The Banker's Finance Minister of the Year 2020 awards celebrate the officials that have best managed to stimulate growth and stabilise their economy.
Global and Asia-Pacific
Mustafa Kamal, Bangladesh
Mustafa Kamal took on the role of Bangladesh’s finance minister in January 2019 with the aim of building up the country’s economy by opening it up to foreign investment.
The country has already seen an impressive rate of economic growth in recent years, reaching 8% over the past two years. While the country was ranked 41st in the Centre for Economics and Business Research’s World Economic League Table 2019 global rankings, it has forecast that Bangladesh will become the 24th largest economy in the world by 2033.
“After attaining an economic growth rate of more than 7% for three consecutive years, Bangladesh achieved an 8.15% growth rate in the fiscal year 2019. The country also made remarkable progress in the improvement of socio-economic indicators such as poverty reduction, health, education and women’s empowerment,” says Mr Kamal.
To achieve the consistent 7% or above growth rate needed to hit this target requires the country to rethink how it operates. Mr Kamal has been instrumental in attracting international support for the country by pushing for greater levels of foreign direct investment. Turkey has been highlighted as a location for increased investment, with the electronics, medicine and gas industries all positioned as presenting opportunities. He has also looked to attract more investment from Japanese companies, promising to assist them with issues around VAT, tax and policy.
Support is also forthcoming from the development banks. The Asian Infrastructure Investment Bank pledged to continue supporting Bangladesh, with Mr Kamal outlining projects covering energy, connectivity and social development – with a specific focus on education – being the key targets for support in the coming years.
“According to the Asian Development Bank, Bangladesh attained the highest gross domestic product [GDP] growth rate in the Asia-Pacific region [in 2019],” says Mr Kamal. “Strong macroeconomic stability has been the hallmark of success of the economy. Inflation came down to 5.6% and the country has very low debt-to-GDP ratio of 34%.”
Taking Bangladesh into the capital markets for the first time is another of Mr Kamal’s ambitious moves. The first ever taka-denominated bonds were issued in November 2019, and the Bangla bond was launched at the London Stock Exchange and issued through the International Finance Corporation. The three-year bond was oversubscribed at Tk800m ($9.42m). Issuing the local currency bond has set a benchmark, and raised the possibility of a sovereign local currency bond.
Internet access across the country has also been a priority, thanks to Mr Kamal’s belief that it is possible to provide lower cost fibreoptic internet access by using the infrastructure of the Trans-Asian Railway.
Bangladesh has seen an increase in the number of remittances made into the country: money sent home by overseas workers is one of the country’s main sources of foreign exchange. The government had introduced a 2% cash incentive to encourage people to send money back home, and to do so through legitimate channels, a move that Mr Kamal believes will see a 25% increase on remitted sums during the 2019-20 financial year.
Finance minister of the Year,
Europe
Paschal Donohoe, Ireland
The Irish economy has expanded at lightning speed in recent times. The year 2019 was no exception; by most estimates, the economy is likely to have grown by more than 6%. As a result, Ireland’s could be the fastest growing economy in the EU and among the leading advanced economies anywhere in the world.
This impressive trajectory has been accompanied by prudent management of public finances. Today, Ireland has established strong fiscal buffers and is set to face an uncertain regional and global economic outlook from a position of strength. Much of this comes down to the work of Paschal Donohoe, the country’s minister for finance, public expenditure and reform and the winner of the European Finance Minister of the Year award.
Since taking office as finance minister in June 2017, in addition to his role as minister for public expenditure and reform since 2016, Mr Donohoe has continued Ireland’s impressive fiscal consolidation efforts. The government posted a surplus of 0.1% of gross domestic product (GDP) in 2018, according to the country’s Central Statistics Office, the first surplus in more than a decade.
Meanwhile, the estimates for 2019 and 2020 are even brighter, with rating agency Standard & Poor’s pointing to a surplus of 0.2% for both years. It is worth noting that, thanks to higher than expected corporate tax receipts, the ministry’s own estimates indicate that Ireland will benefit from a surplus equivalent to 0.4% of GDP in 2019.
Ireland’s 2020 budget, meanwhile, lays out a prudent path towards sustaining the country’s growth trajectory. Mr Donohoe has, for example, effectively maintained the fundamentals of the tax regime while offering supportive measures for business groups, including tax relief for the research and development efforts of small and micro enterprises. In doing so, he is looking to shield elements of Ireland’s private sector from the prospect of any global or Brexit-related headwinds over the coming year, while stimulating highly productive segments of the economy.
In further evidence of the long-term thinking behind Mr Donohoe’s work, in 2019 the ministry launched a ‘rainy day’ fund, a Ä1.5bn fund that will act to safeguard the country from unforeseen economic shocks. The fund will be topped up by an amount of Ä500m every year to rebuild Ireland’s economic resilience.
Finance minister of the Year,
Americas
Paulo Guedes, Brazil
Soon after his nomination, and as others before him had done, Brazil’s finance minister Paulo Guedes promised he would quickly bring about long-awaited, sweeping pension reform. Unlike others, he came through.
