account deficit, including grants, is expected to narrow from 3.5 percent of GDP in 1998 to 2.9 percent of GDP in 1999.
16. Debt sustainability analysis. The external debt-service ratio, which had increased to about 32 percent of exports of goods and nonfactor services in 1997, because of the impact of earlier nonconcessional borrowing, declined to about 28 percent in 1998, a trend that is expected to continue. Under present assumptions, Ghana's debt-service ratio would fall further to about 15 percent in 2002, underpinning Ghana's ability to service the debt, including obligations to the Fund. Ghana's external debt, albeit largely concessional, is large, with the ratio of external debt stock to exports of goods and nonfactor services ratio at about 300 percent—or 200 percent on a net present value basis—as at end-1998. Cognizant of the vulnerability of the external sector, the authorities will implement policies oriented toward keeping debt at sustainable levels. Indeed, under present policies the level of debt in relation to exports is expected to fall to about 250 percent—or 165 percent on a net present value basis—by 2001. The government will neither contract nor guarantee nonconcessional external loans.
17. External financing requirements. External financing requirements are projected to total about US$2.5 billion over the 1999-2001 period. The external financing requirement for 1999 of US$874 million is expected to be fully financed. Financing for the following two years will be firmed up in a Consultative Group meeting expected to take place in late 1999. With adherence to the financial policies envisaged in the program, Ghana should not have difficulty in meeting its external debt-service obligations, including those to the Fund, provided it is not confronted with major external shocks.B. Structural Reforms
18. The government realizes that creating a low-inflation environment will not by itself provide a sufficient basis for sustained and durable growth, and that structural reforms need to be directed at encouraging private sector initiative and improving resource allocation. It is therefore moving ahead with its plan to deregulate the energy and cocoa sectors, to further divest interests in the manufacturing, services, and financial sectors, and to promote private participation in infrastructure.
19. Agriculture. Without agricultural development, the objective of achieving sustained growth rates and reducing poverty will be unattainable. To strengthen its agricultural policies, the government is preparing the Agricultural Services Sector Investment Program (AGSSIP), an integrated program of expenditures to be financed by the government and a consortium of donors committed to pooling their resources for this purpose.
20. Cocoa. Within agriculture, the cocoa sector is paramount, and reforms are needed to ensure that Ghana remains a leading producer of cocoa in the next decade. In September 1998, a task force was established with wide representation from stakeholders; its report was issued in December 1998, and a workshop was conducted in January 1999. As a result of this broad-ranging consultation process, a medium-term strategy has been drafted and submitted for cabinet approval.
21. Key elements of the government's medium term strategy for cocoa include: unifying the extension services of Cocobod and those of the Ministry of Agriculture; increasing competition in internal marketing by giving licensed buying companies (LBCs) equal access to Cocobod's warehouses and crop financing; allowing qualified LBCs to export at least 30 percent of their domestic purchases, starting with the 2000/2001 crop; maintaining quality-control services in a public sector institution; eliminating price discounts on exportable cocoa to domestic processors in the 1999/2000 crop season; increasing the producer price to 60 percent of the f.o.b. price of cocoa for the 1999/2000 crop, and thereafter by at least 2 percentage points in each of the next two years; reducing the share of the Cocobod and the tax on cocoa to allow for increases in the farmers' share of the f.o.b. price; and outsourcing the Produce Buying Company for divestiture before end-March 1999 and offering it for sale before end-June 1999. Once the LBCs begin exporting cocoa, the Bank of Ghana will review surrender requirements.
22. The government believes that the above cocoa strategy will best serve the interests of the country during the next three years, but it will be prepared to take bolder steps, as needed, in the light of its experience and that of its competitors; it will assess the progress in the first phase of reforms with a view to moving toward a fully competitive system with open entry.
23. Banking restructuring. The government believes that a sound and competitive banking system would greatly help to improve the allocation of resources in the economy. Since the mid-1980s, the government has taken a number of steps to clean up the existing portfolio of nonperforming loans, to divest its shares in banks, and to find strategic investors willing to manage or take over weaker banks. In this context, the government will streamline regulations on entry and exit in the industry. It will lift the freeze on applications for banking licenses and will so notify the public before end-March 1999. It will withdraw by end-September 1999 the license of any bank that at that date, fails to meet capital adequacy requirements of the Banking Law of 1989; in doing so, it will ensure that depositors are protected and that debts are collected. By March 1999, the Bank of Ghana will establish monitorable quarterly targets for banks failing to meet capital adequacy requirements. These banks will be asked to invest any additional deposits in government securities.
