Last year, the government run a
heavy budget deficit. But there is hope for assistance to help reduce it to its
target of nine per cent. Charles Benoni
Okine reports.
The government’s quest to reduce its huge budget deficit to a
single digit is expected to receive a major boost as the World Bank pledges
conditional support in that regard.
According to the bank, it is in a position to help the Ministry of
Finance and Economic Planning to achieve its aim if the government is prepared
to adequately resource the ministry to pragmatically monitor and keep
expenditures in check to avoid overruns.
The huge budget deficit for last year which stood at about 12 per has
attracted condemnations from economic experts both from within and outside the
country because of the serious implications it has on the stability of an otherwise
robust economy which has recorded a relative macroeconomic stability.
Answering questions from members of the Institute of Financial and
Economic Journalists (IFEJ) in Accra, Dr Dante Mossi, Senior Operations
Officer, said “we are concerned about the huge budget deficit but we are ready
to help the government bring that under control if it is able to follow through
what it has proposed”.
According to him, the Finance Ministry requires the needed
governmental support to be able to control and closely monitor expenditures and
when “that is seen to be done, we will then lend our support to ensure that the
target set is achieved”.
Government has set a target of nine per cent for the year although
some experts have described it as unambitious.
Sources of
budget deficit
In presenting the 2013 Budget and Economic Policy of the
government, the Finance Minister, Mr Seth Terkper told Parliament that “we are
resolved to tackling the main fiscal challenge which is the budget deficit”.
To him once the government has been able to identify the sources
of the deficit, it was enough roadmap to ensuring that the gaps are closed.
“The sources of the excess deficit are known and include; Shortfalls
in corporate income taxes, notably from the petroleum sector – GH¢708.2 million
(1.0 per cent of GDP); Shortfall in grants from our development partners –
GH¢389.4 million (0.5 per cent of GDP); and the Implementation of the single
spine salary structure – GH¢1.91 billion (2.7 per cent of GDP); Higher interest
cost – GH¢245.0 million (0.3 per cent of GDP)”, he said.
Also included are; utility and fuel subsidies – GH¢339.0 million
(0.5 per cent of GDP); and Higher spending on goods and services (which is
already constrained by other expenditures) – GH¢354.7 million representing 0.5
per cent of GDP.
Proposed
corrective measures
“Mr. Speaker, as part of the corrective measures
to be undertaken, in January 2013, the NPA announced an adjustment in petroleum
prices to a reasonable level that is still below the full cost”, he said.
To the Finance Minister, the government will take
seriously, the suggestion to implement periodic upward or downward adjustments
to avoid severe disruptions to public and private sector output and financial
planning.
The government pledges to continue to identify
credible sources for financing infrastructure projects to curtail costly and ad
hoc short-term borrowing.
The purpose is to curtail over reliance on
short-term instruments such as treasury bills to finance the capital budget and
deficit.
Government has also committed to maintain a
stable macro-economic and debt service record in other to tap into the 10 year
or more bond and loan markets in an effort to ease pressure on credit to the
private sector and help reduce interest rates.
“Mr. Speaker, since the problems are also
structural, we are implementing more efficient systems and procedures for
processing government transactions”, Mr Terkper said.
In this regard: Ghana Revenue Authority (GRA) is
to hasten its reforms to improve the tax processes and elevate them to an
electronic platform; improve compliance to increase the level of taxes we
generate; and root out corruption, tax evasion and tax avoidance.
It is also expected to improve the efficiency of
government expenditures by hastening the implementation of new budget and
accounting modules under the Ghana Integrated Financial Management System
(GIFMIS) reforms to replace existing manual processes.
The Finance Ministry is also expected to evolve a
financing plan to sustain the expansion of infrastructure into the near-term
without threatening our public debt status.
“Debt sustainability is a crucial element of our
sovereign ratings and our ability to borrow in a cost-effective manner to
finance the infrastructure projects”, he added.
He noted that “Obviously, this is also a key
element of our transition to middle-income status, as the flow of grants and
concessional loans to the Budget dwindles”.
Way
Forward
Dr Mossi said the government has fine policies
which, when fully implemented, will enable it achieve its set targets without
much stress.
His comments are in line with what economic think
tanks and experts have also suggested.
Meanwhile the general view is that for the
government to be able to restore confidence in the people, it was necessary for
it to strictly abide by the 2013 budget theme: ―Sustaining Confidence in the Future of the Ghanaian Economy. GB
charles.okine@graphic.com.gh
Caption: Dr Dante Mossi addressing IFEJ members.
Picture by Charles Benoni Okine
Ensuring that commercial projects pay for the
facilities that finance their implementation, through mechanisms such escrow
and on-lending arrangements; Financing the capital component of our Budgets
with longer tenor bonds and loans, preferably from the international capital
markets, to ease the pressure on the short-end of our domestic treasury markets
(a practice that crowds out credit to the private sector and increases the cost
of borrowing to businesses and the government); Vigorously pursuing the
public-private partnership (PPP)programme that the government approved in 2011;
Exploring the use of insurance and risk
management options to reduce the premium that the country pays on its
commercial loans for country and project risks;
Improving operational and financial efficiency in
our state-owned enterprises—notably those in infrastructure development—to
enable them borrow from the local and foreign capital markets on their own
Balance Sheet, without recourse to sovereign guarantees;
Minimizing the risk that is put on public debt
through the use of sovereign guarantees and making the issue of such guarantees
commensurate with the risk that the state assumes in the implementation of all
projects.
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