Tuesday, September 29, 2009
We are not anti-growth gov't
Deputy Minister of Finance, Mr. Seth Tekpeh, has denounced the notion that government is not spending by emphasising that the new administration is not an anti-growth government.
He said if it is deemed to be pursuing an austere budget, it is because government is mindful of the implications of spending activities for general credit conditions wherein the government does not want to crowd out the private sector.
"The issue is that there are more arrears to be funded. Some say government is not spending, but government is actually spending above target.
"Remember, the government is not an anti-growth government. It is the same government that launched the structural adjustment programmes (in early 1980) that lifted the economy from negative growth and placed it on the path of positive growth ever since." The Deputy Minister was speaking at a 2010 pre-budget forum of Pricewaterhouse Coopers in Accra last week.
The public's criticism of government's spending programme for the year and its decision to sign onto the International Monetary Fund (IMF) bailout programme heightened when the Minister of Finance and Economic Planning, Dr. Kwabena Duffuor, presented a supplementary budget to parliament seeking to raise GH¢253 million just to meet expenditure arrears left unpaid by the previous administration.
The supplementary budget did not make mention of any additional project or programme to execute that would induce growth. This omission was largely deemed by segments of the public as part of the IMF policy prescriptions aimed at stabilization.
Three weeks ago, the Bank of Ghana also confirmed that government had sought assistance from the Bank to raise GH¢1.5 million over a period "to augment its fiscal resource base so as to meet outstanding arrears that accumulated in 2008 and were not known at the time of preparing the 2009 budget."
Mr. Tekpeh therefore pointed out that the decision to go to the IMP for balance of payment support ought to be put in perspective - in that if government were to address the balance of payment problem from its own domain, it was going to come with some sacrifices - such as growth-inducing projects.
"Do not forget we inherited a budget deficit of 24.2 percent and current account deficit of 20 percent. IMF lending comes at zero percent interest rate, over a 25-year repayment term and with a five-year grace period. Those who say the budget is an austere one, is it really tighter than what the IMF would demand under normal circumstances?" the Deputy Minister asked.
Government's overall budget programme for the year targets an end-period deficit of 9.4 percent of gross domestic product (GDP). Even though end-period inflation target was reviewed from 12.5 percent to 14.5 percent in the supplementary budget, the budget deficit target was maintained.
In the latest report of the Monetary Policy Committee of the Bank of Ghana released last week, overall budget operations for the first eight months of the year resulted in a deficit of GH¢901.55 million, the equivalent of 4.2 percent of GDP. This compared with GH¢1.43 billion, equivalent to 8.8 percent of GDP recorded for the same period in 2008.
According to the Governor, Dr. Paul Acquah, the deficit was mostly financed on the domestic money market. He noted also that developments show output growth is much closer to the trend rate of six percent from 7.3 percent in 2008.
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