24. Both the government and the Bank of Ghana will take steps to divest their shares in the banking industry. By September 1999, the government expects to complete the sale of at least 30 percent of the shares of the National Investment Bank to a strategic partner. Similarly, at least 40 percent of the shares in the Ghana Commercial Bank will be divested by December 1999. The Bank of Ghana will also sell all its shares in commercial banks, except those in the Agricultural Development Bank (ADB), by December 1999.
25. Before end-1999, the government will place before parliament a new Bank of Ghana bill that will ensure the independence of the central bank in formulating monetary policy and supervising the financial system, while making it more transparent and accountable. A new banking law will also be submitted to modernize regulatory practices. Banking supervision will be strengthened. A new foreign exposure regulation was introduced in December 1998 and will become effective in mid-1999. The Bank of Ghana is encouraging the creation before December 1999 of an "apex institution" that will provide services to rural banks. The Bank of Ghana will, however, retain final regulatory authority over these banks and, as demonstrated by its closure of 23 rural banks in late-1998, will not hesitate to withdraw the licenses of problem banks.
26. Divestiture program. The government aims to create an environment in which private investment increases over the medium term, helped by a vigorous and transparent divestiture program. The government has prepared a divestiture work program for 1999-2000 covering about 80 companies. The government projects divestiture receipts of 100 billion in 1999, and 100 billion and 50 billion in 2000 and 2001, respectively. The government will seek to attract more investor interest by using experienced sales advisors and by improving the disclosure of information on the program. In that context, the government will reduce the publication lag of the annual audited financial reports of the Divestiture Implementation Committee (DIC) and will, following its completion, disseminate a detailed impact assessment of the divestiture program.
27. Public sector reforms will be carried out to refocus the government's efforts on core areas, particularly the social sectors and basic infrastructure. The government has begun to implement the public service reform program adopted by the cabinet and discussed at a conference of all stakeholders in 1998. This reform program is expected to be carried out in stages over the next decade. A pilot project for the reform of subvented agencies will commercialize, restructure, or close down at least 17 of them by the end of 2001. Legislation to support the commercialization or closure of agencies will be presented to parliament this year. The government also plans to reform the central management agencies over the 1999-2001 period, putting a coherent and transparent regulatory environment in place and streamlining functions. It is negotiating with the social partners a comprehensive long-term wage policy, aimed at reforming the pay structure based on a detailed job evaluation of the entire public sector. The Central Management Board (CMB) appointed to implement the program has regraded current public service jobs according to the categories of the new remuneration system. The government intends to conclude the ongoing negotiations on the implementation of the new salary structure as soon as possible.
28. Energy. Reforms in this sector will remain important, as highlighted by the early 1998 crisis. The government is expected to complete the regulatory framework for the sector, including the Rules of Practice for the Operation of the National Grid, by end-1999. State-owned utilities will be made into separate corporate entities for the generation, transmission, and distribution of hydroelectric and thermal power. In anticipation of this, the government has already initiated the transformation of Volta River Authority (VRA) into four entities and is in an advanced stage of divesting its thermal generation plant. The Electricity Company of Ghana (ECG) is being restructured and will be offered for sale by end-1999. Both utilities are also implementing financial recovery plans approved by the government to deal with past liabilities and to ensure their future viability. To guide the growing number of participants in the industry, including regulators and private operators, the Ministry of Mines and Energy is preparing a Statement of Sector Development Policy, to be discussed with stakeholders in 1999. The statement will outline the remaining reform agenda. The financial restructuring of the Tema Oil Refinery (TOR) will be completed by June 1999, enabling the government to offer it for sale before end-December. The West Africa Gas Pipeline is under consideration by government in partnership with the private sector to address Ghana's long-term energy needs; feasibility studies of the pipeline are expected to be completed by mid-1999.
29. Education. As indicated in the "Ghana—Vision 2020" document, the government's priorities in education are to achieve universal basic education and adult literacy, increase access to secondary and tertiary education, and improve technical and vocational training. In line with these objectives, the government launched in 1996 a Basic Education Sector Improvement Program with the assistance of the World Bank. Implementation of the program is, however, experiencing difficulties as teaching and learning achievements are not improving. Measures are being taken to shore up the program. To monitor progress on the quality of basic education, the government is targeting significant improvements in pupils' achievements in the recently introduced Performance Monitoring Test, Criterion Reference Tests, and Basic Education Certificate Examination. Gross enrollment ratios for 2001 have been targeted at 81.2 percent for primary schools and 64.9 percent for junior secondary schools. Education expenditures are projected to rise from 3.8 percent of GDP in 1998 to 4.1 percent of GDP in 2001.
