2013 Budget unveiled to sustain confidence in economy
Following strong public criticism of the size of the
country’s budget deficit, the government has decided, among other things, to
implement periodic upward or downward adjustments of petroleum products to
avoid severe disruptions to public and private sector output and financial
planning.
Advertisement
Presenting the 2013 Budget and Economic Policy of the Government to Parliament in Accra on the theme; “Sustaining Confidence in the Future of the Ghanaian Economy”, the Finance Minister, Mr Seth Terkper, said, “Mr Speaker, the National Petroleum Authority (NPA) announced an adjustment in petroleum prices to a reasonable level that is still below the full cost. Government will take seriously, the suggestion to implement periodic upward or downward adjustments to avoid severe disruptions to public and private sector output and financial planning.”
He also noted that the government would continue to identify credible sources of financing infrastructure projects to curtail costly and what he described as ad hoc short-term borrowing.
The purpose, he explained, was to curtail overreliance on short-term instruments such as treasury bills to finance the capital budget and deficit, adding that the “Government will endeavour to maintain a stable macroeconomic and debt service record in order to tap into the 10-year or more bond and loan markets. This will ease pressure on credit to the private sector and help reduce interest rates.”
The government had earlier identified the sources of the huge deficit which include the shortfalls in corporate income taxes, notably from the petroleum sector — GH¢708.2 million which represents 1.0 per cent of GDP; shortfall in grants from the country’s development partners — GH¢389.4 million, representing 0.5 per cent of GDP and the implementation of the single spine salary structure — GH¢1.91 billion which is 2.7 per cent of GDP.
The other areas are the “Higher interest cost — GH¢245.0 million, representing 0.3 per cent of GDP; utility and fuel subsidies — GH¢339.0 million, representing 0.5 per cent of GDP; and higher spending on goods and services which is already constrained by other expenditures and represents GH¢354.7 million, i.e. 0.5 per cent of GDP.
“Mr Speaker, since the problems are also structural, we are implementing more efficient systems and procedures for processing government transactions,” he said.
In that regard, the finance minister said the Ghana Revenue Authority (GRA) would hasten its reforms to improve the tax processes and elevate them to an electronic platform; improve compliance to increase the level of taxes generated; root out corruption, tax evasion and tax avoidance; and improve the efficiency of government expenditures by hastening the implementation of new budget and accounting modules under the Ghana Integrated Financial Management System (GIFMIS) reforms to replace existing manual processes.
Mr Terkper said as already directed by the Cabinet, the Ministry of Finance would evolve a financing plan to sustain the expansion of infrastructure into the near term without threatening the public debt status.
He said “debt sustainability is a crucial element of our sovereign ratings and our ability to borrow in a cost-effective manner to finance the infrastructure projects”.
Mr Terpker said “obviously, this is also a key element of our transition to middle-income status, as the flow of grants and concessional loans to the budget dwindles”.
“Some elements of an improved sovereign financing plan include ensuring that commercial projects pay for the facilities that finance their implementation, through mechanisms such as escrow and on-lending arrangements while financing the capital component of our budgets with longer tenor bonds and loans, preferably from the international capital markets, to ease the pressure on the short-end of the domestic treasury markets, a practice that crowds out credit to the private sector and increases the cost of borrowing to businesses and the government.
“The government is also vigorously pursuing the public-private partnership (PPP) programme that the government approved in 2011; exploring the use of insurance and risk management options to reduce the premium that the country paid on its commercial loans for country and project risks while improving operational and financial efficiency in our state-owned enterprises — notably those in infrastructure development — to enable them to borrow from the local and foreign capital markets on their own balance sheet, without recourse to sovereign guarantees.”
The finance minister was also optimistic that the measures would also minimise the risk that was put on public debt through the use of sovereign guarantees and make the issue of such guarantees commensurate with the risk that the state assumed in the implementation of all projects.
Story by Charles Benoni Okine & Samuel Doe Ablordeppey