Although later and more diluted than he had initially hoped, the reform indeed passed at the end of 2019. Its importance can hardly be overstated. Changes to Brazil’s generous retirement system had been discussed and in some cases energetically supported by previous governments since the late 1990s. The imperative of addressing public spending was clear. But the more significant changes beyond the initial important but gentle tweaks had always failed to gain sufficient support across the tumultuous political climate of Latin America’s largest economy.
Not only does this new pension package lead to expected savings of about 800bn reais ($196bn) over the next decade, easing pressure on the state’s finances, it also paves the way for the equally challenging modernisation of Brazil’s cumbersome tax system which weighs particularly on small businesses and which some see as benefiting powerful interests rather than ordinary Brazilians. Further pleasing international investors and analysts concerned about the size of the public sector and its hold on certain key organisations and economic areas, Ms Guedes has also continuously reinforced his commitment to privatisations.
This achievement, and the international trust in Mr Guedes, has boosted the standing of a government led by highly controversial far-right president Jair Bolsonaro, who has often made homophobic, racist and misogynistic statements and lashed out at others in his administration.
But Mr Bolsonaro seems to have been proven right in allowing Mr Guedes complete autonomy in pursuing a reform agenda that Brazil badly needs, given that its economy has failed to regain speed after the dire recession that ended in 2017 and that exacerbated social tensions in a country where nearly one-quarter of the urban population still lives in slums.
“I am honored by The Banker magazine’s award,” says Mr Guedes. “It is a recognition that Brazil is on the right track. We are on the road to prosperity. Our reforms ensure the acceleration of economic growth and public policies to reduce social inequalities.”
Finance minister of the Year,
Middle East
Sheikh Salman bin Khalifa Al-Khalifa, Bahrain
Of the six members of the Gulf Co-operation Council, Bahrain has been among the hardest hit by the ongoing weakness of the price of oil. While the country was a regional pioneer in seriously embracing the need to diversify its economy, oil still accounts for around 70% of government revenue.
Bahrain’s gross domestic product (GDP) growth hit a 10-year low of just 1.8% in 2018, down from as high as 5.4% in 2013, according to the International Monetary Fund (IMF). While the country’s overall deficit improved to 11.7% of GDP by end-2018, public debt rose to 93% of GDP, with the current account deficit increasing to 5.8%, according to the IMF.
While the challenges facing Bahrain’s economy have few easy answers, 2019 is likely to be seen as a watershed year, on the heels of a $10bn bailout package agreed with Saudi Arabia, Kuwait and the United Arab Emirates in October 2018. The bailout coincided with the announcement of Bahrain’s Fiscal Balance Program (FBP). The policy package, unveiled by the Ministry of Finance and National Economy, aims to deliver annual fiscal savings of BD800m ($2.13bn), and to eliminate the country’s budget deficit by 2022.
Heading up such efforts is Sheikh Salman bin Khalifa Al-Khalifa, who was appointed minister of finance and national economy in December 2018. While much work needs to be done, the 2020 Middle Eastern Finance Minister of the Year award recognises Mr Al-Khalifa’s commitment to the FBP, and willingness to introduce potentially unpopular reforms for the sake of a more balanced economy.
One of the most notable steps has been the introduction of VAT – at a rate of 5% – in January 2019, a year later than originally planned. Bahrain was the third country in the region behind Saudi Arabia and the UAE. Also notable has been the introduction of a voluntary retirement scheme for public-sector employees in a bid to trim the state’s large wage bill, together with a number of measures to cut wasteful spending.
The early signs have been encouraging; Mr Al-Khalifa said in October that the country had managed to cut its deficit by 37.8% in the first half of 2019, its administrative costs by 14%, while nearly one in five civil servants had accepted voluntary retirement packages.
Finance minister of the Year,
Africa
Uzziel Ndagijimana, Rwanda
Rwanda’s economy has been one of Africa’s brightest stars of the past decade. A government-led reform programme has significantly improved the country’s business climate, with extensive spending on public infrastructure accompanied by rising private investment.
Uzziel Ndagijimana was appointed the country’s minister of finance and economic planning in April 2018, after serving as the ministry’s head of economic planning. The 2020 African Finance Minister of the Year award reflects both Mr Ndagijimana’s achievements since his appointment as minister and his work in the ministry over a greater period of time.
Recent questions about the accuracy of historic economic data should not obscure how impressive Rwanda’s growth continues to be. Gross domestic product grew by 10.3% in the first half of 2019, according to the International Monetary Fund (IMF), and is expected to remain at about 8% per year for the next two to three years. While the country’s infrastructure expansion programme is likely to see debt levels and current account deficits rise in the coming years, such levels are expected to remain moderate, with debt-servicing costs likely to remain low, according to Standard & Poor’s, which upgraded the country’s debt rating in August 2019 to B+.
The country continues to press ahead with plans to reach middle-income status by 2035 (followed by high-income status in 2050), with the Ministry of Finance and Economic Planning at the heart of such efforts. Central to this is National Strategies for Transformation 1 (NST1), covering economic and social development together with transformational governance initiatives, as a means of achieving the UN’s Sustainable Development Goals.
The key aims of the economic component of NST1, which runs from 2017 to 2024, include the creation of 1.5 million jobs (214,000 per year), doubling the rate of sustainable urbanisation, promoting industrialisation by establishing and expanding domestic industries and developing priority value chains, and increasing domestic savings and positioning Rwanda as a hub for financial services.
