Editorial
The Minister of Finance, Seth Terkper, is noted to have said that the downgrading of Ghana from ‘B+’ to ‘B’ by Fitch, an international rating agency, is very harsh and totally uncalled for. He said the agency did not take into consideration major economic interventions that the government was undertaking within the short to medium term.
The agency has also downgraded Ghana’s sovereign from B+ with negative outlook to ‘B’ with stable outlook. The rating had been on a negative outlook since February, 2013, when Fitch took the decision to review Ghana’s credit quality in the light of issues that arose in 2012, which were analysed in the government’s 2013 budget.
To most, the agency did not take many things into consideration before downgrading the country as the economy has indeed registered some modest growth within the short term.
The country is implementing various restructuring programmes which included the periodic adjustment of petroleum and utility prices to bring sanity into the economy, while at the same time shoring up government revenue. The government is also fully committed to implementing various fiscal policies, including the implementation of a three-year adjustment programme.
According to Terkper, the medium-term economic outlook remained very solid and that the government was targeting a five to six per cent budget deficit in the near term, while maintaining seven to eight per cent growth, adding that while the advanced economies were growing at two to three per cent, the country was growing at seven per cent, according to the Ghana Statistical Service.
According to Terkper, the report completely ignored the various growth factors and that Fitch focused narrowly on the short term and high level compensation challenges facing the economy. “The current difficulties are an aberration and we are already showing signs of returning to the medium-term targets we have set out,” the minister stated.
He said despite the lower rating, the country was viewed as being among the fast growing economies within the sub-region and that the IMF, in such situations, allowed for a three-year adjustment programme.
Ghana is considered one of Africa's brightest economic prospects, with a stable democracy and an economy expected to keep growing at about eight per cent in 2013. 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 government has worked tirelessly to address the many challenges the country faces, all against a weak global economic environment which has resulted in significantly lower gold and cocoa prices and a year-long power shortage due to the disruption of gas supply from the West African Gas Pipeline.
Implementation of the Single Spine Salary system has been necessary but difficult. While it has entailed higher-than-expected fiscal outlays, it is nearly complete and will form the basis for a more controlled wage bill in the future. The improvement in payroll systems and processes is part of the comprehensive public financial management (PFM) reforms being implemented.
For 2013, annual wage increases were moderated to 10 per cent, compared to previous high levels, and explained that the near-term goal was to comply with the Economic Community of West African States (ECOWAS) convergence criteria on wage-to-tax and wage-to-GDP ratios.
The government had already taken the tough steps of minimising the adverse impact of subsidies on petroleum products and utility tariffs on the budget.
Though the measures were causing some discomfort, it would reduce the strain on the government’s already stressed budget and also allow for more investment into the sector in the medium term.
We acknowledged the challenges in the wage bill and the efforts being made to address them. As well as the gradual increase in country’s oil and gas production, value addition and the diversification plan to boost agriculture, in particular, as well as a vibrant and growing services sector, are still driving the projected annual economic growth rate of seven to eight per cent over the medium term. We are also not oblivious of the three-year fiscal consolidation plan to boost a very strong economic environment and outlook.
We, however, believe that Fitch grading should be a wakeup call for the government to speed up efforts aimed in bringing the economy back on track before other credit rating agencies also take negative look at the country.
Fitch rating maintains that the challenges facing the economy remained significant enough to justify a lower sovereign rating. The other truth is that some economists in the country think same.
Donor funds have dried up, companies are not making enough revenue in order to pay their taxes, while at the same time the purchasing power of the average Ghanaian continues to dwindle.
For us to come out of this predicament, we are calling for an act that will facilitate the implementation of key actions to resuscitate the economy while at the same time not creating more problems for the business community.
We should be reminded that no one kills the chicken that lays the golden egg, and for the economy to grow at the expected rate there is the need for a thriving business community.
The Minister of Finance, Seth Terkper, is noted to have said that the downgrading of Ghana from ‘B+’ to ‘B’ by Fitch, an international rating agency, is very harsh and totally uncalled for. He said the agency did not take into consideration major economic interventions that the government was undertaking within the short to medium term.
The agency has also downgraded Ghana’s sovereign from B+ with negative outlook to ‘B’ with stable outlook. The rating had been on a negative outlook since February, 2013, when Fitch took the decision to review Ghana’s credit quality in the light of issues that arose in 2012, which were analysed in the government’s 2013 budget.
To most, the agency did not take many things into consideration before downgrading the country as the economy has indeed registered some modest growth within the short term.
The country is implementing various restructuring programmes which included the periodic adjustment of petroleum and utility prices to bring sanity into the economy, while at the same time shoring up government revenue. The government is also fully committed to implementing various fiscal policies, including the implementation of a three-year adjustment programme.
According to Terkper, the medium-term economic outlook remained very solid and that the government was targeting a five to six per cent budget deficit in the near term, while maintaining seven to eight per cent growth, adding that while the advanced economies were growing at two to three per cent, the country was growing at seven per cent, according to the Ghana Statistical Service.
According to Terkper, the report completely ignored the various growth factors and that Fitch focused narrowly on the short term and high level compensation challenges facing the economy. “The current difficulties are an aberration and we are already showing signs of returning to the medium-term targets we have set out,” the minister stated.
He said despite the lower rating, the country was viewed as being among the fast growing economies within the sub-region and that the IMF, in such situations, allowed for a three-year adjustment programme.
Ghana is considered one of Africa's brightest economic prospects, with a stable democracy and an economy expected to keep growing at about eight per cent in 2013. 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 government has worked tirelessly to address the many challenges the country faces, all against a weak global economic environment which has resulted in significantly lower gold and cocoa prices and a year-long power shortage due to the disruption of gas supply from the West African Gas Pipeline.
Implementation of the Single Spine Salary system has been necessary but difficult. While it has entailed higher-than-expected fiscal outlays, it is nearly complete and will form the basis for a more controlled wage bill in the future. The improvement in payroll systems and processes is part of the comprehensive public financial management (PFM) reforms being implemented.
For 2013, annual wage increases were moderated to 10 per cent, compared to previous high levels, and explained that the near-term goal was to comply with the Economic Community of West African States (ECOWAS) convergence criteria on wage-to-tax and wage-to-GDP ratios.
The government had already taken the tough steps of minimising the adverse impact of subsidies on petroleum products and utility tariffs on the budget.
Though the measures were causing some discomfort, it would reduce the strain on the government’s already stressed budget and also allow for more investment into the sector in the medium term.
We acknowledged the challenges in the wage bill and the efforts being made to address them. As well as the gradual increase in country’s oil and gas production, value addition and the diversification plan to boost agriculture, in particular, as well as a vibrant and growing services sector, are still driving the projected annual economic growth rate of seven to eight per cent over the medium term. We are also not oblivious of the three-year fiscal consolidation plan to boost a very strong economic environment and outlook.
We, however, believe that Fitch grading should be a wakeup call for the government to speed up efforts aimed in bringing the economy back on track before other credit rating agencies also take negative look at the country.
Fitch rating maintains that the challenges facing the economy remained significant enough to justify a lower sovereign rating. The other truth is that some economists in the country think same.
Donor funds have dried up, companies are not making enough revenue in order to pay their taxes, while at the same time the purchasing power of the average Ghanaian continues to dwindle.
For us to come out of this predicament, we are calling for an act that will facilitate the implementation of key actions to resuscitate the economy while at the same time not creating more problems for the business community.
We should be reminded that no one kills the chicken that lays the golden egg, and for the economy to grow at the expected rate there is the need for a thriving business community.
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