Govt targets 7.5% fiscal deficit for 2017
The government plans to bring the fiscal deficit down to 7.5 per cent of gross domestic product (GDP) this year after revenue shortfalls, mainly from the petroleum sector, combined with expenditure overruns to push the gap between public expenses and revenues to 8.6 per cent of GDP (on cash basis) in 2016.
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The 2017 deficit target is due to be announced in the year's budget, scheduled to be presented to Parliament on March 1, the Senior Minister, Mr Yaw Osafo-Maafo, told the paper on the sidelines of the Graphic Business-Stanbic Bank Breakfast Meeting on February 14.
As its first budget, Mr Osafo-Maafo said the government would be using the 2017 revenue and expenditure estimation tool to announce some audacious policy initiatives that would seek to reverse the fiscal slippages, boost revenues and create more jobs for the teeming youth.
One of these, he said, was the streamlining of earmarked funds to create some fiscal space for the government to prosecute its programme.
The decision would help create room for fiscal manoeuvring, in a manner that would help bring the deficit down to the 2017 target of 7.5 per cent, he explained.
Difficult situation
Although a marked variation from the 3.5 per cent deficit target agreed with the International Monetary Fund (IMF) for 2017, the government's target of 7.5 per cent will represent an improvement under the current situation.
As of December, last year, Mr Osafo-Maafo, who was a former Finance Minister under the first New Patriotic Party (NPP), said records showed that the deficit, including commitments, spiralled to 10.2 per cent of GDP, thereby making the country's fiscal situation "not pleasant" and "disturbing."
"We are in the process of preparing the budget and the figures are not too pleasant; not too pleasant in the sense that the end of year figures for 2016 are disturbing," he said in reference to the deficit figures.
Under the current situation, the senior minister said there was no fiscal space for the government to carry out some of its policy initiatives, prompting the economic management team, which he is a member, to consider easing the regulations barring public spending of earmarked funds.
Earmarked funds
For years, fiscal rigidities, comprising salaries and wages of public sector workers, debt servicing cost and disbursements into earmarked funds, have posed a bane to the smooth operation of the budget.
Policy think tank, the Institute for Fiscal Studies (IFS), said at its pre-budget forum on February 13 that these rigid expenditures accounted for 33 per cent of total revenue and grants as of 2016.
Commenting on the challenges that disbursements into earmarked or statutory funds posed to the government, Mr Osafo- Maafo said the rigid nature of the payments made it inimical to the successful prosecution of government's agenda.
Of grave concern, he said, was how the funds were managed by the various institutions overseeing them.
"The government gives money to these institutions and they transfer those monies into private banks and these banks buy treasury bills with these monies. That will be stopped by the next budget," the senior minister said.
"If it is a government fund, it must be in a single account at the Bank of Ghana (BoG) but you have a situation where we are borrowing our own money," he said, explaining that if earmarked funds were consolidated into a single account, the country's fiscal deficit and primary surplus position would have been different.
Economy's potential for growth
Last year, the IMF estimated that Ghana's economy would grow at an average of 5.8 per cent over the next 25 years.
Although positive, Mr Osafo-Maafo said government disagreed with such estimates, given the enormous potential for growth in the agriculture and industrial sectors.
After witnessing economic growth jump from 3.6 in 2001 to 9.1 per cent in 2008 without oil, the senior minister said nothing stopped Ghana from growing at double digits, similar to what is happening in the economies of its African peers.
"If we grew this much systemically without oil, why do we average ourselves at 5.8 per cent for the next two decades if the system is modernised," he asked.
"I think that Ghana can easily grow between nine and 12 per cent. We are going to grow close to 10 per cent as the years go on," he added.
