Mr Seth Terkper, Minister of Finance, on Friday noted that government’s prudent investments have provided critical social services to improve the lives of Ghanaians.
These investments have resulted in the creation of tens of thousands of jobs for the youth, Mr Terkper stated during the presentation of the Budget Statement and Economic Policy for 2016 in accordance with Article 179 of the 1992 Constitution.
He noted that notwithstanding these successes, “we are mindful of the fact that some risks to the budget and medium term macro-economic projections persist and new ones could emerge”.
The budget on the general theme: “Consolidating Progress towards a Brighter Medium Term,” however highlighted major economic setbacks, such as the tumbling crude oil prices to a low of $ 45.0 per barrel compared to a bench mark revenue projection of $ 99.38 per barrel in the 2015 Budget.
He said this prompted government to revise its revenue targets and related expenditures that were to be funded from the Annual Budget Funding Amount.
He said gold spot price is yet to recover and even though cocoa prices are now recovering, prices and output keep fluctuating on the global markets.
“We have had to sacrifice government revenue in some years to fulfil our commitment to improve the welfare of farmers; the US economic recovery and appreciation of the dollar, coupled with pressures on our foreign exchange reserves from declining commodity prices, continue to weaken the Cedi, thus making imports more expensive.
“This is fuelling inflationary pressures and increasing the external debt service burden in Cedi terms; the global financial uncertainty that hit emerging and peripheral economies, including Ghana, pushed us into headwinds at the time of issuing the 2015 sovereign bond.
“We managed to navigate the turbulence, and in the process, added to our store of experience,” he noted.
Mr Terkper said as a middle income country, “we will be in the capital and financial markets in both good and bad times; concessional terms of some facilities from bilateral and multilateral partners including the World Bank (WB) and African Development Bank (AfDB) have hardened.
He said the WB, AfDB and other lenders also changed the repayment period of facilities to Ghana whilst interest payments and financial costs have increased the repayment period has reduced from 40 to 25 years.
The basis for calculating loan concessionality to include commitments and risks of floating exchange rates has also changed.
The Finance Minister said the disruption in gas supply and the low level of water in the Bui, Akosombo and Kpong dams due to climate change continue to pose power supply challenges, reduction in generation capacity and recurring power outages.
However, it is now clear that investments in the sector is rapidly changing the situation; and finally, the recommended overall budget deficit target of 5.3 per cent of GDP, under the IMF Extended Credit Facility programme , provides a tighter fiscal space than anticipated in the original programme.
“It is against this background that we must even be more prudent in 2016 and avoid the consequential cycle of huge election year budget overruns and deficit.
“We will focus on these risks and adopt appropriate measures to minimise their likely adverse impacts on the economy.
“Our approach is not to bemoan our challenges, offer excuses or fail to act decisively,” he said.
Mr Terpker the national debt and consequent burden of debt service would continue to rise only if the country does not emulate the success with which many middle income and advanced countries finance infrastructural, economic and social development on a sustainable basis.
To this end, government would continue to implement the debt management measures that were approved by parliament.
He said as a result of measures taken, the public debt is now increasing at a slower pace.
“We have always bemoaned our narrow export base and the resultant depreciation of the Cedi when we lose reserves from falling commodity prices.
“As part of our transformational agenda to achieve an export led economy, the Ghana Export and Import Bank Bill has been laid before Parliament,” he said.
Mr Terkper said the operations of the Bank would support the nurturing and growth of the private sector to address the longstanding problem of access to credit for expanded exports.
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