The Banker's Finance Minister of the Year 2017 awards celebrate the officials that have best managed to stimulate growth and stabilise their economy. 

Global and Americas

Alfonso Prat-Gay, Argentina

With the election of a new president at the end of 2015, Argentina’s tune seemingly changed overnight, from the protectionist, populist stance of the previous Peronist administration, to the pro-business, orthodox attitude of the new regime.

Economy and public finances minister Alfonso Prat-Gay has been one of the most high-profile and effective agents of this change. Well known and respected by the international community, Mr Prat-Gay has been filling rooms at investor roadshows and conference auditoria in countries around the world over the past 12 months.

Previously the head of Argentina’s central bank and an economist at JPMorgan, Mr Prat-Gay now leads what one investor colourfully described, in a football analogy, as the Real Madrid of economic cabinets. His authority helped secure make-or-break deals just a few months into his role. He was also instrumental in the resolution, at the end of February, of the long and bitter legal dispute with the so-called ‘vulture’ funds that held out from the sovereign debt restructurings following Argentina's 2002 default, which had previously kept the country outside international markets.

Investor confidence in Mr Prat-Gay explains much of the success of Argentina’s mammoth $16.5bn bond that followed, in April, the country's first in 15 years and the largest ever among emerging markets (before an issuance by Saudi Arabia later in the year) – a testament to the international community’s new-found trust in Argentina.  

The bond’s 10-year tranche secured an impressive 7.5% yield, compared with Brazil’s 12.59% on the same type of paper, Colombia’s 8.12% and Peru’s 6.25%. Not only did offers on the $16.5bn bond reach $70bn, after buying into the sovereign, investors turned their eyes on provinces too, in the hope that they would choose to replenish their funds through debt issuances. Indeed, 2016 closed with discussions being initiated around a capital markets reform that would encourage local issuances.

Key measures that Mr Prat-Gay has supported also included the unification of the foreign exchange market, which was running on official and unofficial tracks, distorting both private sector and public sector activity; and the overhaul of the internationally discredited national statistics agency, so that official inflation and gross domestic product figures could be relied upon by the country’s public and private sectors as well as, crucially, foreign investors.

Mr Prat-Gay also pressed ahead with the removal of untargeted utility subsidies, a necessary measure to channel funds more effectively in the future. Last year was an important one for the country as the front-loaded reforms introduced by the government were necessary but it needed to tread carefully so the adjustments would not cause unnecessary damage to the economy and the population. Ultimately, says Mr Prat-Gay, the government’s goal is to lift as many Argentines as possible out of poverty.

Talking to The Banker at the annual meeting of the Inter-American Development Bank in April, Mr Prat-Gay said: “Our main concern is how to contain inflation and how to protect the poor and most vulnerable [in society] who are most exposed to some of those consequences. We’ve inherited a 28% [inflation rate]; the measures we’ve taken have had an impact of about 5% or 6% annual points on the price index, but these are mainly transitory movements.”

Finance minister of the Year, Europe

Dana Reizniece-Ozola, Latvia

With a debt-to-gross domestic product (GDP) ratio of only 36%, Latvia has one of the lowest debt levels in the EU and the budget is nearly balanced – forecasts are for a 1.1% deficit in 2017, 1% in 2018 and 0.7% in 2019.

“The strength of Latvia is that we have been able to keep our fiscal stance following strict austerity measures right after the crisis,” says Dana Reizniece-Ozola, finance minister of Latvia (who is also interviewed on page 82).

With an eye on both fiscal consolidation and growth, Ms Reizniece-Ozola not only has a strict fiscal stance, but is also contributing to positive economic results for Latvia with an ambitious structural reform programme.

Although she only took office as finance minister in February 2016, Ms Reizniece-Ozola had already made an impact in her previous role as minister of economics, a job she had done since November 2014. In 2015, the Latvian economy grew some 2.7%, with expectations of 1.9% in 2016, according to data by the European Commission, and the Latvian government forecasts 3.5% GDP growth in 2017, “mainly thanks to the influx of EU structural funds” and internal consumption, according to Ms Reizniece-Ozola.

In 2016, Latvia joined the Organisation for Economic Co-operation and Development, with whom, as well as the World Bank, the government is seeking to develop a new mid-term tax strategy by April 2017. 

“We are trying to figure out what the best suited tax strategy is for Latvia, aiming at three goals: increasing the revenues, decreasing inequality – the income gap between the different layers of the society is still pretty high – and ensuring the competitiveness of businesses,” says Ms Reizniece-Ozola.

She adds that the government will launch an active discussion within society, together with the trade unions and business organisations, “so that they also understand and believe in what we decide”. 

The reforms will contribute to Latvia’s aim of raising tax revenue to one-third of GDP. For this, Ms Reizniece-Ozola is also focusing on reducing the shadow economy, fighting illicit flows of money and potential terrorism financing. There is “zero tolerance” for these dealings, she says, adding that the government is strengthening the enforcement of existing regulations and increasing the capacity of regulators to combat this.

Finance minister of the Year, Asia-Pacific

Ravi Karunanayake, Sri Lanka

Ravi Karunanayake has won the Finance Minister of the Year award for Asia-Pacific for his efforts to steer Sri Lanka into a new era of economic reform and a change of mindset. Crucially, Mr Karunanayake secured a $1.5bn International Monetary Fund (IMF) loan programme that the country needed to avoid a balance of payments crisis, replenish reserves and rebuild confidence among international investors.

