IMF projects 10 percent fiscal deficit for 2013

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Accra, April 12, GNA – The International Monitoring Fund (IMF), on Friday said that Ghana’s fiscal deficit would rise to 10 per cent of Gross Domestic Product (GDP) this year, about one per cent higher than government’s budgeted projections, on delayed adjustment in utility tariffs.

Government in the 2013 budget planned to cut the deficit to nine per cent of GDP this year, from 12 per cent in 2012.

“The mission projects a reduction in the budget deficit to 10 per cent of GDP this year,” Ms. Christina Daseking, leader of the IMF mission to Ghana, told a news conference in Accra.

On economic growth, she said while activities in the non-oil sector would be dampened by energy disruptions and high interest rates, increased oil production should keep overall economic growth close to eight per cent.

Ms. Daseking, however, said a weaker outlook for cocoa and gold exports will leave the current account deficit around 12 per cent of GDP.

She said despite increased Foreign Direct Investment into the economy, the low external buffers and a rising domestic debt ratio would expose the economy to risks such as weaker terms of trade, reduced capital inflows or unanticipated spending needs.

‘Energy sector problems could curtail growth, while excessive government borrowing is raising the cost of credit to the private sector. Both factors have been identified as key growth constraints in Ghana,’   Ms Daseking said.

She said the IMF supported government’s transformation agenda, but noted that the attainment of the development goals would require lower budget deficits to contain external pressures and keep debt sustainable.

‘Going forward, successful economic transformation will require a realignment of spending, away from wages and subsidies toward infrastructure investment,’ Ms Daseking said.

She warned that ‘a ballooning wage bill, if untamed, will bring debt to levels that could endanger government’s transformation agenda.”

The IMF said government’s deficit target of 6 per cent of GDP by 2015 will keep public debt high and buffers low and, therefore, recommended an additional fiscal adjustment of three per cent of GDP by 2015.

Ms Daseking said the mission shared the Bank of Ghana’s views on a tight monetary policy stance, saying a successful fiscal consolidation will allow an easing of interest rates, provided inflation expectations decline to levels consistent with the achievement of the target.