17 June 2014

Ghana: Budget Deficits "Hurts" Ghana's Reputation

Photo: Kwabena/Twitter
Ghanaians have taken to the streets - marching to petition President John Mahama about what they say are worsening economic conditions in the country.

Accra — THE Deputy Minister of Finance, Cassiel Ato Forson, said the structural causes of Ghana's large budget deficits was hurting the economy's reputation as a stable place to invest international private capital.

Delivering an address to policymakers, academics and researchers gathering in Accra at the Africa Growth Forum 2014, Forson admitted that the rigidities, imposed on the government's budget by statutory resource allocations and quasi-statutory expenditure such as wages and interest payments were hitting hard on the country.

Nonetheless, he assured Ghanaians and the investor community that government was firmed in its determination to cut the budget deficit to a more sustainable ratio.

Since 2010, the West African country has been recording budget deficits in double digits which Fitch Ratings, the World Bank, and International Monetary Fund have raised concern about.

The Governor of the Bank of Ghana, Dr Henry Kofi Wampah noted that Ghana was "a victim of its own success" because its middle-income status made it difficult to borrow on concessional terms.

According to him, the country has to now utilise more commercial debt facilities to finance government budget deficits.

Ghana is currently experiencing a transition from a low-income classification to a middle-income status.

"After graduating to the middle-income bracket four years ago, Ghana's maximum tenor of loans from the World Bank was reduced from 40 years to 25 years, and with grants from foreign donors not keeping up with their pledges, the country has increased its use of international capital markets to raise development finance, " Wampah emphasised.

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