Development partners tighten credit term

Government’s tagging of Ghana as lower middle-income country (LMIC) in recent times has led to the reduction in soft and long-term aid inflows, with attendant fiscal and balance of payments challenges.

Two of the country’s multilateral development partners, the World Bank (IDA) and the African Development Bank (AfDB), have varied the terms of credit to Ghana as a result of her LMIC status.

Seth Terkper, Finance Minister, disclosed this yesterday while delivering Government’s budget speech for the 2014 financial year in Parliament, Accra.

“For example, World Bank credit at 0.75 percent service charge and 40 years of maturity is now revised to 1.25 percent and a maturity of 25 years. Likewise, the African Development Bank has notified us of changes in the terms of their credit, similar to that of the World Bank,” he stated.

Such conditions, according to some analysts, have pushed Government to tighten taxes for businesses operating in the country in 2014.

Though government scrapped some of the taxes on imports such as cutlasses, condoms and outboard motors, among others, it introduced new ones to make up for the scrapped ones.

Coupled with the foregoing, Ghana’s manufacturing sub-sector did not perform well in 2013.

It posted a growth of 2.5 percent, down from 5.0 percent growth in 2012 primarily due to the power crisis experienced in the first half of the year.

On the fiscal front, the 2013 Budget was aimed at achieving a reduction in the budget deficit from 11.8 percent of GDP in 2012 to 9.0 percent of GDP in 2013 but preliminary data for the first nine months of the year indicate that both revenue and expenditure were below their respective targets for the period.

The resulting fiscal deficit on cash basis, according to Mr Terkper, was equivalent to 8.4 percent of GDP as against a target of 7.2 percent.

“Total revenue and grants for the period was GH¢13,868.2 million, equivalent to 15.9 percent of GDP. This compares with a target of GH¢16,341.9 million, equivalent to 18.4 percent of GDP. In nominal terms, the provisional outturn was 17.6 percent higher than the outturn for the same period in 2012.

“The shortfall was partly as a result of low disbursement of grants from our development partners and mainly due to lower than anticipated domestic revenue collections. For 2013 as a whole, total revenue and grants are projected at GH¢20,801.0 million, 7.7 percent lower than the budget target for the year.

Again, total expenditure, including clearance of arrears and outstanding commitments for the first three quarters of the year amounted to GH¢21,202.8 million (24.3 percent of GDP) against a target of GH¢22,710.3 million (25.6 percent of GDP).

The outturn was 6.6 percent lower than the budget target and 25.5 percent higher than the outturn for the corresponding period in 2012.

The growth in expenditure was mainly due to the increase in interest cost and the growth in the wage bill during the period.

Total expenditure for the year, including provision for the clearance of arrears and commitments, is projected to be 2.7 percent lower than the 2013 budget estimate.

For the year as a whole, total expenditure is projected at GH¢29,706.4 million, 34.1 percent of GDP.