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Ghana’s budget deficit poses risk - Razia Khan

Razia

Fri, 4 Oct 2013 Source: The Ghanaian Times

Government should institute pragmatic measures to control excess spending to reduce the country’s current account deficit, the Global Head of Research of Standard Chartered Bank, Razia Khan, has said. The growing current account deficit, she said, could scare investors and also expose the economy to risk.

Speaking to business journalists after the Standard Chartered Bank Africa Summit in Accra on Monday, Ms Khan said considering the size of the current account deficit, Ghana was not well placed to be able to absorb the shock of weaker export commodity prices.

The summit was on the theme “Transforming, Rebalancing and Outperforming.’’ The country last year recorded a budget deficit of 12 per cent which was partly influenced by the implementation of the Single Spine Pay Policy, but the government pledged to reduce the deficit to nine per cent this year.

Ms Khan who is also Africa Regional Head of Research for Standard Chartered Bank said the outlook for commodity prices was going to be challenging due to the dwindling cocoa and gold prices. In the first half of the year, she however said, Ghana was fortunate because oil export bounced back due to the resumption of production.

Ms Khan said the increasing wage bill could squeeze out the room for spending on capital expenditures, and stressed the need for fiscal consolidation to address the increasing current account deficit.

Commending government for the initiatives it had taken to stabilise the economy, she called on government to reduce the size of government to cut down on government wage bill. The size of government, she said, was ‘’worrying,’’ and could keep the public sector wage bill ballooning.

She stressed that government should encourage public consumption to keep the current account deficit to more sustainable levels. Asked whether Ghana was borrowing unnecessarily, she replied in the negative and said considering the country’s public debt ratio to the Gross Domestic Product, the denominator is growing.

Ms Khan said most of Ghana’s public debts were wrongly classified, saying most of the debt was invested in capital projects which could pay for themselves, unless anything wrong happened to the institutions which were supposed to retire the debt. Touching on the issue of the euro bond, she said it was good news and because it would help the country to retire some of its short term debts. Warning of Ghana of the oil curse, Ms Khan noted that studies done in the past ten years had showed that non-oil rich countries had performed well than oil-rich countries. The Head of Research was happy about the transparency that had characterised the management of the country oil revenues, and urged the government to sustain that effort.

Source: The Ghanaian Times