Business News of 2014-07-16

Finance minister presents mid-year budget review today

The Finance Minister, Seth Terkper, will today present to Parliament a mid-year review of the budget statement and economic policy of government for consideration and adoption.
The mid-year review is expected to review targets set out by the ministry in the 2014 budget statement and propose new policies on how the ministry intends to meet those targets it fell short of.
some of government’s macro economic targets announced by Seth Tekper when he delivered the 2014 budget statement include an end of year inflation target of 9.5 percent within the band of plus or minus 2 percent, an overall budget deficit equivalent to 8.5 percent of GDP, gross international reserves of not less than 3 months of import cover of goods and services as well as overall real GDP (including oil) growth of 8.0 percent.
But months after these targets were made and a few months to the day of reckoning it is clear government will not be able to meet them. Economist John Gatsi tells Citi Business News all targets set must be reviewed. Inflation currently stands at 15 percent and the country’s budget deficit is still rising likely to go beyond the 8.5 percent target set.
Gross international reserves at the end of June were 4.5 billion cedis corresponding to 2.5 months of import cover, compared with 5.6 billion dollars at the end of December. Other targets set were that of revenue and expenditure.
However provisional data on government fiscal operations indicate lower than budgeted outturns for both revenues and expenditures for January to May this year. Total revenue and grants was 9 billion cedis below the target of 9.5 billion cedis while total tax revenue amounted to 7.1 billion lower than the expected 7.3 billion.
Government’s under performance of its revenue for the first five months have been attributed to low import volumes declines in international gold prices and a general slowdown in economic activities among others. Finance minister Seth Tekper is expected to tell law makers how he intends to deal with the challenges leading to government missing its targets and also how he will ensure government meets its revenue targets.
Government expenditures including arrears clearance amounted to 13.1 billion cedis lower than the estimated 13.6 billion cedis. But industry players say the finance minister is not likely to announce a reduction in expenditure as the country’s wage bill continues to grow as well as the need to spend more due to the country’s huge infrastructure deficit among others.
It appears there is hope however in increasing the country’s gross international reserves. Governor of the bank of Ghana in presenting the monetary policy committee’s findings after its held its 60th meeting to review developments in the economy early this month said ‘the onset of gas production in the fourth quarter of this year would reduce the oil import bill going forward this development coupled with others is expected to help restore the gross international reserves to a minimum of 3 months import cover’.
Meanwhile the finance minister is also expected to touch on moves government is putting n place to deal with the deprecating cedi.
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