Govt takes steps to control expenditure — Terkper
The Ministry of Finance is taking urgent steps to control spending in order to ensure that the continued fall in crude oil prices does not derail the achievement of the country’s fiscal deficit target for the year.
Advertisement
The move is also to ensure that the country’s medium-term fiscal consolidation objectives remain attainable and do not detract from the projections made in this year’s budget.
In that regard, ministries, departments and agencies (MDAs) that are funded from the Annual Budget Funding Amount (ABFA) have been asked to control their expenditure within the budget allotments provided by the ministry.
The Minister of Finance, Mr Seth Terkper, outlined the measures at a press conference to brief the media on updates on the economy in Accra Thursday.
“With the continuous decline in crude oil prices, the original and revised estimate of Petroleum Benchmark Revenue for 2015 may not be achieved and this can have implications for the budget execution,” he said.
Oil prices, which began to rebound at the start of the second quarter of this year, have suddenly begun to plunge due to excess supply.
The prices of other commodities such as gold and cocoa continue to decline due to soft global growth which is hurting the demand for those commodities.
Oil price stocks for net importer countries have already started experiencing terms of trade shocks, decline in growth, exchange rate instability, declining domestic revenue collection among other challenges.
Other Trending Stories
Medium-term plans
In spite of those developments, Mr Terkper reiterated the government’s commitment to ensure a sound and stable macroeconomic environment that would spur the country’s return to high growth and job creation while paving the way for the nation to benefit from the bright prospects envisaged for the medium term.
Spelling out the government’s medium term plans towards the rebound of the economy, Mr Terkper said there would be a tightening of customs operations with regard to tariff classification and valuation.
He observed that revenue from the Ghana Revenue Authority (GRA), especially the Customs Division, could have been far higher than what had been realised in the past and attributed the situation to the undervaluation of imports.
Mr Terkper said the Bank of Ghana (BoG) had taken steps to smoothen seasonal export commodities such as cocoa to ensure high returns and enhanced foreign exchange income.
In addition, he said, there would be liberalisation and competitive use of the country’s stock of foreign exchange, coupled with inflows from the 2015 sovereign bond and benefits from the country’s development partners.
Passage of Exim Bill
Mr Terkper also announced that as soon as Parliament resumed, the Exim Bill would be presented before it and expressed the hope that the law-making body would deal with it with dispatch, as had been done on previous occasions.
The creation of an Exim Bank, he explained, would lead to the availability of export finance to spur the export-oriented growth direction of the government on.
He said with the outward-looking perspective of the Exim Bank, the potential for the earning of foreign exchange was anticipated.
That, he said, was because exports would boost the nation’s foreign exchange reserves, since exporters would be bringing more forex to reduce the over-reliance on forex from the cocoa and mining industries.
He was optimistic that with the creation of the Exim Bank, export credit would be well structured and enhanced as well.
Mr Terkper said in the past the annual budget had been contingent on recurrent expenditure, subsidies and wages, a situation which had led to budget deficits and the inability to make statutory payments.
He said in view of the global volatilities being experienced in the major economies, sub-Saharan Africa was expected to remain weak throughout 2015, a reflection of the negative impact of falling commodity prices, rising fiscal constraints and instability in the financial and foreign exchange markets.
Advertisement
Impact of global developments
Those global developments, he said, had implications for Ghana’s Gross Domestic Product (GDP), reserves and foreign exchange earnings, thereby contributing to the weakening of the cedi as was currently being experienced.
Developments during the first half of 2015, he said, indicated that policies and reforms implemented since 2013 were taking hold and yielding results.
“Although fiscal performance shows significant improvement, the economy experienced some challenges during the first half of 2015, mainly due to lingering energy sector problems, depreciation of the local currency and softening commodity prices,” he said.
He said inflationary pressures remained elevated, while increase in foreign exchange demand as against limited supply sources largely underpinned the weakening of the cedi against the major currencies.
Advertisement
“Hence the situation would have been much better but for the impact of these setbacks, notably commodity prices and disruption in gas supply between 2013 and now,” he explained.
Mr Terkper said the fact that the government had admitted that there were challenges did not mean a gloomy picture ought to be painted of the economy.
He, therefore, cautioned the media to show circumspection in their reportage on the economy in order not to create an over-reaction that tended to scare potential investors.