Meeting the Future: Belize, Colombia and Ghana
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Bibliographic details
- Authors: ANALISA R BALA, ADAM BEHSUDI, NICHOLAS OWEN
- Published: March 1, 2022
Overview
- Three country case studies (Belize, Colombia, Ghana) illustrate how technology and innovation can strengthen public finances, improve accountability and transparency, and generate funding for conservation.
- Cross-cutting themes: debt restructuring for conservation, open-data tools to reveal potential conflicts of interest, and digital identification, property, and payments systems to expand tax bases and improve service delivery.
Belize — Swapping debt for nature
- Key outcomes and design:
- Debt-for-nature swap signed on November 5 reduced Belize’s stock of external debt by a striking 10 percent of GDP.
- The government bought back a $553 million “superbond” (the government’s entire stock of external commercial debt, equivalent to 30 percent of GDP) at a discounted price of 55 cents per dollar.
- The Nature Conservancy (TNC) subsidiary financed the buyback by issuing $364 million in “blue bonds” arranged and underwritten by Credit Suisse, with insurance from the International Development Finance Corporation (DFC).
- The loan features: a low interest rate, a 10-year grace period during which no principal is paid, and a long maturity of 19 years.
- Belize agreed to spend about $4 million a year on marine conservation until 2041.
- Protection will expand from 15.9 percent of its oceans to 30 percent by 2026.
- An endowment fund of $23.5 million will finance conservation after 2040.
- The DFC’s insurance supported an investment-grade rating for the blue bonds (Moody’s rated them Aa2).
- Observations and implications:
- The deal combined a bond-market discount as the “grant” and private financing to restructure privately held debt.
- Investor appetite was aided by ESG considerations and TNC’s track record, which reduced concerns about “bluewashing.”
- TNC is exploring similar arrangements in seven other countries.
- Impact on debt-to-GDP depends on the size of discounted debt relative to GDP and the depth of the discount; Belize’s unusually large and deeply discounted debt made the fiscal impact particularly significant.
- Policy takeaways:
- Debt-for-nature swaps can generate cash for conservation/climate projects and reduce expensive debt service for countries with debt trading at a discount.
- Participation by development insurers or guarantors can be crucial to attract risk-averse institutional investors.
Colombia — Connecting the dots with open data
- Problem and opportunity:
- Offshore leaks (e.g., the Panama Papers) revealed how elites use offshore structures to hide assets and avoid taxes; disclosure can increase tax compliance and public scrutiny.
- Juliana Londoño-Vélez and Javier Avila-Mahecha found that disclosure of hidden wealth by Colombian elites increased sixfold after the Panama Papers; taxes paid by those listed more than doubled.
- Data and tools:
- More than 160 countries have financial disclosure systems; in 80 of them information must be made public. Nearly 90 have passed legislation for “beneficial ownership” registries.
- Public access to beneficial ownership registries is limited; Ecuador is cited as the only country in Latin America with public access.
- Global Witness analyzed more than 4 million companies from the UK beneficial ownership registry to expose potential loopholes.
- Directorio Legislativo and EITI created the Joining the Dots tool (with IMF Anti-Corruption Challenge seed funding) to identify and publicize potential undeclared conflicts of interest by combining public officials’ financial disclosures with beneficial ownership data.
- Pilot results in Colombia:
- The project used Colombia’s December 2019 law mandating publication of public officials’ financial disclosure forms and leveraged Colombia’s open procurement database (compra eficiente) and the EITI portal as proxies where beneficial ownership data were not publicly accessible.
- The team found a total of 20,969 red flags, involving 19,814 politically exposed persons.
- More than 20 percent were high- and middle-ranking officials (described as “2 out of 10 prominent politicians” showing inconsistency in disclosures).
- Uses and limitations:
- The Office of the Comptroller General is most likely to use the data for investigations; preventive checks are valuable but often performed by journalists and transparency organizations.
- Businesses and investors can use the data to avoid reputational risk and ensure legitimate partners.
- The tool is adaptable and being tested for implementation in Nigeria, though data quality and availability require customization and significant data cleaning.
- Policy takeaways:
- Public access to beneficial ownership and financial-disclosure registries enhances verification, prevention, and investigative capacity against corruption.
- Open, machine-readable government registries and cross-checkable public datasets multiply the value of transparency initiatives.
Ghana — Digital transformation to widen the tax base and improve services
- Identification, property, and tax-registration initiatives:
- Ghana’s population is roughly 31 million.
- The Ghana Card initiative has enrolled 15.5 million people, with the goal of covering most of the adult population by the end of this year.
- Each card issues a unique, biometrically enabled national identification number that doubles as a tax ID.
- Under the old system, only 3 million had been registered with tax identification numbers.
- The Land Use and Special Planning Authority has identified 7.5 million properties using GPS for inclusion on tax rolls.
- Digital services and compliance measures:
- Ghana.gov.gh provides a one-stop portal for government services to reduce corruption and improve access.
- The Ghana Revenue Authority is conditioning renewal of driver’s licenses and professional licenses on tax payment and stepping up audits of large companies, particularly in mining and resource extraction.
- Mobile money, e-levy, and financial inclusion:
- There are roughly 19 million active mobile money accounts.
- Ghana’s mobile money system is interoperable across networks and with bank accounts; the Bank of Ghana oversees transactions via Ghana Interbank Payment and Settlement Systems.
- The 2022 budget proposes an e-levy of 1.75 percent on electronic transactions (mobile money payments, bank transfers, merchant payments) applying to transactions beyond the first 100 Ghanaian cedis ($16) a day.
- The revenue-to-GDP ratio was 12 percent and is expected to rise to about 16 percent at the end of 2022 because of electronic collection and other 2022 budget measures.
- The medium-term target is to raise the tax-to-GDP ratio to a 20 percent target.
- Concerns exist that taxing mobile-money transactions could push users back to cash, potentially reversing progress on financial inclusion.
- Central bank digital currency and capacity needs:
- The Bank of Ghana plans a pilot launch of a central bank digital currency, the e-cedi, later this year.
- The next challenge identified is equipping the tax administration with capacity and technology to leverage big data for enforcement and compliance.
- Private-sector engagement:
- The private sector is positioned to build on government data to create user-facing services; calls exist for the government to open data from day one to enable private innovation.
- Policy takeaways:
- Comprehensive digitalization (national ID, property registration, interoperable mobile money, online services) can expand the tax base and improve revenue collection.
- Balancing financial inclusion with revenue generation (e.g., design of the e-levy) is critical to avoid unintended regressions to cash usage.
- Investments in tax-administration technology and big-data analytics are needed to maximize the revenue and compliance benefits of digital systems.
Source: Meeting the Future: Belize, Colombia and Ghana (F&D Magazine, March 2022).
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