My pick of key pillars in 40-yr devt plan
A high rate of economic growth, price stability, low inflation, equitable parity in income and wealth, optimum levels of employment and equilibrium in the balance of payments, have become the foremost macroeconomic objectives of every government in these era of new economic goals.
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This, indeed, is being championed through surplus or deficit budgets, implemented at one time or another.
Ghana has undergone several economic transformations in search for growth and development. From the Economic Recovery Programme of 1983-1986, the Structural Adjustment Programme of 1986-1991 and the Economic Development programme of 1992-1996, through to the famous Ghana Vision 2020, aimed at a middle–income status which Ghana has achieved.
Under these reforms, the country has moved away from a controlled market economy to a free market system on the back of budgetary policies that have aimed at raising revenues through taxation and investments in infrastructure and other public expenditures to accelerate growth and development.
Greatly, the recent developments in government revenue and spending have for some time now had been escalating. This is as a result of increased demand for development projects.
And for the government to meet all these demands, it has to resort to tax increases and raising its expenditure levels to be able to satisfy the growing needs of the citizenry.
Budget deficit policies adopted and other borrowings have also come in handy to solve these teething phenomenon. But the fiscal and economic growth rate development of Ghana had been that of a mix and a careful analysis of the situation needs to be looked at.
From the beginning of the year 2000, succeeding governments have implemented various forms of fiscal policies and other economic programmes to fast-track the growth and development of the Ghanaian economy; and to raise the standards of living of the people to a varying height.
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According to Ewusi (2013), Ghana’s economy has grown appreciably from the 1997 onwards even up to 2011, with good record rate of 6.1 per cent per annum for a real GDP and 3.5 per cent per annum for real per capital Gross Domestic Product (GDP), with most macroeconomic growth targets being met and some even being exceeded.
But in spite of these significant growth records in the output of the economy, a greater sum of structural imbalances and other poor records of macroeconomic instabilities exist.
These fundamentally have been in heavy fiscal and balance of payments and balance of trade deficits, increasing growth rates not backed by improvements in human development pointers, high unemployment among the youth, and the ever increasing poverty disparities among most Ghanaians.
So admittedly, as Ghana faces several economic challenges, driven by macroeconomic imbalances that make it difficult for sustained growth, there is the need for macroeconomic policies to re-establish stability, and to foster an environment that would be conducive enough for economic activities and entrepreneurship.
Assuredly, the need to redirect courses of action and refocus on other areas normally out of the norm, as we chart a new path under the proposed 40-year development plan, should be a matter of urgency now.
In fact, a real look at the sub-sectors of agriculture, industry and the railway sectors could turn things around, as all the other sectors could spin and hinge around these sectors to bring in the needed balance in the economy.
Recent macroeconomic operations
Ghana became attained a middle income status in 2011, the same year that it was recognised among the fastest growing economies in the world after posting a 14.4 percentage growth in real Gross Domestic Product (GDP) as a result of oil exports.
Inflation also remained flat, being 8.58 per cent as compared to the previous year-on-year rate of 2010, and shy of a nine per cent estimate.
Fast forward to 2014, macroeconomic targets were to have an overall budget deficit equal to 8.5 per cent of GDP, an overall real GDP (with oil) growth of eight per cent, and an end of year inflation of 9.5 per cent within the range of two per cent, according to the Ministry of Finance, 2014.
Indeed, the fiscal performance expected from the 2014 budget was to have a fiscal policy that aimed at improving debt sustainability efforts and an efficient fiscal prudence through an effective revenue mobilisation mechanism.
There was also the need to embark on prudent public expenditures, and, as well as a managed debt sustainability reforms that were to be implemented.
But the year showed stunted growth in both the domestic and external environment of the economy. Really, the GDP in the first quarter only grew by 6.7 per cent shy of the nine per cent in the previous year of 2013.
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In fact, provisional figures from January to May showed that revenues and expenditures had been lower than their targets. Revenue was below the shortfall in expenditure and as such, the equivalent cash fiscal deficit was 3.6 per cent of GDP, as compared to a target of 3.5 per cent.
Indeed, this revenue amount Ghana missed, among other factors, was attributed to the unexpected lower revenue collections made from the Ghana Revenue Authority; just as the lower than forecasted expenditures for the same period was also attributed to statutory funds that were not paid early enough.
Tentatively, as fiscal policy is an instrument in the execution of government programmes for the growth and developmental needs of a country, it is expedient to liken the pattern of government spending and taxes rose to provide infrastructure and the creation of conducive environment for investment and job creation for the wellbeing of the citizenry.
Arguably then, the ever increasing expenditures and the consistent increases in deficits as well as the shortfalls in revenue raised, gives concern to find out why this is so with Ghana’s policy direction on its fiscal, monetary and other economic and financial programmes.
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For the country’s debt stock, the Bank of Ghana data reveals that the country’s debt stock is now about 71 per cent of the total value of the economy. Indeed, Ghana's public debt went up from about GH¢89 billion in May to GH¢95 billion as of June this year, and according to The World Bank indicators, a country’s debt-to-GDP ratio hovering over the 70 per cent debt line makes the country highly geared.
However, the fiscal data shows that there is an over-performance in total revenue and grants and this is largely as a result of a strong and prudent growth in domestic revenues, fueled by good tax and non-tax revenue performances.