Efforts To Reduce Budget Deficit Viable
Minister for Finance and Economic Planning, Dr Kwabena Duffuor
The International Monetary Fund (IMF) has declared that the country's target of reducing its budget deficit from over 14 per cent of Gross Domestic Product (GDP) to 9.4 per cent is achievable.
While ratifying the country's economic plan, the fund, however, urged the government to vigorously carry out the desired reforms in energy pricing and revenue mobilisation, as well as public sector reforms, in order to remove bottlenecks in the economy.
An IMF mission, led by Mr Peter Allum, which visited the country from May 11-22, 2009 to engage in the annual consultation with the government, observed that structural reforms in revenue administration, cost-recovery pricing of petroleum products and utilities, as well as improving the standard of service by the public service, are crucial for the country's economic stabilisation.
'The mission's review of the first quarter fiscal data suggests that the budget goal of limiting the deficit to 9.4 per cent of GDP in 2009 is within reach,' the IMF said.
Further fiscal consolation is needed to reduce the mission said, encouraged the authorities to 'consider all options for the 2010 budget on both the revenue and expenditure side to meet this goal'.
During the 12-day tour, the mission held high-level discussions with the Minister for Finance and Economic Planning Dr Kwabena Duffuor, the Governor of the Bank of Ghana, Dr Paul Acquah, and other senior officials, representatives of Parliament, labour unions, research institutions, development partners, as well as the private sector.
According to a release issued by the IMF Office, the discussions centred on recent global and domestic developments and the challenges of implementing fiscal adjustment and structural reforms against a deteriorating external environment.
Mr Allum and his team also noted that the country's revenue administration faces the challenges of a broad range of tax exemptions and the lack of a unified income tax and value added tax authority.
The 2009 budget has already proposed a merger of the three revenue agencies, namely, the internal revenue Service (IRS), the Customs, Excise and Preventive Service, (CEPS) and the Value Added Tax (VAT) Service, into one entity to make for efficient revenue mobilisation.
The IMF team also observed that expenditure monitoring and control should be fully computerised, while cost-recovery pricing in the petroleum sector is crucial to avoid heavy subsidy costs.
'The Government is encouraged to move ahead vigorously with its reform plans in these areas,' Mr Allum said in a statement after the visit.
The impact of the global economic downturn has affected Ghana more in the area of private inward transfers, which amounted to $1.98 billion in the first three months of 2009, a 7.3 per cent decline from what was recorded during the same period in 2008, according to latest reports from the Bank of Ghana.
Of total first quarter transfers, $359.37 million accrued to individuals, compared with $432.8 million in the first quarter of 2008.
The country's gross international reserves at the end of March 2009 also stood at $1.75 billion, representing 1.5 months of goods and services import cover.
The figure as of December 2008 was $2.04 billion, compared with $2.23 billion in March 2008.
The country's situation is said to be better than that of most of its peers, as the prices of two of its main exports, cocoa and gold, remain strong on the international market.