Government targets low fiscal deficit
Loading ...Ghana has targeted an annual four percent decline in its fiscal deficit if all measures adopted by government materialize, Kwadwo Baah Wiredu, Minister of Finance and Economic Planning informed CITY & BUSINESS GUIDE yesterday.
Government’s expenditure always outpaced its revenue and this had been the phenomenon over the past few decades, thus widening the fiscal deficit gap.
The country’s fiscal deficit as at the end of the first quarter of 2008 stood at GH¢479.54 million, about 2.9 percent of GDP.
In the past five years, government’s spending had averaged about 30 percent of GDP.
External pressures such as escalating oil prices which reached $135 yesterday and rising food prices among others had increased the country’s import bill especially the oil bill, which recorded $2.4 billion at the end of April this year, compounding the issue.
But Mr. Baah Wiredu explained that several measures such as the National Strategy for the Export of Professional Services which contributes 70 percent to the gross domestic product (GDP) of developed countries would drive this course.
“We need to be cautiously optimistic so that expenditures at the education and health ministries do not enlarge so that we can have the hope of narrowing the fiscal deficit.”
On Wednesday, a report published by Citigroup Global Markets stated that Ghana was about to go through tough times in the next 12-18 months while its current account deficit continued to widen.
Nonetheless, the report noted that the country might be a more exciting destination than South Africa since in comparison, Ghana’s GDP growth of 6.4 percent and targeted to grow at 7 percent by the end of the year, was bigger than South Africa’s target of 4 percent this year.
Citigroup said the rise in the fiscal deficit was due to expenditure on resolving the energy crisis among others. Significant rises in spending on wages and salaries and capital expenditure were also noted.
Delivering the key note address at the Final Workshop on the National Services Export Strategy yesterday, the Finance Minister said it had always been government’s vision to increase its export service since it would aid in marching up imports, thus improving the balance of payment.
With only 4.5 million population, Singapore, an eastern Asian country had an economic size 20 times bigger than Ghana.
Mr. Baah Wiredu reiterated that there was the need for Ghana to accelerate its economic programmes.
“The development of the National Services Export Strategy will serve as a blueprint for the development and promotion of Ghana’s export and is in line with government’s drive to grow this economy into a middle-income status”.
Services accounted for over 70 percent of employment in developed countries and 35 percent in developing countries.
Since 1990, the share of services in GDP had grown from 65 to 72 percent in developed countries and 45 to 52 percent in developing countries.
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