Government asked to secure livelihood of Ghanaians

Accra, Sept. 7, GNA - Government has been urged to secure the livelihoods of Ghanaians even in the midst of the global economic downturn. In its comments on the Mid-Year Review of government's Budget Statement and Economic Policy for 2009, the Centre for Budget Advocacy (CBA) of Integrated Social Development Centre (ISODEC) said it was yet to see a coherent growth strategy for the national economy. The centre said the quality of growth was critical for reducing poverty and inequality and for investment in generating further growth and called on government to pursue the growth agenda outlined in the 2009 Budget.

While macroeconomic stability is desirable, the Centre said the macroeconomic framework needed in the current economic crisis should be aimed at promoting broad-based economic growth. For example, the high domestic interest rate currently existing could be a major contributing factor to the increased domestic interest payment burden on government.

Further, the high interest rate could partly explain the slowdown in business activity. A commendable achievement is the reduction in the trade deficit from US$2,155 million in the period January to June 2008, to US$955.8 million in the period January to June 2009. However, a conducive framework should be provided to boost the domestic productive sectors with the aim of increasing exports and relying more on domestic products towards transforming the structure of our traditional economy based on cocoa, timber and minerals. It said the government should commit itself to linking the macroeconomic framework to employment generation in the country. The government's strategy of promoting growth should target productive sectors where the poor are disproportionately employed, especially the agriculture sector.

The Centre expressed concern about the declining trend in agriculture's contribution to total growth. "Growth should be enhanced in sectors that would employ the teeming unemployed youth. This would contribute to the country's poverty reduction effort."

On revenue generation, the Centre asked government to consider the revision of natural resource taxation to take advantage of the current increase in the gold prices, for example, in addition to measures to improve its receipts such the immediate elimination of exemptions granted under special permits and general concessions, as well as the reduction of some exemptions granted relating to investment. Government, it said, should be moving towards working collaboratively with existing associations in the informal sector with the aim of fully capturing their members in the tax net. ISODEC said working with associations would also provide an environment for enhancing citizen-state relationship for increased accountability.

"Government's aim of reaching out to the large informal sector should not only rest on increasing resource mobilization but also serve as an avenue where tax payers can engage the government for the provision of the needed services and infrastructure towards growing their business.

"This move is particularly necessary before oil revenues start accruing to government because experiences from other countries show that such revenues can have a dampening effect of the ability to raise revenue from other sources, promote less transparency and accountability if there is high government dependence on oil revenues." On expenditure, the Centre while commending government for her move in rationalizing public expenditures, asked that attention be paid to increasing resources to services and investment, whiles maintaining efficiency in its expenditures. There must also be increased transfers to households during the period of economic downturn to provide safety nets to the citizens, especially to the population that are hardest hit by the current crises.

On debt sustainability, the Centre expressed worry about the high outstanding arrears and commitments reported in the mid-year review for the year 2008 which amounted to GH¢1.7 billion, about twice the budgeted figure.

"This figure is very alarming because it is more than the total discretionary expenditure for the half year. Also worrying is the number of court judgments against Government, which has resulted in the payment of judgment debt amounting to GH¢49.2 million against a budget provision of GH¢30 million."

It said the commitments and debts were likely to hamper efforts at improving service delivery and improving livelihoods. Effort should be made to forestall such a situation in the future. The Centre said government could use the option to restructure both international and domestic debt obligations (through negotiations) to reduce the burden but also to free up space for investment in the social and productive sectors of the economy.

"While we encourage government to re-issue the bonds that will soon fall due, as a way to structure it and free up more fiscal space for resources to cover critical infrastructural and social investment expenditure, we would recommend that parliament places a cap on both domestic and international borrowing with a quantitative target fixed and tied to GDP and anchored in law.

"In addition, all loans contracted must be scrutinized by parliament towards ensuring that due process is followed, including due diligence and also directing such resources to pro-growth areas." The Centre commended government on interventions in the agriculture sector, including providing GH¢10.7 million to support youth in agriculture, 50% reduction in the cost of fertilizer as subsidy, rehabilitation of dams among others. It, however, asked government to target its beneficiaries, especially with programmes whose support were limited, to ensure that the very poor benefit from the interventions for poverty reduction. The Centre said it regarded the mid-year review exercise as part of the duty of the executive to account to Ghanaians, through their elected representatives, how they generated and used resources for the priorities approved for them by the legislature. 7 Sept. 09