March 11, 2016

Macroeconomic imbalances threaten Ghana’s middle-income status
Masahudu Ankiilu Kunateh, Ghanadot

Accra, April 19, Ghanadot - The government has observed that the current risks associated with the macroeconomic imbalances in the country have the potential to seriously undermine Ghana’s efforts to becoming a middle-income status by the year 2020.

To this end, the government is therefore giving top priority to the challenge by pulling back from the expansionary fiscal stance, the Minister of Finance and Economic Planning, Dr. Kwabena Duffuor has disclosed this to journalists in Accra.

He added that fiscal policy would thus carry the brunt of the country’s medium term adjustment, recounting the weeding out wasteful and fruitless public spending, and enhancing government revenue through significant improvement in tax policy and tax administration in the country.

“In the light of the rapid rise in domestic debt and the declining level of debt concessionality, the government is working towards adopting a comprehensive debt management framework and utilizing fully the country’s concessional financing possibilities that still exist”, Dr. Duffuor further disclosed.

While, the rising inflation would be brought down to its medium term target of a single digit through a further tightening of monetary policy supported by the fiscal consolidation.

According to him, the fiscal adjustment measures the government is currently implementing would help to restore macroeconomic stability, debt sustainability, and create further room for sustained private sector growth.

These outcomes together with the fundamentals of the economy would combine to strengthen the confidence and credibility in the Ghanaian economy.

The Finance Minister hinted that in his recent discussions with a number of offshore clients through some major banks in UK, he was quick to report that the confidence in the economy is being restored and that the initial desire of foreign investors to dispose off their investment in the government’s short term securities has been pulled off.

In this regard Dr. Duffuor acknowledged that there is an increasing desire on the part of foreign investors to hold the government’s securities.

Given these developments, he emphatically stated that ‘I firmly believe that foreign investors hold a positive outlook for the country in the medium term’.

The paper has gathered that Ghanaian economy has maintained strong growth in the last couple of years. Private sector response to the macroeconomic policies and structural reforms has generally been positive although fiscal policy has been very expansionary in recent years, leading to strong excess domestic demand.

As a result, the fiscal and external account deficits widened, inflation rate rose significantly, and the foreign reserve position was weakened.

 
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