30. Health. The government's health sector reform program, which is based on implementation of the Medium-Term Health Strategy Toward Vision 2020, aims at providing universal access to basic health services, improving the quality and the efficiency of health services, and fostering linkages with other sectors contributing to health. The government has adopted a sector-wide approach to coordinate donors' efforts in the sector, including joint systems to monitor sector performance. Main strategies to achieve sector objectives include (a) strengthening primary health services; (b) improving the capacity for policy development and analysis, resource allocation, performance monitoring and evaluation, and regulation of services delivery and health professionals; (c) strengthening national support systems for human resources, logistics and supplies, financial management, and health information; and (d) promoting private sector involvement in the delivery of health services. A hospital development policy will be prepared in 1999.
31. The impact targets of the health sector program for end-2001 are (a) increase life expectancy from 58 years in 1997 to 60 years; (b) reduce the infant mortality rate from 66 to 50 per 1,000 live births; (c) reduce the under-5 years old mortality rate from 132 to 100 per 1,000 live births; (d) lower the maternal mortality rate from 214 to 100 per 100,000 live births; (e) bring down the total fertility rate from 5.5 to 5.0 births; and (f) reduce the proportion of children with severe malnutrition from 12 percent to 8 percent.
32. Poverty. In collaboration with donors, the government is preparing a national poverty-reduction program for the period 1999-2001. In this context, poverty monitoring will be given high priority, including such poverty assessments as the Core Welfare Indicators Questionnaire (CWIQ) of 1997 and the fourth Ghana Living Standards Survey, which is to be completed in June 1999.
33. Statistical issues. The government continues to attach high priority to improving its statistics base. It intends to conduct a housing and population census in 2000 and will publish the results of the fourth Ghana Living Standards Survey by the third quarter of 1999. The Ghana Statistical Service will continue its review of the methodology used to compile national accounts; it will publish updated national accounts (sources and uses) with a lag of at most six months. The government will assess and explain before June 1999 the discrepancy between the trade data obtained from the Automated System for Customs Data (ASYCUDA) and from the Customs, Excise, and Preventive Services; it will ensure that national accounts and balance of payments data reflect the conclusions of that assessment. Finally, the government will reduce lags in reporting consumer prices and monetary accounts to not more than one month and budget execution data to six weeks.
34. Prior Actions. The government will take prior actions in a number of key areas of reform to underscore the government's commitment to the strategy described in this memorandum. In particular, the government will obtain cabinet approval before April 1999 of a medium-term cocoa strategy in line with the main elements described in paragraph 21 of this memorandum. It will ensure equal access to Cocobod's crop financing and warehousing facilities for all licensed buying companies. The government will also define clear targets for its divestiture program and rescind the freeze on the licensing of new banks before end-March 1999.
35. Performance criteria. Performance through end-1999 will be monitored on the basis of the following quantitative performance criteria (for end-June 99 and end-December 1999) and benchmarks (for end-March 1999 and end-September 1999): (a) domestic primary balance of the government budget; (b) government revenue;3 (c) net domestic financing of the government budget; (d) reserve money; (e) net foreign assets of the Bank of Ghana; (f) new nonconcessional external borrowing; and (g) the stock of external short-term debt (Table 1). The nonaccumulation of new external payments arrears will also constitute a performance criterion, applying on a continuous basis. Structural performance criteria and benchmarks are shown in Table 2.
36. Current account restrictions. During the period of the three-year ESAF arrangement, the government will not introduce new or intensify existing exchange restrictions, nor introduce or modify any multiple currency practice, or introduce import restrictions for balance of payments reasons.
37. Provision of information. In order to ensure effective monitoring of the program, the government will make available to Fund staff all core data on a timely basis. In particular, the Bank of Ghana will compile and provide to the Fund staff with no more than one-week lag a set of indicators of financial policies. This set will include at a minimum data on market and bureau exchange rates, reserve money, net foreign assets of the central bank, net placement of government securities (outside the central bank), and treasury bill and repurchase rates.
1Government of Ghana, "Ghana—Vision 2020 (The First Step: 1996-2000): Presidential Report on Coordinated Program of Economic and Social Development Policies," January 1995.
2The government sees the ADB as primarily a development bank, which serves, inter alia, as a conduit for foreign assistance to the agricultural sector. Its commercial bank activities, which have been profitable, are seen as a way to defray part of the costs of its development operations.