The Economy is in the red, hard times ahead - Minister

Accra (Greater Accra), 27th October 99 - Mr. Victor Selormey, Deputy Minister of Finance on Wednesday told Parliament that out of the total projected donor inflows of 1,546 billion cedis, only 460 billion cedis was received as at June this year.

Presenting the state of the economy to members, Mr. Selormey said the figure which represents 29.8 per cent has not only worsened government's revenue position, but has also weakened "further an already precarious foreign inflow position."

He disclosed that the budgeted receipts of 6,063 billion cedis has declined to 5,985 billion cedis even though the financing has already been increased from 668 billion cedis to 793 billion cedis.

The deputy minister said as at now 648 billion cedis of the financing has been utilised.

Statutory expenditures, he stated, have increased from 310 billion cedis to 3,195 billion cedis.

Mr. Selormey told Parliament that the timely discharge of statutory payment obligations is essential "if we are to retain our credit worthiness in the future."

He conceded however that if we are to live within the estimates approved by Parliament, then discretionary payments will necessarily have to be seriously curtailed.

He indicated that discretionary expenditures which had been budgeted at 1,547 billion cedis may have to be revised downwards to 509 billion cedis.

"This means severe, and I dare say, irreversibly damaging consequences for our development programmes."

Mr. Selormey said taxes may have to go up to help meet the shortfalls in Ghana's revenue earnings as part of measures to arrest the decline in revenue and its impact on planned expenditures.

He said other measures such as the tightening of administrative and other procedures in the tax system and the sourcing of grants from external sources would have to be applied to keep the economy moving.

The Deputy Minister made it clear that since the government does not believe in "unduly increasing the debt burden", it is unlikely that "it will increase borrowing substantially to cover the shortfall in revenues".

He said the nation cannot continue to rely on aid from donor agencies, and therefore stressed the need for self-reliance.

"We have to do all we can, if donor aid is to be meaningful and effective. If we are going to ask for support from the donor community, it will be useful to demonstrate firstly that we recognise the problems and difficulties that we face and also demonstrate our preparedness to do something about them."

Mr. Selormey said government has shown restraint in its expenditure and has against all adversity been able to keep the macro situation relatively stable by prudently managing its finances.

The economy, he indicated, has shown resilience, adding, "we have demonstrated that we can withstand the severest of shocks. What is required now is how we can turn this event around and make it the last time that this economy has to go through such pain again."

The deputy minister, however, admitted that all sectors of the economy would be adversely affected at least over the next 12 to 18 months.

For instance, he said, real gross domestic product projection which was to hit 5.5 per cent has to be revised downwards to 4.4 per cent.