Govt urged to restore macroeconomic imbalances
The Managing Director of Societe Generale Ghana, Mr Gilbert Hie, has stressed the need for the government to initiate moves to fix the economic imbalances in order to restore confidence in the Ghanaian economy.
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With particular emphasis on rising inflation and the decline of the local currency, cedi, against major foreign currencies, in an interview on May 21, 2014, he said “we need to be realistic because as long as those macroeconomic parameters will not be rebalanced properly, it will be difficult to attract investors.”
According to the seasoned banker, doing business under such unfavourable conditions is not the best, adding that “any kind of business with 15 per cent inflation and more than 20 per cent depreciation of the currency is very difficult.”
Proposing what should be done to salvage the ailing economy, he said “what is very important to restore Ghana’s confidence, especially vis a vis foreign investors, is to quickly restore the balances and reduce the fiscal deficit.”
Inflation, which measures the average change in the price of goods and services acquired for the purpose of consumption, has been on a rising trend, with the April 2014 rate pegged at 14.7 per cent.
Despite measures put in place by the Bank of Ghana to halt the decline of the cedi, it has still recorded some free fall which, according to Bank of Ghana figures, stands at about 23.1 per cent since the beginning of the year.
This has made the local currency one of the weakest currencies on the continent. Today, US$1 is being exchanged for almost GH¢3.00, something Mr Hie described as a sad spectacle for the economy.
“Although it is not popular at all, I think it is absolutely necessary to reduce the imports,” he said.
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Fiscal deficit
In 2013, the economy recorded a fiscal deficit of 10.8 per cent of Gross Domestic Product (GDP) and in 2012, it stood at 11.8 per cent.
This was as a result of the government’s expenditure being more than its revenue, resulting in the imbalance.
Total revenue and grants for 2013 was GH¢19.2 billion, against a budget target of GH¢22.5 billion. Of this, domestic revenue amounted to GH¢18.7 billion, below the target of GH¢21.3 billion.
Total tax revenues amounted to GH¢14.3 billion, lower than the target of GH¢17.1 billion.
Total expenditures, including payments for the clearance of arrears and outstanding commitments, amounted to GH¢28.6 billion, lower than the budget target of GH¢30.5 billion.
All these have created serious imbalances in the economy, as well as eroded confidence in the economy, the reason many economic analysts are calling for urgent restoration of the macroeconomic indices.
Societe Generale in 2014
According to Mr Hie, although it has been a difficult period in 2014, the bank will position itself to ensure that it remains profitable.
“I believe that 2014 will be more difficult, it doesn’t mean that our performance will be declining, it means that we will need to manage it in a different way,” he said.