Create atmosphere for growth- Tetteh

Accra, Jan.29, GNA - The Vice-President of Databank Financial Services on Friday asked government to be bold enough to spend since there cannot be real economic stimulation without capital to generate growth at the micro level.

Mr Ogbarmey Tetteh, who was speaking to the Ghana News Agency Business Desk in Accra, noted that although it was essential to build on the three consecutive years of macro-economic stabilization, it is equally prudent to create the necessary atmosphere for growth in the 2004 budget. He was commenting on his expectations of the 2004 budget vis-=E0-vis what Ghanaians should expect this year.

Mr Tetteh said in every situation, the availability of capital to transform and improve economic outlooks is very significant and government must work to bring about these developments though the measures and policies that it churns out.

It is also expected to come out with initiatives that would enable the private sector to play its role in increasing capacity to perform creditably.

Mr Tetteh said it was important for government to come out with specific measures in the 2004 budget that would, for instance, aim at widening the tax net to capture a larger number of people, "especially those in the informal sector, a very large number at that."

He said government, on its own cannot force interest rates down, however, it must work to reduce inflation and inflationary trends such as not borrowing from the domestic market, crowding out the private sector from gaining access to funds.

Mr Tetteh admitted that the situation was particularly tricky, especially in an election year where government would be trying to woo people to vote for it.

He said Ghanaians should remain assured since government itself had said it was committed to avoiding excessive spending this year, which, if not done could fuel inflation.

Mr Tetteh said over spending in this years' election was not likely, since benefits under the Highly Indebted Poor Country's (HIPC) Initiative would be available for funding developmental and poverty reduction projects, which hitherto had been done with money borrowed from bilateral and multilateral donors.

He noted that Ghana would reap more money when it reaches the completion point later this year.

"Already, as you may know, Germany has forgiven us our entire debt owed them. Many more others are expected to forgive Ghana her debts under the HIPC programme adopted some three years ago.

"These funds purposefully targeted at reducing poverty and for development are a very welcomed way of accessing funds," he added.

He said, the promised venture capital fund must come on stream this year to help the private sector as its continued delay was negatively affecting development of the sector. Mr Tetteh said he was not sure that the National Reconstruction Levy would go off the tax line this year, especially as some people are advocating for government to move from heavy reliance on foreign borrowing.

"What government must do basically is to widen the tax net and get more people to pay taxes. By this, it (government) could then reduce tax rates. There are many loopholes in the revenue collection process likewise too many people underpay while some do not pay at all. "If they take it out, the question is how would they work out to plug out the holes in the national economy, " he queried. He however admitted that the banks, corporate institutions must be supported in several ways that would make them feel less taxed than they are doing now.

On how the economy could cope with impact of the recent corruption index rating by Transparency International, Mr Tetteh said it was something to worry about, "but I do not think it would make any significant impact, more so with the B+ sovereign credit rating by Standard and Poor recently. This would obviously damper the corruption index rating".

He said the B+ credit rating reflects the situation on the macro economic level and the outlook for the country and a strong advocate for the country indicating that despite the problems the country was facing, it was significantly working towards reversing its negative growth indicators.

He commended government for achieving a four-month gross reserve target, saying, "It's a historic achievement. The government earlier planned two and a half months, but achieved more than that."

He said a good external market situation has helped the economic situation in the country. Ghana's major trading items, gold and cocoa, have enjoyed one of the highest prices in recent years with world crude oil prices also on the descent.

Mr Tetteh said the 2004 budget should not contain anything that will lead to an increase in fuel prices as this could make life rather unbearable for Ghanaians.

He noted that perhaps it was strategic for government to have increased fuel and water tariffs by almost 100 per cent last year so that it would not do so this year.

"All this would however, be determined by the trend on the international world market," he explained.