Economy still reobust, inspite of crisis

Story: Boahene Asamoah
THE Centre for Policy Analysis (CEPA), a policy and research think-tank, has said that in spite of the energy crisis the economy looks poised for a take-off of a sustained accelerated growth which could bring about the much needed development.
However, CEPA warned that some inherent problems such as the over-blotted wage bill and the inability to meet revenue targets and the government’s expenditure could derail the process.
Speaking at the yearly launch of CEPA’s “Current State of the Ghanaian Economy” in Accra yesterday, the Executive Director of CEPA, Dr Joe Abbey, said the cornerstone of Ghana’s macro-economic stability has been prudent and complementary to fiscal macroeconomics stability”.
He added that “this must continue if Ghana is to reduce interest rates, increase private investment and continue to receive favourable investment ratings and continued donor support.
Dr Abbey however, stated there was the need to deal decisively with the main short term threats to fiscal prudence and called for the urgent improvement in the framework for the management of the public sector wage bill.
“Failing that, budget implementation would continue to weaken as the wage bill progressively crowds out other important areas of public spending not to mention the possible adverse consequences for employment in the formal sector”, he stated.
He said IMF analysis of the country’s economic performance stated that after years of sustained consolidation, the fiscal deficit including grants widened to 7.7 per cent of GPD in 2006 from 2.3 per cent of GDP in 2005.
On government revenue, he said tax revenue was on target, however non-tax revenue was the area which recorded significant shortfalls in collection and added that “ there has been significant volatility in revenue mobilisation in this category of government revenue.
Dr Abbey said on account of this situation the total tax revenue could fall short of budgetary target by almost five per cent.
On government expenditure, Dr Abbey stated that contrary to the out-turn for 2006, reported in the 2007 budget, the year ended with a much wider deficit than planned resulting in substantial domestic borrowing by government instead of net repayment.
He said the revenue shortfalls and the additional expenditures would mean large deficits that must be appropriately financed in macro-economics stability whichwas to be sustained as required by the GPRS II.
Dr Abbey said the government’s successful issue of a sovereign bond of $500 million was seen in financial circles as a “hugely important step for a sub-Saharan African country” other than South Africa to have entered the international capital market.
He said given the B+ sovereign rating, mobilisation of loan finance on reasonable terms does not appear to pose much challenge to the country.
Dr Abbey proposed the setting up of a special fund to be named Jubilee Development Fund (JDF) to ensure that all loan proceeds as well as any such identified and dedicated resources mobilised in support for the accelerated growth and development objective would be deposited into the account.
“This is to ensure transparency and accountability”, he added.