Accra, (Greater Accra) 30 Oct., The Centre for Policy Analysis (CEPA) today blamed Ghana's economic woes on poor fiscal management which is dictated by intense socio-political pressures in the face of resource constraints. ''Consequently, fiscal management should necessarily occupy centre stage in the design of a prudent overall adjustment strategy that aims at redirecting the current dismal economic fortunes of the nation,'' the Accra-based research think-thank said. In its mid-year economic review presented by Dr. Joseph L. Abbey, Executive Director, CEPA said developments through the end of June confirm its worst fears and suggest that the health of the economy ''is anything but sanguine.'' It said available data on the fiscal position show a sizeable half-year deficit of about 270 billion cedis as against the year's budgetary target of 191 billion cedis surplus. Together with a net external loan repayment of 215 billion cedis the Public Sector Borrowing Requirement for the first half-year stood at 485 billion cedis. This means government had to borrow that amount from domestic sources to finance its operations, especially in the light of an apparent squeeze by donors,'' CEPA said. It blamed large increases in treasury bills for the high nominal interest rates and said the government's net addition to the stock of treasury bills increased by more than 90 per cent, amounting to 573 billion cedis, over the net stock outstanding at the end of December, last year. CEPA said the high interest rates have resulted in substantial increases in the interest component of government expenditures. It said for the first time in the history of the nation, total interest payments on government's public debt - domestic and external - exceeded the wage bill. ''These developments clearly indicate that the crowding-out effect of government debt service is likely to be with us for a while''. Touching on money supply, CEPA said after hitting a trough of 31 per cent in April, money supply growth has reached 34 per cent by end of June, a situation which, it said, can lead to resurgence in the high rate of inflation in the latter part of the year. Inflation which is currently running at about 30 per cent is far more than the 15 per cent target set in the 1997 budget and CEPA said the emerging trends show it would be difficult to stabilise the cedi on the foreign exchange market. In the foreign exchange market, the interbank market rate rose from 1,734.11 cedis per dollar last December to 2,071.07 cedis per dollar last June. This means that the cedi against the dollar depreciated by 19.4 per cent over the first six months of the year. CEPA said its concern is that if such a situation continued, it would lead to economic recession, increased unemployment, enterprise failures and bankruptcies. CEPA said for the half-year, the nation recorded a large trade deficit estimated at 330 million dollars. This was the result of disappointing export earnings largely on account of a fall in the world market price of gold and an import binge. The slow pace of disbursements of grants and loans, sluggish export receipts, pressure for foreign exchange have all contributed to the deterioration in the external payments position, CEPA said. ''Consequently, by the end of June, the nation had seen a decummulation in its international reserve to the tune of 92 million dollars. ''In fact, if anything, the developments in the third quarter point to a worsening of the fundamentals and if this situation persists, 1997 may end up worse than we had anticipated''. Dr. Abbey said, however, that Ghana still has the capacity to manage its economy successfully bearing in mind the global economic changes. ''The discipline that is needed must therefore come from within. This requires that painstaking and hard choices be made by major decision-makers...,'' Dr. Abbey said.
Accra, (Greater Accra) 30 Oct., The Centre for Policy Analysis (CEPA) today blamed Ghana's economic woes on poor fiscal management which is dictated by intense socio-political pressures in the face of resource constraints. ''Consequently, fiscal management should necessarily occupy centre stage in the design of a prudent overall adjustment strategy that aims at redirecting the current dismal economic fortunes of the nation,'' the Accra-based research think-thank said. In its mid-year economic review presented by Dr. Joseph L. Abbey, Executive Director, CEPA said developments through the end of June confirm its worst fears and suggest that the health of the economy ''is anything but sanguine.'' It said available data on the fiscal position show a sizeable half-year deficit of about 270 billion cedis as against the year's budgetary target of 191 billion cedis surplus. Together with a net external loan repayment of 215 billion cedis the Public Sector Borrowing Requirement for the first half-year stood at 485 billion cedis. This means government had to borrow that amount from domestic sources to finance its operations, especially in the light of an apparent squeeze by donors,'' CEPA said. It blamed large increases in treasury bills for the high nominal interest rates and said the government's net addition to the stock of treasury bills increased by more than 90 per cent, amounting to 573 billion cedis, over the net stock outstanding at the end of December, last year. CEPA said the high interest rates have resulted in substantial increases in the interest component of government expenditures. It said for the first time in the history of the nation, total interest payments on government's public debt - domestic and external - exceeded the wage bill. ''These developments clearly indicate that the crowding-out effect of government debt service is likely to be with us for a while''. Touching on money supply, CEPA said after hitting a trough of 31 per cent in April, money supply growth has reached 34 per cent by end of June, a situation which, it said, can lead to resurgence in the high rate of inflation in the latter part of the year. Inflation which is currently running at about 30 per cent is far more than the 15 per cent target set in the 1997 budget and CEPA said the emerging trends show it would be difficult to stabilise the cedi on the foreign exchange market. In the foreign exchange market, the interbank market rate rose from 1,734.11 cedis per dollar last December to 2,071.07 cedis per dollar last June. This means that the cedi against the dollar depreciated by 19.4 per cent over the first six months of the year. CEPA said its concern is that if such a situation continued, it would lead to economic recession, increased unemployment, enterprise failures and bankruptcies. CEPA said for the half-year, the nation recorded a large trade deficit estimated at 330 million dollars. This was the result of disappointing export earnings largely on account of a fall in the world market price of gold and an import binge. The slow pace of disbursements of grants and loans, sluggish export receipts, pressure for foreign exchange have all contributed to the deterioration in the external payments position, CEPA said. ''Consequently, by the end of June, the nation had seen a decummulation in its international reserve to the tune of 92 million dollars. ''In fact, if anything, the developments in the third quarter point to a worsening of the fundamentals and if this situation persists, 1997 may end up worse than we had anticipated''. Dr. Abbey said, however, that Ghana still has the capacity to manage its economy successfully bearing in mind the global economic changes. ''The discipline that is needed must therefore come from within. This requires that painstaking and hard choices be made by major decision-makers...,'' Dr. Abbey said.
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