Ghana defends projected 9% fiscal deficit for 2013

The government of Ghana has defended its projected fiscal deficit of 9 percent for 2013.

At a workshop with journalists in Accra Friday March 8, 2013, officials of the Ministry of Finance and Economic Planning insisted that the 9% projected fiscal deficit for 2013 is ‘credible’.

According to the Chief Economic Officer of the Ministry, Mr. Oku Afari, the projection of 9 percent deficit of GDP is more credible, because the country aims at making a gradual move to reduce deficit.

Presenting the 2013 budget to Parliament March 5, 2013 Minister of Finance, Mr. Seth Terkper said the country is targeting 9% deficit of GDP for the fiscal year after it widened to 12.1% in 2012 from an initial target of 4.8% at the start of the year [2012] and a revised target of 6.7% in July.

The deficit was the result of a sharp wage bill increase, higher interest costs and payment of arrears.

In his remarks at the workshop, Mr. Terkper said the excess deficit and reasons for the excess are  of concern to the government adding that “some of what occurred are aberrations which will be corrected with an adjustment of price which has started.”

He indicated that the deficit will be corrected with gradual adjustments.

He however said there are other elements which are non-recurring like salary arrears that were paid on Single Spine. Single Spine has increased the salary base, he said.

According to the Minister there is two percent of workers that are yet to be migrated onto the Single Spine salary scheme.

“When you take some of these measures together, this is what make us optimistic that we will be able to meet the targets,” he said.

The 2013 budget, however, included measures to improve budget management, public procurement and payroll and treasury management in order to curb the deficit.

The 9% target has been criticized by both investors and credit ratings agency Fitch, which has warned it would downgrade Ghana’s outlook from Stable to ‘B+ negative’. The agency  says it had expected Ghana to target a  percent cut.

However, Mr. Afari says, a projection of 9 percent is a more realistic basis of managing the economy.

Fitch was expecting a 5 percent cut.

By Emmanuel K. Dogbevi