The Finance Minister, Seth Terkper, on Friday laid bare government’s ambitious plans to grow the economy in 2016 by 5.4 percent and drive down inflation to near single-digit level in a year the country will go to the polls.
Next year’s economic growth figure is more than the 4.1 percent the Finance Ministry is confident will be achieved this year, which is above the 3.5 percent earlier projected in the 2015 revised budget.
The projected rate of expansion for the economy in 2016 — expected to be driven mainly by the industry sub-sector and the services sector — when achieved will be the highest in three years amidst commitment by the government to safeguard against fiscal overruns in an election year.
According to government’s 2016 budget statement and economic policy presented to parliament last week, the state will spend a little above GH¢43.5billion, which is GH¢5.57billion more than it will spend in 2015.
At the same time, government has projected to rake in a total revenue of GH¢38billion next year, above the GH¢30.5billion in the 2015 revised budget.
This is expected to further reduce the country’s budget deficit from 7.3 percent expected this year to 5.3 percent by the end of 2016, the lowest in almost a decade.
Mr. Terkper, who presented the budget looking radiant amid unusual quietness from the minority in parliament, revealed that the deficit for 2016 will be financed mainly by borrowing from the domestic market with the rest supported with extra borrowings from the foreign debt market.
Subsequently, government has budgeted GH¢10.49billion as interest payments in 2016, which is more than the GH¢9.3billion set aside as interest payments for this year.
Interestingly, the Bank of Ghana — which has in the past been the main source of funding for government’s huge deficit — will next year not bail out government, in an apparent enforcement of the IMF conditionality for the central bank to completely shy away from printing money to finance government’s budget by 2016.In the past, central bank financing of the budget swelled in an election year; and it was feared the 2016 elections could jeopardise the fiscal consolidation efforts so far achieved — a concern that is shared by the IMF.
But Mr. Terkper contends government has acted decisively to address significant economic challenges, and implemented socio-economic programmes with a view to “Changing Lives and Transforming Ghana”.
He said the plans of government for next year are geared toward ensuring macro-stability by keeping to the strong fiscal consolidation efforts in order to put public debt on a more sustainable path through enhancing revenue mobilisation and strictly containing expenditures.
He said government’s consolidation efforts will also help to drive down inflation for 2016 to 10.1 percent, even though it is on course to miss its inflation target of 13.7 percent for 2015.Currently, the 17.4 percent inflation figure recorded by the Ghana Statistical Service in October this year is way above the target band for the year — and is expected to further rise as Christmas activities which are often characterised by high consumer spending approaches.
Mr. Terkper however said the Bank of Ghana stands ready to tighten the monetary policy regime in order to keep inflationary pressures in check.
He assured that the erratic energy supply situation that has caused economic activities to be sluggish will be resolved by operations of the emergency power barges, and the coming on-stream of a number of thermal projects by end of this year.