The Institute of Economic Affairs (IEA) has said that some of the government’s macroeconomic targets in next year’s budget are “not ambitious enough” to ensure economic growth.
While describing the GDP growth target of 8 percent as over-ambitious, the IEA said the government’s 2014 inflation target of 9.5 percent, budget deficit of 8.5 percent of GDP, and tax-to-GDP ratio are all not ambitious enough.
A Senior Fellow of the IEA, Dr. J.K Kwakye, said some of the government’s macroeconomic targets for next year indicate that the country is far disconnected from the world’s economy. Dr. Kwakye said with oil output set to increase to about 120,000 barrels a day, the oil-inclusive economic growth of 8.5 percent seems to compare favourably with the 7.4 percent achieved this year.
He however added that given the oil-exclusive target of 7.4 percent, which compares with 5.8 percent for this year, looks ambitious in the face of uncertainties in commodity prices and agricultural output.
Dr. Kwakye meanwhile contends the government’s other macroeconomic targets are too modest. “The inflation target does not seem ambitious enough. The targetted deficit does not seem ambitious enough, and raising the tax efforts from 17.3% in 2013 to 19.3% in 2014 is unambitiously feasible.
“Globally, inflation has been subdued; so as a country we seem to be disconnected from the rest of the world with a very high rate of inflation.
“The deficit is also not ambitious and we should bring the deficit down faster than is now envisaged, because if we maintain this high deficit, it will entail a high level of borrowing and further escalate the public debt and interest payments.
“As for our tax-to-GDP, it is nothing to write home about. It is below international standards and middle-income standards, so we can do a lot on the revenue side by roping in the informal sector rather than burdening existing taxpayers with more taxes,” he said.
Dr. Kwakye said the satisfactory level for the inflation target should be 7 percent and 6.5 percent of GDP for the budget deficit.
He said while some aspects of the budget provide some hope, more could be done to address challenges facing the country.
The Finance Minister, Seth Terkper, is hopeful government’s economic plans and programmes for 2014 will aid in economic recovery.
The government has projected GDP growth to rise to 8 percent next year from an estimated 7.4 percent this year, with the budget deficit shrinking to 8.5 percent of GDP from a projected 10.2 percent in the same period.
