Business News of Friday, 28 July 2017
The Institute for Fiscal Studies (IFS) has cautioned that government will miss its 2017 budget target should it fail to spend in critical sectors of the economy.
The IFS argues that government’s refusal to pay valid arrears and invest in infrastructural development for the first half of this year has impacted heavily on economic growth.
The warning comes on the back of an assessment of the economy for the first half of 2017.
The Executive Director of the IFS, Professor Newman Kusi explains that the cut in some critical expenditure has affected economic performance so far.
“The cuts in expenditure have been affected; those that we actually need such as the capital spending, earmarked funds, payment for goods and services among others. But then again the government has its hands tied at its back because it cannot cut back on wages and salaries, interest payments, etc and these together take a disproportionate share of the revenue that is collected,” he stated.
The assessment comes ahead of the midyear budget review by Finance Minister, Ken Ofori Atta to be presented to Parliament on Monday, July 31.
In general, the IFS described as encouraging, the government’s efforts to achieve economic stability.
Some key indices that the economic think tank lauded included the declining inflation rate (12.1%), increased oil exploration activities as well as increased exports among other initiatives undertaken in the first half of 2017.
On fiscal performance and real sector development, the IFS described the 1st half performance as mixed.
The revenue targets fell by 2.3 billion cedis or 17.1% with government’s expenditure target also dropping by 3.6 billion cedis or 20.5%.
This was influenced mainly by the tight fiscal and monetary policies pursued by the government.
Meanwhile Professor Newman Kusi maintains the government needs to do more to propel economic growth.
“So the government would have to look at how to clean the expenditure in such a way that the little spend will give the country the needed benefits for instance Irregular payments, unbudgeted expenditures among others must be cleaned.”
While optimistic of prospects for economic growth, the IFS warns the issues would also require strict adherence to prudent financial management in order to reduce the government’s debt burden from borrowing.
“By implementing effectively and strictly the provisions of the Public Financial Management Act (PFMA) and the Public Procurement Act (PPA). I am sure that if these two laws are implemented to the latter, there’s a lot of money that the government can save even if revenue is increasing to deal with that.”