World Bank Warns Ghana Over Growing Fiscal Deficit
The World Bank has expressed concern about Ghana’s growing fiscal deficit and warned of dangerous repercussions if the figure increases above 10 per cent of gross domestic product (GDP).
The 2014 target for fiscal deficit of GDP is 8.5 per cent. Currently, the fiscal deficit of GDP stands at 10.8 per cent.
A Chief Economist at the World Bank Africa Division, Mr Francisco Ferreira, who made the point, observed that the increase in inflation rate and volatile food prices were due to the depreciation of the cedi.
He said the current macroeconomic situation in Ghana required serious attention and expressed the hope that efforts by the government to address it would be successful.
Mr Ferreira was sharing some perspectives on a new World Bank report on Africa’s economic outlook from Washington, USA, via a video conference with some African journalists at their respective bases in Ghana, Ethiopia, Kenya, Uganda, South Africa, Sierra Leone, Nigeria, Liberia and Zambia.
The World Bank’s observation of the country’s economy reflects evaluation made by other institutions, including the International Monetary Fund (IMF), that suggests that unless the current macroeconomic challenges were dealt with, the country may not achieve the 8.5 per cent fiscal deficit of GDP target for 2014.
But Mr Ferreira said it would even be very dangerous for Ghana to go beyond 10 per cent fiscal deficit of GDP.
Africa Pulse report
The World Bank report, dubbed, Africa Pulse, is based on a twice-yearly analysis of the economic prospects of sub-Sahara African countries.
The report noted that the economic outlook for sub-Sahara African countries remained robust, projecting Africa’s growth rate to reach 5.2 per cent in 2014, up from 4.7 per cent in 2013.
“This performance is boosted by rising investment in natural resources and infrastructure and strong household spending,” it indicated.
The report said capital flow to sub-Sahara African countries continued to rise, reaching an estimated 5.3 per cent of regional GDP in 2013, significantly above the average of 3.9 per cent in developing countries.
According to Africa Pulse, Africa’s infrastructure deficit is most acute in energy and roads, adding that unreliable and expensive electricity supply and poor road conditions continue to impose high costs on business and intra-regional trade.
Responding to a question on how the Economic Partnership Agreements (EPAs) may benefit Africa, Mr Ferreira said the trade pact between the European Union and Africa could help improve manufacturing export in the region.
A Lead Economist of the World Bank Africa Region and author of Africa Pulse, Punam Chuhan-Pole, expressed the hope that Africa’s economic prospects would continue to improve.