Slump in agric worrying - ISSER
The Institute of Statistical, Social and Economic Research (ISSER) has described as worrying the slow growth of the agricultural sector, which it says grew at 2.4 per cent in 2015.
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According to the think tank, the decline in agricultural growth was mainly from the crops and cocoa sub-sectors, which recorded a growth of 5.7 per cent in 2014.
Launching the 2015 State of the Ghanaian Economy Report in Accra, the Director of ISSER and coordinator of the report, Professor Felix Asante, said despite repeated calls in favour of agricultural-based industrialisation, the agric sector was dwindling.
The contribution of the agriculture sector is likely to drop further in 2016 as government has cut its 2016 expenditure on the sector by GH¢40 million despite growth in the sector stalling to 0.04 per cent this year, when government had targeted 3.6 per cent growth.
Last year, government's budgeted expenditure on the agricultural sector was GH¢395.19 million while for 2016, GH¢355.14 million has been budgeted, indicating a 10.1 per cent decrease.
The Ghana Statistical Service estimates that the sector will grow at an average of 3.3% between 2016 to 2018, indicating that the sector's future remains far from bright as services and industry look to narrow agriculture's contribution to GDP.
On debt management, the economic research think tank said the debt strategy of increasing borrowing on the private capital market, while the challenge of spending efficiency remained might be counterproductive.
Prof. Asante, who is also the lead author of the report, said an analysis of the debt management strategy indicated that the situation was not improving.
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He said: “Our indicators have exceeded the threshold levels and our risk exposure has worsened,” and added that, “we must rethink the debt strategy particularly, the sequencing of it so that we can prioritise the improvement in the spending efficiency in other to control our appetite to borrow on the private capital market,” he said.
Increasing taxes
The research think tank also warned that the increasing levels of taxes as well as the energy challenges that the country experienced might compromise the growth target for the year.
These, Prof. Asante said, were problematic because some of the taxes adversely impacted on the cost of doing business.
The report, which assesses challenges and progress made in the economy last year, will also provide an outlook of what researchers at the institute make of the economy in a year the country goes to the polls.
“If the private sector investment and growth slows down, it will subsequently affect revenues and compound the fiscal challenges,” Prof. Asante said.
The government has outline some specific policy objectives it wants to achieve in 2016. Those objectives include the realignment of statutory funds to address the increasing rigidities in the budget to improve flexibility in policy and the rationalisation of internally generated funds.
Other aspects of the government objectives include the implementation of the Income Tax Act, 2015 (Act 896), which is expected to improve compliance and yield additional revenue equivalent to 0.3 per cent of GDP.
Fiscal challenges
Prof. Asante said that though those policies were consistent in dealing with the fiscal challenges, there were inherent risks that might derail those achievements in the short to medium term.
Though the government has indicated that it will not overspend in the run-up to the elections, ISSER fears that fiscal outcomes are compromised in election years.
“It is very important that we remain firm in our commitment not to get carried away by the pressure to spend,” he said.
“The country is still paying for the fiscal sins of 2012”, but was hopeful that the passage of the Public Financial Management Bill 2016 may help protect the managers of the country’s finances against undue political pressure,” Professor Asante said.