The Ministry of Finance has stated Moody’s
negative rating of Ghana's economy was based on the same short-term
challenges which the government had identified and was addressing.
Government is stressing that the government
had brought the bold and comprehensive measures to the attention of
ratings and other agencies and pointed out that multi-year fiscal
consolidation efforts led to positive medium-term prospects.
The Ministry has assured, the short to
medium-term prospects for the country remained bright and that the
government would continue to work hard on plans to ensure that they
materialised.
Moody's
Investors Service has downgraded Ghana’s sovereign rating to B2 from Bl,
citing the country’s rising debt burden and deteriorating debt
affordability.
In its report, Moody’s stated that the
primary driver of its decision to downgrade Ghana’s sovereign rating to
B2 was the country’s high and rising debt burden and deteriorating debt
affordability.
The report indicated that the rating agency
expected public debt to exceed 65 per cent of Gross Domestic Product
(GDP) by the end of 2015 from 55.7 per cent in 2013, mirrored by rising
interest expenses relative to government revenues.
But the Ministry has said the measures that
government had announced so far would add value to the country’s raw
material base, diversify the economy and include a strong local content
element.
“We are hopeful that the measures to address
the short-term challenges after allowing for the necessary lags would
form the basis for stabilising and growing the economy when the new
opportunities come on stream in the next few years,” it said.
The Moody’s report said persistently high fiscal deficits were the main cause of the increasing debt ratio.
Moreover, it said Moody's anticipated that
any fiscal consolidation from double-digit deficits would be slow over
the forecast horizon, in view of rising interest payments, the clearance
of arrears and the elections scheduled for 2016.
“These factors counteract the
revenue-enhancing measures introduced by the government in 2013 and
constrain the effectiveness of the government’s efforts to reduce the
wage bill as a percentage of tax revenues to 35 per cent by 2017 from
above 50 per cent at present,” the report said.
It said interest payments had increased
significantly over the past year to 23 per cent of revenues in 2013,
from 14 per cent in 2012, which placed Ghana in the 95th percentile
among all rated sovereigns by Moody’s on that metric of fiscal stress.
The report stated that interest payments
had continued to rise during the first quarter of 2014, reflecting the
high rates on domestic debt.
It indicated that domestic debt accounted
for slightly less than 50 per cent of total public debt at the end of
the first quarter of 2014, about one third of which was of short
maturity.
The report stated that the second driver
behind the downgrade was Ghana's increased susceptibility to event risk,
particularly liquidity risk in the light of the government’s large debt
financing needs.
It said the strong pressure on the Ghanaian
cedi from the weak overall balance of payments position and from above
target inflation at 14.8 per cent as of May 2014 was mirrored by a
declining stock of international reserves to low levels.
“Gross international reserves at the
central bank at the end of the first quarter of 2014 represented 2.7
months of import cover,” it said.
The Ministry of Finance, in a statement,
said the corrective measures and further opportunities, notably in the
oil and gas sector, would propel the economy on a path of sustainable
economic growth and development.
In the 2013 and 2014 budgets, it said, the government identified the main items
leading to the budget overruns and misalignment — namely, high wage
bill, high expenditure on petroleum and utility subsidies, high interest
payments, low revenue mobilisation, including low disbursements from
development partners, disruptions in gas supply which affected energy
production, and falling commodity prices (especially gold and cocoa) on
the international market.
“For about a year the government has been
working on a fiscal consolidation plan to address these factors. First,
the revenue measures aim at mobilising more taxes, broadening the tax
base, reviewing all the tax laws by Parliament and improving
administration.
“Second, expenditure rationalisation and
efficiency measures included salary rationalisation, refinancing of
public debt, limiting the award of new contracts and minimising
excessive and non-targeted subsidies.
"Third, the government is implementing
structural or long-term measures to improve revenue and expenditure
management. These include implementation of the Ghana Integrated
Financial Management Information Systems (GIFMIS) to budget and
accounting processes, setting up a human resource information management
system, as well as modernising Ghana Revenue Authority systems and
procedures,” it said.
those measures and many more were contained
in the Home-Grown Fiscal Consolidation Programme that had been
finalised with inputs from the Senchi National Economic Forum.
It said the economy had gone through major challenges in the first full year (2013) of implementing the measures.
It pointed out that in spite of those major
price and energy challenges to the economy and consolidation effort,
the fiscal deficit went down from about 12 per cent to 10.1 per cent in
2013 and was projected to decline further by the end of 2014.
“In addition, the economy continues to grow
at respectable levels, averaging 8.6 per cent in the past five years
and 7.1 per cent in 2013, after growing at a revised 8.8 per cent in
2012,” it said.
Seth Terkper
Responding to the issues raised by Moody's,
the Minister of Finance, Mr Seth Terkper, said it was important to
reiterate what the President said earlier that the economy would witness
a turnaround with the measures and prospects that had been outlined by
the government.
He explained that the measures | were
necessary to consolidate the fiscal situation, in order that “we may not
destabilise the medium-term prospects”.
Mr Terkper noted that the economy faced
serious challenges between 2011 and 2013 but assured the people that
that situation was not a permanent feature, “as we have been there
before ! and worked our way out of the challenges”.
He mentioned some of the ; challenges as
the falling prices of gold j and cocoa, the power crisis and the global
financial crisis, saying that the key task for managers of the economy j
was to have measures to address the i challenges as they occurred.
Mr Terkper repeated the government’s
position that the economy was going through transformation, while the
government worked with the agenda to consolidate I the country’s
middle'-income status to the benefit of all Ghanaians.
Source: Daily Graphic
No comments:
Post a Comment