Government On Track - Dr Duffuor

The Finance and Economic Planning Minister, Dr Kwabena Duffuor, says the government has achieved encouraging results in its target of reducing pressures on inflation, the exchange rate and the Balance of Payment (BoP).

Dr Duffuor, who said this when he addressed members of the Association of Ghana Industries (AGI) and a section of the private sector in Accra yesterday, added that the government had also made strenuous efforts to stabilise the economy, which was reeling under macroeconomic difficulties, including a twin fiscal and balance of payment deficits.

“The challenge for economic management when we took over the administration was to address the economic imbalances inherited from 2008, namely weakened public finances, high inflation, depleted official foreign currency reserve position and depreciating exchange rate,” the finance minister stated.

Speaking on the topic, “The State of Ghana Economy since January 2009,” Dr Duffuor stated that the strategy of the government through the implementation of an austere budget, was to “lay a firm base for the gradual adjustment and consolidation of public finances over the medium term”.

He said those weaknesses deteriorated the public debt position and that the restoration of fiscal sustainability and macro-stability would pave the way for sustainable pro-poor economic growth to resume.

The efforts had largely yielded “encouraging results” as the government had met a good number of its budget targets, Dr Duffuor said.

On fiscal stabilisation, the finance minister said the overall fiscal balance had shown a deficit of GH¢608.9 million, equivalent to 2.8 per cent of Gross Domestic Product (GDP), the exact target for the first five months of the year. The figure excludes the payment of GH¢225 million arrears with respect to 2008.

The country’s total revenues and grants for the same period came up to GH¢2.4 billion, an increase of 13.6 per cent over the figure recorded for the same period last year.

Domestic revenues alone accounted for GH¢2 billion, as against the GH¢1.7 billion in the same period last year, Dr Duffuor stated.

He said revenues from tax were 17.8 per cent higher than the corresponding figure in 2008.

The finance minister said total expenditure, which settled at GH¢2.9 billion for the five months under review, was four per cent higher than what was recorded in the same period last year.

Dr Duffuor said having depreciated by 25 per cent last year, the cedi continued its free fall against the greenback, reaching 15.5 per cent in the period under review due, primarily, to the unexpected twin deficits and the depletion of the foreign reserves, but said the rate of volatility had started to stabilise.

“We have also observed a gradual convergence of the interbank market and the forex bureau dollar/cedi rates in April-May period. This notable achievement has come about as a result of the prudent macroeconomic measures being pursued by the government,” the finance minister added.

He said on the external front, the Ghanaian economy reduced its trade deficit to $552 million as against $1.8 billion recorded in the same period last year.

“As a result, the current account recorded a deficit of $429.5 million in the first quarter of 2009, compared with a deficit of $801.1 million for the same period in 2008,” the finance minister added.

Investments in the economy have also been picking up following successful elections, as figures from the Ghana Investment Promotion Centre (GIPC) indicate $372.32 million of new investments, reflecting an increase of 45.1 per cent over the total new investments for the same period in 2008.

Dr Duffuor, however, identified a number of risks that posed possible difficulties to the economy. They include weak public finance management capacity in the public sector that make it difficult to control, monitor and evaluate the effectiveness of government spending, the poor management of state-owned enterprises (SoEs), stemming from inadequate monitoring, as well as the wage risk, and said the government had taken a number of measures to introduce a comprehensive public sector reform.

“The key objective of the reform is to link public sector pay to productivity, position and qualification,” he said, adding that it would also make public sector incomes competitive relative to the private sector so as to attract competent and experienced people to the sector.

Dr Duffuor disclosed that the government had secured a total of $400 million since January this year to fund water and sanitation projects across the country.

The minister said the investment, which was meant to improve social services and reduce the cost of doing business, was in swift response to the inadequate delivery of basic public services, which, according to him, had been identified as one of the risks that threatened to disrupt efforts at economic stabilisation in the country.

This is different from the $1.2 billion budgetary and project support from the World Bank and the $1 billion balance of payment support expected from the International Monetary Fund (IMF).

The President of the AGI, Mr Tony Oteng-Gyasi, called on the finance minister to work harder at resolving a number of issues that confronted the private sector, such as the rising interest rates.

He said the government also needed to address the issue of inadequate funding for small and medium-scale enterprises, and where possible make direct interventions to help them grow to increase employment.

On measures to help salvage the Ghana cedi from depreciation, Mr Oteng-Gyasi, on behalf of the AGI, called on the government to take a look at the units in the economy that demanded more foreign currencies (the dollar) and where businesses happened to be foreign entities, they should be encouraged to list on the Ghana Stock Exchange (GSE).

With particular reference to the mobile phone operators in the country, the AGI president said when they listed on the GSE, their demand for foreign currencies to repatriate would be drastically reduced.

He said the country should also explore the alternative of locally producing certain basic items, such as clinker for cement and aluminium coils, so as to reduce the high demand for foreign exchange.