IMF Lauds Ghana's Fiscal Space Advantage
Ghana's Economic Foundation shows a good prospect of fiscal space to attract more foreign capital inflows but care must be taken because of higher debt service burden and higher risk of debt distress, the International Monetary Fund (IMF) World Economic Outlook Report has stated.
Launching the report in Accra yesterday, Ms Benedicte Vibe Christensen, a Deputy Director of IMF, however, said that such a move could be feasible if the overall risk of debt distress remained manageable and resources were used for high-return projects.
Fiscal space is defined as the availability of budgetary room that allowed a Government to provide resources for desired purpose without prejudice to the sustainability of the financial position of the Government.
Ms Christensen said Ghana stood to implement an ambitious public investment programme in an environment where concessionary aid inflows in percentage of GDP were at best flat or declining.
Generally, she said, the prospects for fiscal space for most developing countries was not good and therefore a lot more needed to be done to diversify sources of fiscal space either through improvement in domestic mobilisation and efficiency of expenditures.
Giving indicators for six selected African countries, Ghana ranked high with 11.0 percent of GPD being her sources of fiscal space. The next being Rwanda, has 8.3 percent of GDP and the least Uganda, -3.0 percent of GDP.
Domestic and External contributions for Ghana were 3.4 percent of GDP and 7.5 percent of GDP respectively. At the regional level in Africa, Ms Christensen said the report indicated the strongest growth and lowest inflation in over 30 years given a positive outlook for 2008.
She said GDP growth would accelerate and inflation decline further in Sub Saharan Africa (SSA) countries next year because the region looked well poised to sustain its growth momentum.
She however reiterated that sustaining the expansion would require efficient use of fiscal and debt space, structural and institutional reforms that increase productivity, boost resilient to shocks and attract private investment.
Ms Christensen said the risk to the outlook included the recent global financial market turbulence but added the impact has not been felt in SSA.
Terms of Trade in SSA improved especially, for oil exporting countries whilst growth volatility and conflicts also saw significant declines. Overall external debt SSA also declined but more for oil exporting countries. Ghana's total public debt also declined to moderate levels.