Dr John Kwabena Kwakye
The Institute for Fiscal Studies (IFS), an economic think-tank, says the slow growth of the country’s non-oil sector, as announced by the Finance Minister recently in Parliament during the mid-year review of the 2017 national budget, is worrisome, as the sector has seen continuous decline in growth since 2013.
“There is urgent need for policy initiatives geared at revamping the non-oil sector, particularly agriculture and manufacturing, to ensure balanced growth of the economy. As suggested by IFS, government should accelerate the various private sector-supporting policy initiatives,” John Kwabena Kwakye, a Senior Research Fellow at IFS, told journalists in Accra at a press conference yesterday.
According to him, government’s commitment to strengthening collaboration with the private sector to address issues such as tax, energy, and cost of credit, which businesses had repeatedly cited as impediments to their progress, was a step in the right direction which should be followed through.
Request for explanation
He asked government to explain how some savings from interest cost to the tune of GH¢612 million was made in the first half of the year following the re-profiling of the country’s domestic debt.
“It is not clear how the GH?612 million savings made compares with the total interest cost for extending the maturities of the domestic debt to 7 and 15 years. We are informed that arrears clearance is to be expedited in the second half of the year and eliminated completely by end-2019.”
Effects of unpaid arrears
He commented: “According to the Minister, the outcome of the arrears audit will be completed by October 2017. Meanwhile, the non-payment of arrears is having serious implications for private sector businesses and thus for growth and should therefore be addressed as a matter of urgency. That said, it is expected that the budgeted cuts in expenditure will not be circumvented by the MDAs to accumulate new arrears.”
Updated figures show that the public debt increased by GH?16.2 billion from GH?122.3 billion at the end of December 2016 to reach GH?138.5 billion at the end of June 2017.
“In terms of percentage of GDP, the Minister only reported the figure for end of March 2017 to be estimated at 70.9 percent. Further, he reported that the debt-to-GDP ratio is expected to be around 71 percent by the end of the year.
Mismatch
“However, the Minister’s figure of 70.9 percent for March differs from the 62.5 percent published by Bank of Ghana. The difference appears to be the result of the use of different measures of GDP to divide the nominal debt. It is known that Bank of Ghana used the GDP projection for the year. However, the GDP figure used by the Minister is not certain. It is important to reconcile the figures so as to avoid confusing international investors and markets.”
Further clarification
The IFS further called for more details in other areas of the Minister’s Budget-Review statement to help make informed assessment.
Such areas included planned measures to ensure that the revised revenue target is met; expenditure cuts in the first-half of the year, including relating to expenditure per function (MDAs); how the distribution of the goods and services cut across MDAs; the specific statutory and earmarked funds that were cut and the amounts involved; the capital expenditure that was cut, such as sectors, projects (new or ongoing projects), infrastructure, among others, that suffered the brunt of the expenditure cut.
Projects amount disclosure
Furthermore, it said in protecting spending on government’s flagship projects, amounts budgeted for each of the projects should have been disclosed while also the expenditures to date, and the measures put in place to ensure efficiency in spending on these projects were made open.
On the energy sector debt, the IFS also said there were supposed to be plans or measures to ensure financial viability of the energy beyond appointing lead managers to establish SPV to issue medium-to-long term domestic energy bond by securitizing the ESLA receivables.
By Samuel Boadi