Ghana can’t meet 9% deficit target in 2013 – Fitch

Credit ratings agency, Fitch doubts the Ghana government’s ability to bring down the country’s rising budget deficit.

According to the agency, the government has failed to fully implement its fiscal consolidation plan in 2013 as the country targets a 9% of GDP deficit end of year.

“The authorities continued to overrun on wages, interest costs and arrears, leading Fitch to expect that the government will fail to meet the 9% of GDP fiscal deficit target for this year,” Fitch said October 17, 2013 in a statement after downgrading Ghana’s credit rating from B+ to B with a stable outlook.

However, Fitch indicated that the sharp hikes of utility tariffs and removal of the fuel subsidy in the country will reduce the “risk of an overrun in the coming fiscal years”.

Fitch forecasted that lower gold prices and still strong import demand will put further pressure on Ghana’s external balances.

The agency expects Ghana’s current account deficit to widen to 13.1% of GDP in 2013, from 12% in 2012 adding it does not expect capital inflows to keep pace with the widening current account deficit, keeping foreign reserves under pressure.

Meanwhile, the Ghana government has described Fitch’s assertion on the fiscal plan implementation as unfortunate.

According to the Finance Ministry, it has implemented several measures to resolve the issue of the deficit such as removal of subsidies.

“This year has seen progress in fiscal consolidation after last year’s deficit as part of the necessary steps to address long-standing issues that have plagued Ghana,” the Ministry said in a statement.

It added “… we have taken these actions with a balanced approach mindful of the need to ensure Ghana’s economy continues to grow”.

By Ekow Quandzie