Business News of Saturday, 13 April 2013
The International Monetary Fund (IMF) on Friday urged government to gain control over the wage bill, saying “rising debt levels could endanger government’s transformation agenda.
“A ballooning wage bill, if untamed, will bring debt to levels that could endanger the government’s transformation agenda,” Ms Christina Daseking, leader of the IMF mission to Ghana told journalists. The wage bill in 2012 rose by 47 per cent and the IMF mission has recommended a thorough audit of the 2012 payroll.
The IMF also projected Ghana’s fiscal deficit to rise to 10 per cent of gross domestic product (GDP) in 2013, about one per cent higher than government’s budget 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. On economic growth, Ms Daseking 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. However, a weaker outlook for cocoa and gold exports will leave the current account deficit around 12 per cent of GDP.
Ms Daseking 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,” she said. The mission, she said, supported government’s transformation agenda but said 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,” she said, adding 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 six 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.