Policy Comment

According to ISSER, revenue targets have consistently been under-achieved due to external borrowing.

ISSER stated that the government had borrowed about GHS50billion over the past years, including bailout loans, adding that, if the situation is not checked, it would lead to high-interest payments which would affect the fiscal space left for capital spending.

Professor Peter Quartey, the Head of Economics Division, ISSER at a press briefing in Accra on the 2019 budget, said the real Gross Domestic Product growth as at September 2018 was below target although December 2018 estimates may show a higher growth rate.

He said fiscal deficit based on both rebased and non-rebased was within target even though the revenue targets were missed.

Prof Quartey said the exchange rate depreciation for September 2018 was 7.5 per cent compared to 4.5 per cent rate of depreciation against the dollar recorded in 2017, adding that the situation had a serious implications on import duties, the cost of doing business as well as the general cost of living.

Touching on the fiscal sector, the Professor said the overall fiscal deficit was expected to increase by 4.2 per cent in 2019 and that this would be on account of an expected increase in expenditure over revenue.

He said the expenditure was expected to increase from 19.4 per cent to 21.3 per cent of GDP between 2018 and 2019, while revenues would increase from 15.7 per cent to 17.1 per cent over the same period.

Prof Quartey stated that the nominal public debt stock as at September ending was GH¢ 70.8 billion, comprising external debt of GH¢86.6 billion and domestic debt of GH¢84.2 billion, explaining that the figure includes about GH¢7.9 billion bailout bonds.

Focusing on the monetary and financial sector, Prof Quartey said both the monetary policy rate and the Bank of Ghana reference rate showed a downward trend in 2018 with the MPR declining to 17 per cent.

He said the money market rates responded to the decline in the policy rate with all the Treasury bill rates declining except the 91-day rate which firmed up marginally.

He recommended to the government to continue their efforts to improve on the country’s NTEs and an aggressive industrialization agenda as well as add value to the primary raw materials exports.

He encouraged the government to promote non-traditional exports because agriculture growth had been positive and rising, and that, the planting for food and jobs programme should promote more irrigation and encourage private sector participation.

Prof Quartey said the 2019 budget had ambitious programmes and targets, which aims to transform the country but its outcome depends on how government, was able to address the domestic revenue mobilization challenges.

Source: Modern Ghana