Ken Ofori-Atta, Finance Minister
THE CENTRAL
Bank has said gaps in the country’s revenue mobilization, coupled with the
increasing spate of spending, could pose risks to the country’s macroeconomic
stability if not addressed.
The aforementioned
concerns have slowed down the pace of fiscal consolidation, the Governor of the
Bank of Ghana (BoG), Dr Ernest Addison, stated on Friday at a press conference
in Accra, after the 89th Monetary Policy Committee (MPC) meeting.
Deficit
He disclosed,
“Provisional data for the first five months of 2019 showed an overall budget
deficit (on cash basis) of 3.0% of GDP against the target of 2.4% of GDP. This
excludes some legacy energy-related payments of about 0.7% of GDP. The
higher-than- projected fiscal deficit outturn was primarily driven by
lower-than-expected revenues outturn against increased pace of spending.
“The revenue
shortfalls were mainly from international trade taxes. Over the review period,
total revenue and grants amounted to GH¢18.5 billion compared to a programmed
target of GH¢21.5 billion, indicating an annual growth of 7.6%. Total
expenditures, however, reached GH¢28.6 billion, marginally below the target of
GH¢29.7 billion, representing 25.2% annual growth.”
Corrective measures
Dr Addison
said, “The MPC expected that some corrective measures will be announced in the
mid-year budget review. This should help address the financing gap challenges
as well as manage the risks from the large unbudgeted energy sector related
payments that could adversely impact foreign exchange reserves and undermine
the macro stability gains made so far.”
Price stability
However, he
said while such risks remained, the BoG’s core mandate of price stability
appeared to be on track.
Inflation
“Inflation
has remained within the target band in the last 15 months,” he said, adding
that the MPC’s assessment showed that the pass-through from exchange rate
depreciation was waning, while the underlying inflationary pressures, as well
as inflation expectations, were well-anchored.
Policy rate
He said the
MPC decided to maintain the policy rate at 16%.
Growth
Noting also
that economic activity remained strong and broad-based, he said, “Although
there are some downside risks to growth, mainly from subdued business
sentiments and increase in utility tariffs, growth is expected to remain robust
in the second half of the year. The medium-term outlook for the real sector is
positive based on improving consumer sentiments and continued recovery in
private sector credit growth.”
Continuing,
the BoG Governor said the strong external payments position witnessed in the
last 24 months continued in the first half of the year.
“Both the
trade and the current account recorded surpluses. These, together with
improvements in the capital and financial account, translated into a slight
build-up in reserves in the first half of the year, supporting the local
currency market, as the cedi remained relatively stable in the second quarter.”
BY Samuel Boadi
