It’s getting better-Terkper assures
The Finance Minister, Mr Seth Terkper, has reposed confidence in the government’s management of the economy, explaining that an economic turnaround has begun as the various indices begin to take a better shape.
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He said in his supplementary budget to Parliament on July 25 that “things are getting better” hence the need for Ghanaians and the business community in particular not to despair but have hope in the government’s ability to ride the storm.
Beyond making the assurance, the minister also requested Parliament’s approval to supplementary estimates, which totalled GH¢1.89 billion in accordance with Article 179 (8) of the 1992 Constitution and Standing Order 143 of this House.
The revision, he said followed the impact of global challenges on the economy, which led to a lower-than estimated prices of gold, cocoa and crude oil.
The situation had be worsened by the challenges to the turret bearing on the FPSO, which reduced oil production.
He thus revised the benchmark revenue of oil from the initial target of US$53 per barrel to US$45.3.
This has reduced oil revenue targets to GH¢1.4 billion from the previous estimate of GH¢2 billion. This translates into a 60 per cent reduction in revenue from crude oil.
Declining debt growth
Touching on the turnaround, Mr Terkper mentioned that the five per cent growth in total revenue and grants and a reduction of the deficit from the budget target of 7.3 per cent of gross domestic product (GDP) to 6.3 per cent of GDP in 2015 as some of the evidence that things were shaping up.
“It is even getting better, as the economy expanded by 4.9 per cent in the first quarter of 2016 compared to 4.5 per cent for the same period in 2015. In spite of the anticipated shortfalls in price and production of crude oil, GDP growth is projected to end the year at 4.1 per cent,” the minister said to cheers and boos from the Members of Parliament (MPs)
“We are also proud to note that we were able to slowdown the rate of debt growth to GDP ratio,” he said in reference to the drop in the debt levels from 72 per cent in December 2015 to 63 per cent in May, this year.
The decline is remarkable, given that it is the first reduction to have been recorded since the country’s debts were forgiven under the Highly Indebted Poor Country (HIPC) and the Multilateral Debt Relief Initiative (MDRI).
Between 2001 and 2006, when the HIPC and MDRI were initiated, the country’s debt to GDP ratio declined from 150 per cent to 26 per cent in 2006 but later took an upward trajectory until it peaked at 72 per cent in December, last year.
With the ratio now at 63 per cent of GDP, Mr Terkper said “this point to a turnaround and bright prospects for the economy.”
“They also provide us with the opportunity to gradually remove the temporary taxes, including the the Fiscal Stabilisation Levy and the Temporary Import Duty over time,” he added.
These achievements notwithstanding, the minister said government would not be complacent in its debt management strategies but would continue to undertake its smart borrowing initiatives, which have since served the economy well.
These strategies, he said required that state-owned enterprises such as the Volta River Authority, Ghana Ports and Habours Authority (GPHA) and the Electricity Company of Ghana (ECG) are made to borrow on their own balance sheets.
Revenue performance
On the revenue front, the minister said in spite of constraints to generation, revenue performance remained robust.
“Total revenue and grants amounted to GH¢32.04 billion (22.9 per cent of GDP) against a target of GH¢30.5.2 billion (22.8 per cent of GDP). In nominal terms, the provisional outturn was 29.5 per cent higher than the outturn for the same period in 2014,” he said. The performance in total revenue and grants for the period was driven mainly by taxes on goods and services, which resulted from the implementation of new tax measures, particularly the imposition of Special Petroleum Tax of 17.5 per cent as well as the implementation of the value added tax (VAT) on fee-based financial services and the five per cent flat rate on real estate, among others.
These measures, he said pushed tax revenue to GH¢24.14 billion, which is 4.4 per cent higher than the revised Budget target of GH¢23.12 billion.
Expenditure
On expenditure, the minister said total expenditure, including payments for the clearance of arrears and outstanding commitments, amounted to GH¢40.8 billion (29.2 percent of GDP), against a target of GH¢40.29 billion (30.1 percent of GDP).
The outturn was 1.2 per cent higher than the budget target and 12.4 per cent higher than the outturn for 2014.
He blamed the slight overruns on corresponding overruns in the wage bill and external interest payments.
“On account of higher-than-budget allowances payments, expenditure on Wages and Salaries for the period totalled GH¢10.56 billion and was 2.6 per cent higher than the budget target of GH¢10.29 billion and 11.7 per cent higher than the outturn in 2014. In addition, an amount of GH¢805.7 million was spent on the clearance of wage arrears. Despite higher-than-budget allowances payments that led to an overrun in the wage bill, the wage bill ratios to GDP and tax revenue continued to decline in 2015 to 7.5 per cent and 43.7 per cent, respectively,” he explained.
Creating jobs
The minister explained that the government was working on employing about 5,000 youth under the youth employment programme.
So far, he said about 4,000 people have benefited from the programme and were working in the various modules.
This, he said underscored the government’s commitment to reducing the unemployment huddle facing the country.
We are also proud to note that we were able to slowdown the rate of debt growth to GDP ratio.
