Business News of Friday, 15 March 2013
Source: Graphic Business
An economic analyst, Mr John Gatsi, has described the 2013 Budget and Economic Statement as “Frank”, saying it reflects the current realities of the country’s economic landscape. However, SEND Ghana, a civil society organisation, thinks the budget lacks detailed social protection provisions.
Mr Gatsi, a Chartered Economist and lecturer at the University of Cape Coast, said the budget made a clear and frank evaluation of the past year, spelling out the achievements and outlining the challenges that still remain to be tackled.
“The financial position was clearly spelt out and the causes of the fiscal deficit outlined, while the growth situation was explained very well,” Mr Gatsi told the GRAPHIC BUSINESS shortly after the Minister of Finance, Mr Seth Terkper, presented the budget and economic policy of the government to Parliament on Tuesday.
The budget announced an over-spending (fiscal deficit) of GH¢8.64 billion equal to 12 per cent of the total value of goods and services produced within the economy during the year, a measure known as Gross Domestic Product (GDP).
The government admits the deficit was too large as it went above the target of GH¢4.6 billion, equivalent to 6.7 per cent of GDP. The budget deficit recorded for the corresponding period in 2011 was equivalent to 4.0 per cent of GDP.
The domestic primary balance also registered a deficit of GH¢1.17 billion, equivalent to 1.6 per cent of GDP, against a targeted surplus of GH¢1.73 billion, equivalent to 2.5 per cent of GDP. Following the huge deficit, the government has accordingly revised the figure downwards in the budget to nine per cent for 2013.
Mr Gatsi said the cut back was in order considering that growth for last year was 7.1 per cent, still among the highest in sub-Sahara Africa, and projected to be maintained at about eight per cent of GDP for 2013.
“The growth situation for me was well explained in the budget. People thought because we recorded 14 per cent in 2011, the growth rate was going to remain the same. But we should understand that the 7.1 per cent is still the highest in Sub-Sahara Africa,” the economist, who is also the President of the Association of Chartered Certified Economists (ACCE) Ghana told the GRAPHIC BUSINESS.
The economist was also happy about the areas the budget channeled the oil money to include expenditure and amortisation of loans for oil and gas infrastructure; road and other Infrastructure; capacity building (including oil and gas), and especially agricultural modernisation.
“Investing in agriculture is of particular importance to avoid the Dutch Disease. Agricultural investments will also help in creating jobs and sustaining those that are already engaged in agriculture,” Mr Gatsi said.
He was, however, not happy the tax initiatives introduced to purposely cater for expanding the funding of the National Health Insurance Scheme (NHIS), which is currently facing dire financial constraints. “I was expecting that the rate of National Health Insurance Levy to increase since it is the major source of funding the NHIS. The scheme has expanded in scope and we need to find other ways of expanding it,” the economist said.
He said otherwise the ministry of finance could have allocated some of the oil money to fund the scheme, since contributions from members cover only about 10 per cent of the funding cost. In an interview, the Country Director of SEND Ghana, Mr George Osei-Bimpeh, agreed with the intention of the budget to reduce deficit, while keeping pace with infrastructural development.
However, he added, there were challenges because some of the proposed strategies to reduce poverty could rather result in the poor paying for services at a much higher rate than they were used to. The missing link he identified was the extent to which government was only focusing on removal of subsidies without looking at mitigating the effect on the poor.
“If we are looking at the situation of financing the deficit and that implies removing subsidies from fuel, the question is that what mitigation measures have you put in place to cushion the poor?, he quizzed.
“Do we have a lot of more of for example the Metro Mass Transport (MMT) buses that will provide cheaper, efficient and affordable services to citizens, so that they are not left at the mercy of private individuals who would certainly take advantage of petroleum price hikes to make life unbearable for these people,” he questioned.
It was not clear, he added, how the government was strategising for the poor in the budget, particularly with mitigation measures, adding “there should be some efficiency in MMT operations so that people can rely on it instead of the long queues that are normally seen at the various bus terminals.”
He said although cutting back on expenditures was in the right direction, the government should come out clearly with some social intervention.