Budget to tackle politics of power
Good times are looming after years of economic challenges, with the government trying to steer its way through years of worsening power cuts, devastating floods, inflation soaring to 17.4 in October, ballooning public debts and claims of unprecedented political and business corruption.
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The Finance Minister, Mr Seth Terkper’s budget presentation to Parliament today may suggest a positive year ahead as the government rolls out its financial statement with an upbeat outlook.
The minister, who has held Ghana’s economy together, despite some global economic setbacks, has the backing of the President, who has kept faith with one of his key lieutenants, despite calls for Mr Terkper’s resignation.
Though some analysts recommend some tough and unpopular corrective measures to tackle the two big worries: a budget deficit that is still high and a sharply rising burden of public debt, political strategists worry about how this will play out in relation to the election timetable.
But having tasted more than a decade of high growth and political stability in an oil and gold producing economy, today’s budget will be expected to spell out measures to deal with the government’s expensive domestic borrowing rates, falling commodity prices and rising public debts.
Power politics
A significant portion of the budget is also expected to be centred on oil and gas and how natural gas could end the power crisis which has slumped industrial productivity and economic growth.
Almost every African country has its power crisis. The lack of electricity from Angola to Zimbabwe holds back economic growth, education and health services. In Ghana, the power crisis is at the centre of partisan politics, with opposition parties putting all the blame for the failure on the present ruling government.
Worse still for President Mahama's government, power shortages are increasing amid a myriad of other problems: rising inflation and interest rates, falling economic growth and a weakening currency, together with the threat of deep cuts in public spending and job losses.
Political tempers are high and the economic situation is much tougher. That second factor has given the International Monetary Fund (IMF) and the World Bank a key role in the country which has been following economic reform programmes for the past three decades.
Developing gas infrastructure
At the height of the current problems, the IMF has agreed to a US$918 million extended credit facility to bolster the country’s finances. The World Bank is offering a $750 million guarantee which it hopes will generate the US$7.9 billion that the country needs to develop its Sankofa gas project.
Using local gas, the plant will generate some 1,000 megawatts of electricity and cut expensive fuel imports and reduce carbon emissions.
Paradoxically, the companies to benefit from the bank's guarantee will be Italy's ENI and the Swiss-based oil trader Vitol; but both companies have been plagued by a succession of accusations of malfeasance and trade mispricing operations, especially in Africa.
Mr Terpker will need every ounce of confidence to woo international investors to float another Eurobond. This time, he may be looking for another US$1 billion, just when a stronger United States dollar and prospects of a US interest rate rise are drawing money away from emerging markets such as Ghana.