Graphic Business/Stanbic dialogue to discuss implications of election deficit
The government's high levels of debt are unsustainable and it is turning to innovative ways of borrowing in order to bridge deficits ahead of the electoral high-stakes in December.
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As the political uncertainty gets thicker ahead of the parliamentary and presidential elections, worries about the re-emergence of spending pressures gradually fade as the government tugged its fiscal consolidation plans in check.
The Finance Minister, Mr Seth Terkper, is taking a high-risk bet that international investors believe is the government’s attempts to reduce spending and contain the debt levels during a period when a change in government could be possible.
This is because the economy is gradually phasing out the tough rough times it had suffered since 2012, when the currency nosedived amid power cuts and a huge government deficit.
The economic difficulties resulted in largely lower interest costs, underpayment of arrears, social contributions and grants to government units, which offset overspending on infrastructure as well as goods and services.
But now the government is revising its forecast for gross domestic product growth in 2017 to 7.0-7.4 per cent from a previous forecast of above eight per cent.
For now, the government spending remains within targets set by the International Monetary Fund under a three-year programme to stabilise the economy, despite the approaching December 7 general election.
"Expenditures are within the IMF programme targets .... We are estimating growth between 7.0 and 7.4 per cent, which is still robust," he said, without giving a reason for the cut to forecasts.
Graphic Business/Stanbic Bank dialogue
The Finance Minister and other high-profile personalities from academia and the business sector are expected to give an account of how the country is striving to curb election year over-spending and the implications for macroeconomic stability.
These and many other relevant concerns will be addressed at the Graphic Business/Stanbic Bank dialogue at the plush Labadi Beach Hotel in Accra on Tuesday.
Other topics that will be treated include restoring debt sustainability and macroeconomic stability to foster a return to high growth and job creation, while protecting social spending.
Government spending, particularly on civil service wages, ballooned in the previous election year of 2012, pushing the budget deficit to twice what the government had targeted, a move which has triggered a fiscal crisis.
Some economists have said they fear the government will again ramp up spending ahead of December's polls, when President John Mahama runs for a second and final term against opposition leader Nana Akufo-Addo and others.
But the fear is gradually fading amid the confidence boosting watchful eye of the International Monetary Fund and the government’s own assurances of staying within the budget limits.
Growth slowed under Mahama in part because of a drop in global prices for the country's exports of gold and oil but also because of economic problems, including increased inflation and the budget deficit.
In the past, the country’s growth had mostly been hampered by power shortages, macroeconomic instability and, more recently, fiscal consolidation.
Turnaround story
In the medium term, growth is expected to be supported by a near doubling in oil production in 2017 as well as new gas reserves coming on stream by 2018, which will help to alleviate the electricity shortfall and reduce the oil import bill.
There is also an improvement in the country’s external position, including a narrowing of the current account deficit and an improvement in international reserves.
The fiscal deficit may improve to 3.6 per cent of GDP in 2017, 3 per cent in 2018 and 2.3 per cent in 2019, the finance ministry said.
The nation forecasts total income of 56.7 billion cedis ($14.4 billion) in 2016, 60.1 billion cedis in 2018 and 67.3 billion cedis in 2019
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