IMANI Warns About Economic Risks

IMANI Ghana has warned of some risks to the 2012 Budget in the third quarter of this year and called for urgent measures from government’s Economic Management Team to appropriately deal with those.

According to the organization, as the country moved deeper into the thirdquarter, hefty shortfalls in projected revenues could be recorded which could affect the country’s foreign currency holding position and contribute to the fall in the cedi’s value.

The policy think-tank opines that if such risks are left unchecked, the effects would compound and begin to undermine efforts to restrain inflation, stabilize the fiscal deficit and improve on Ghana’s balance of payments.

“Because government budgeted for oil revenue of more than $650 million, the shortfall in the budget is correspondingly more than $410 million.

The 2012 shortfall is nearly three times more than the 2011 oil-related budget shortfall of about $140 million. Apart from lower than expected production in the field, the government also budgeted to receive $200 million in corporate taxes from the oil companies but reports indicate that they are in no position to pay.”

It revealed that by the time Phase 1A is complete, at least $4.5 billion would have been spent on development costs.

Also it says it expects production levels of more than 100,000 barrels per day. It assumed that by end of Phase 1A, the completed modules in the field would, over their lifetime of 15 or so years, produce at an average rate of 100,000 barrels a day.

“In summary, there are serious issues within Ghana’s oil sector that are already producing some serious financial consequences. Government would serve Ghanaians better if it engaged in a more transparent way about how it plans to prevent the problems from becoming chronic.”

Touching on the Chinese Development Bank (CBD) loans, it said even though it warned government about it, the latter still went ahead to budget more than $632 million of the CDB facility as capital expenditure related revenue.

“The adverse implication of this decision is that the overall shortfall in expected forex inflows into the economy is more than $1 billion. No wonder the Cedi has taken such a hit from speculators, who in all probability expected a forex crunch somewhere along the line.

“At any rate, none of the projects are actually ready to receive the disbursements. Apart from allocating about $12 million to the Ghana Gas Company for its set up, not much progress has been made in the construction of the Atuabo Gas Plant, which we were assured would be pre-financed by Sinopec. In fact, reports suggest that even sub-structural engineering works have yet to commence.”

Furthermore, it expressed fear that the secrecy-shrouded Huawei-led ICT surveillance platform for the oil fields being developed for National Security was likewise unready.

“In fact one wonders what exactly the $150 million shall be used for. This is a lot of money.”

The think-tank therefore called on government to step up the challenge and provide appropriate solutions since it still has the opportunity to prevent severe damage to the economy.