Terkper touts economic turnaround

Finance Minister Seth Terkper has said that measures being taken by government to restore economic stability have begun to yield results even before full effects of the just-started IMF programme are measured.

According to Mr. Terkper, government’s homegrown economic policies to combat large slippages since 2012 are now beginning to take shape, and adding the gains to the effects expected from full implementation of the programme with the Washington-based lender should restore the country to strong growth by 2017.

The debilitating effects of the 2012 over-runs largely occasioned by a huge wage bill and revenue shortfall, cascaded into subsequent years leading to bouts of twin deficits and eventually putting a damper on economic growth.

Rather than yielding to calls to go for an IMF programme mainly to support its balance of payments difficulties among others last year, government opted for homegrown economic policies to restore the economy to growth.

But a nagging energy crisis meant that the economy still lagged and tax revenues were not performing as they should, while prices of commodities such as gold and cocoa also affected revenue performance.

As those challenges persisted, donors held onto needed funds over perceptions of misappropriated funds and uncertainty as to the economy’s direction. This proved to be one of the factors that forced government to engage the Bretton Woods institution in a programme to restore credibility and provide balance of payments support.

Although discussion with the IMF lasted more than eight months, a three-year Extended Credit Facility worth over US$900million has since been approved and donors have subsequently pledged to release funds previously withheld from government.

Ahead of the next review of the IMF programme in August, the Finance Minister on Wednesday gave fulsome praise to the homegrown economic policies he announced in Parliament last year. Mr. Terkper’s refrain has always been that those policies needed time to take shape, and after a year he’s confident the benefits have begun to show.

Giving a state of the economy and outlook address in Accra last Wednesday, Mr. Terkper said significant progress has been made in addressing most of the challenges largely responsible for fiscal slippage.

According to him, the wage bill as a ratio of the GDP has been reduced from 8.9 percent in 2012 to 8.7 percent a year after; and 8.3 percent in 2014 which is further expected to decline to 7.7 percent this year.

“Similarly, the wage bill including wage arrears cleared as a ratio to tax revenue has declined from 68.2 percent in 2012 to 65.1 percent in 2013 and 52.1 percent in 2014 -- and expect it to decrease further to 46.1 percent this year,” he announced.

Costly subsidies on fuel and utilities have virtually all been removed, Mr. Terkper said, adding that corporate income tax from the oil companies has significantly turned positive.

While admitting that setbacks still exist in sporadic energy supply that will affect economic growth, in addition to lower than expected commodity prices, the Finance Minister said government’s commitment to fiscal consolidation and measures agreed with IMF will help in its recovery efforts.

Mr. Terkper is hopeful of further reducing significantly the fiscal deficit to ensure debt sustainability and macroeconomic stability.

He insisted that the local economy has very bright medium-term prospects, supported by an expanded services sector; the discovery of more oil and gas fields (TEN and Sankofa); and the coming on stream of Atuabo Gas.

Ghana's oil production will rise six-fold by 2018 to an estimated 242.3 million barrels from 39.1 million barrels this year as new fields start production.

Growth is expected to rebound over the medium-term to 9.2 percent in 2017, while inflation will be reduced to 8.2 percent by 2017; and the fiscal and current deficits will be reduced to 3.7 and 4.9 percent respectively in that same year.

This, Mr. Terkper said, should build up reserves to about 4.2 months import cover for goods and services.