“We were not desperate to go to the IMF. But [to others], securing an IMF loan [is a mark of] financial discipline, so our prime objective was achieved. We wanted to show that it is best to have abundance of prudence,” says Mr Karunanayake.

Sri Lanka’s latest bond issues in the international capital markets suggest Mr Karunanayake has indeed reached his objective. In 2015, the sovereign issued a $1.5bn dual-tranche note – its largest since 2007. A year later, it printed a second bond of the same size, with order books of $6.6bn, despite market volatility after the UK voted to leave the EU.

In line with the IMF programme, Sri Lanka is also working towards fiscal consolidation. Sri Lanka’s budget deficit has dropped from 7% when Mr Karunanayake took office in January 2015 to 5.6% in 2016 – just below expectations. 

After a visit in September 2016, the IMF said Sri Lanka’s tightening of fiscal and monetary policies has been effective and that it met the IMF programme’s targets through to the end of June 2016.

Meanwhile, Sri Lanka’s total government revenue grew from SLRs1195bn ($8bn) in 2014 to SLRs1455bn in 2015. Tax revenue rose from SLRs1050bn to SLRs1356bn in the same period. This is crucial for Sri Lanka, which has a very low tax revenue-to-gross domestic product ratio.

To raise tax revenue further, parliament has passed a bill to increase value-added tax from 11% to 15%. Mr Karunanayake is also keen to continue simplifying the tax system as well as change people’s mindset towards taxes.

“We have inculcated in the minds of the people that paying taxes is not something bad, but a must for the country. Every person needs to pay a reasonable charge instead of relying on the government for everything,” he says. As a result, Sri Lanka’s tax records have grown from having 700,000 files in January 2015 to having 1.4 million today.

Finance minister of the Year, Middle East

Anas Al-Saleh, Kuwait

Relative to many of its oil-producing peers, Kuwait is weathering the lower commodity price environment well. Backed by strong fiscal and external positions, as well as a break-even oil price of about $46 per barrel, the country is expected to register gross domestic product (GDP) growth of 2.5% in 2016. Improvements to the investment environment, coupled with the government’s strong commitment to capital spending, have gone some way to supporting this growth.

“[Kuwait] is fortunate enough to be in a position of great financial and economic strength, thanks to a combination of high oil reserves and low oil production costs. As a result, our break-even point for both fiscal and external balances is the lowest among Gulf Co-operation Council [GCC] countries. In parallel, Kuwait boasts a very robust balance sheet with one of the lowest debt-to-GDP ratios in the GCC, and large domestic and international assets,” says Kuwait’s finance minister, Anas Al-Saleh.

But serious longer term challenges remain. A heavy dependence on oil-related revenues will hit the country’s finances much harder in the coming years, as generous subsidies and an inflated public sector wage bill dampen its economic outlook. In response to these challenges, Mr Al-Saleh has enacted an ambitious programme of reform in partnership with other government agencies. This includes the repricing of public goods and services and the introduction of value-added tax.

“The reform plan, comprising more than 40 initiatives over the short and medium term, materialises the government’s strong will to balance public finances as well as diversify the economy. Such diversification will focus on increasing national and foreign private sectors’ contribution to the economy, through the development of public-private partnerships projects, fostering small and medium-sized enterprises, initiating a nationwide privatisation strategy, as well as increasing the ease of doing business in our country,” says Mr Al-Saleh.

Further steps to rein in government spending include improving government efficiency, rationalising subsidies and reforming the public sector wage system. Taken together, this represents one of the boldest reform programmes in the GCC. Though the full implementation of these changes will depend to some degree on the country’s political environment, they nevertheless represent the kind of long-term vision that is required during a deeply challenging time for oil producers across the globe.

Finance minister of the Year, Africa

Pravin Gordhan, South Africa

South Africa’s economic fortunes have taken a hit in recent years, as various global and domestic challenges have stunted its growth prospects. The International Monetary Fund expects gross domestic product (GDP) growth to reach just 0.1% in 2016, signalling a considerable reversal of fortunes for one of Africa’s political and economic heavyweights. The long-term average rate of GDP growth has fallen from 4% a decade ago to just 2% today, with slower global trade growth and lower commodity prices going some way to explaining this performance.

But investor confidence in South Africa has also fallen, driving up unemployment and cutting revenues, as issues of political risk dominate the country’s investment landscape. Allegations of corruption levelled at the administration of president Jacob Zuma, coupled with the government’s apparent attempts to limit the independence of key public institutions, have also caused alarm.

In this challenging environment, South Africa’s veteran finance minister, Pravin Gordhan, has reassured markets and investors alike. On assuming office in December 2015, he worked tirelessly to galvanise greater private and public sector co-operation in order to harmonise efforts to revive the economy. His appointment alone saw the rand rebound by 5% against the dollar.

In the early months of his tenure, Mr Gordhan led an impromptu international roadshow, which involved discussions between the South African Reserve Bank, key private sector leaders and the Johannesburg Stock Exchange on the one hand and international investors on the other. This generated much-needed favour with the investment community, helping the country avoid a rating downgrade to junk status in mid-2016, and again towards the end of the year.

Mr Gordhan’s plan for gradual fiscal consolidation – whereby the treasury is aiming to narrow South Africa’s deficit over the medium term while still allowing for real spending growth – has won plaudits. These measures are expected to reduce the budget deficit from 3.4% in 2015-16 to about 2.5% in 2019-20.

For anchoring South Africa’s economy during a deeply challenging time while shoring up the treasury’s well-deserved reputation for independence, Mr Gordhan has been awarded Finance Minister of the Year for Africa. 

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