A Deputy Minister of Finance, Cassiel Ato Forson, says the structural causes of Ghana's large budget deficits, is hurting the economy's reputation as a stable place to invest international private capital. From 2010 to date, the West African country has been recording budget deficits in double digits which Fitch Ratings, the World Bank and International Monetary Fund have complained about.
Delivering an address to policy makers, academics and researchers gathering in Accra this week for the Africa Growth Forum 2014, Mr. Ato 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.
But he assured Ghanaians and the investor community that government was firmed in its determination to cut the budget deficit to a more sustainable ratio. Adding that while the short-term outlook is challenging, the medium-term prospects of the country are excellent.
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 makes 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 the pains of transitioning 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, Dr. Wampah emphasised.
He indicated that a new area where governments in Africa like Ghana's need evidence-based policy guidance is how to manage the transition from low- inc\ ome to middle-income status a process that is fraught with both challenges and opportunities.
For Ghana and other sub-Saharan African nations, one of the key quandaries in contemporary times is how to sustain relatively brisk economic growth - in Ghana's case averaging 7.3 percent annually from 2003-13 - while translating it into jobs for an ever-demanding population, according to BoG boss.
Another dilemma that confronts governments within the region is how to meet the demands of their people without dislocating tight fiscal budgets, he added. "The onus rests on us as policymakers to find the solutions [to these problems]," he told the delegates of the forum, which was organised by the Internatiorial Growth Centre (IGC) together with the Ministry of Finance and the Bank of Ghana.
Instructively, the IGC is a UK government-funded research institute hosted jointly by the London School of Economics and Oxford University. It conducts research in 14 developing countries including Ghana and nine other sub- Saharan African countries. The IGC provides policy advice to the governments of these countries.