Business News of Thursday, 23 November 2017
Source: citibusinessnews.com
2017-11-23
Finance Minister, Ken Ofori-Atta
As the Finance Minister hints of raising a Eurobond to the tune of one billion cedis, some observers have cautioned government to look for other alternatives to finance government’s spending without issuing a Eurobond.
One option available to government is the 5 percent chance for the Bank of Ghana to finance government spending, but it is an option the International Monetary Fund will not be amused about.
The 2018 national budget read in parliament last week Wednesday by Finance Minister Ken Ofori-Atta has an overall budget deficit of 10.9 billion cedis.
This means that government intends to spend in excess of 10.9 billion cedis in relation to its projected revenue.
By this the Finance Minister will have to look for the said amount either through borrowing, taxes or financing from the Bank of Ghana.
The latter was abused by the previous John Mahama administration forcing the IMF to stop the central bank from printing money to support government’s spending.
Even though the current law allows government to seek a 5 percent financing, the provision is yet to be triggered.
Speaking to Citi Business News, Head of the Economics Department at the University of Ghana, Professor Peter Quartey was of the view that government may find innovative ways to finance the deficit even though central bank financing is cheaper.
“It is too early now. The government has a full year to implement the provisions in the budget. Government may get the money. But in BoG financing, there is a limit, it’s 5 percent. When the need arises, why not. Government can resort to BoG financing but not go beyond the 5 percent,” he said.
Prof. Quartey also advised that government could discuss the possibility of a BoG financing with the IMF.
“I also think it is something that government can negotiate with the IMF, since we are still under the IMF programme, it’s a cheaper way of financing the deficit rather than raising new bonds or borrowing from other sectors,” he recommended.
For the Head of Economics Division at the Institute of Statistical, Social and Economic Research (ISSER), Dr. Charles Ackah, improving domestic revenue mobilization is the answer.
“We have a lot of properties scattered across the country, but the owners don’t pay property rate. Just look at how people buy lands here in Ghana without paying taxes. It is only in Ghana that people buy land for one million cedis and not pay taxes”.
He stated that government can make a lot of revenue from taxes if the right systems are put in place.
Even though the Eurobond seem to be the option taken by government, Economist and Head of Finance at the University of Ghana Business School, Professor Godfred Bokpin warns that it may come with its own challenges if the economic fundamentals are not stable.
