Stringent fiscal policies will be implemented to reduce deficit, Finance Ministry says

The Minister of State in the Ministry of Finance, Abena Osei-Asare, has assured the people of Ghana that in the third and fourth quarters of 2024, the government will implement stringent fiscal policies that will ensure the reduction of the country’s deficit.

Ghana’s fiscal deficit-to-gross domestic product (GDP) ratio is expected to narrow to 4.5% ± 50 basis points in 2024, according to research by Databank.

This projection is largely due to interest savings made through the national external debt restructuring programme.

The Bank of Ghana estimated the country’s fiscal deficit as 2.5% of GDP as of September 2023.

In its 2024 quarterly report, the research firm said potential interest savings from the external debt restructuring could improve the fiscal balance.

The government budgeted GHC19.04 billion towards external interest payments despite halting debt service, with negotiations with the various creditor groups now concluded.

Strict fiscal policy

Addressing guests at the maiden edition of the Quarterly Economic Round Table (QER), organised jointly by the Ministry of Finance (MoF), the University of Ghana (UoG) and the University of Ghana Business School (UGBS) on Tuesday 2 July at the ISSER hall, UoG, under the theme “Restoring Macroeconomic Stability”, Abena Osei-Asare said the government will not overlook fiscal discipline even though it is an election year.

“The foundation of microeconomic stability is fiscal discipline,” she said. “We [the government] are committed to implementing stringent fiscal policies to reduce deficits and manage public debts sustainably.

“We are also committed to transparency in public finance management, fully implementing the [Public Financial Management] Act and enhancing accountability mechanisms to ensure the efficient and effective use of public funds.

“There is always a high demand in election years for the government to overspend and we are committed to rationalising and containing expenditures, especially in the third and fourth quarters, to ensure that unbudgeted and related expenditures are kept to the barest minimum or eliminated,” Abena Osei-Asare said.

Interventions

Osei-Asare observed that the Bank of Ghana is implementing many measures to control inflation and improve Ghanaians’ purchasing power.

She further announced that other interventions by the government are yielding fruit and that officials will pursue them vigorously in the third and fourth quarters of this year to consolidate the gains made.

The private sector, Osei-Asare said, is a vital factor in Ghana’s quest to reduce its susceptibility to external pressures and everything will be done to improve the sector.

“Controlling inflation is critical for the purchasing power of Ghanaians and the Bank of Ghana continues to pursue critical measures to deal with this,” the minister of state said.

“To reduce our vulnerability to external shocks, the government has continued to encourage private investment in key sectors such as agriculture, manufacturing and technology through its flagship programmes such as Planting for Food and Jobs (PFJ) and One District, One Factory (1D1F),” Abena Osei-Asare further said.

“It is by fostering industrialisation that we can create jobs, boost exports and enhance our economic resilience,” said Osei-Asare in her opening speech at the QER.

Calls for expenditure cuts

The country director for the International Growth Centre (IGC-Ghana), Nii Kwaku Sowa, welcomed the decision by the Ministry of Finance and University of Ghana to host the Quarterly Economic Round Table.

Dr Sowa told guests that, as an economist, he has often heard calls for expenditure cuts from both economists and politicians in Ghana.

However, in a country where the government’s biggest expenditure is on salaries, he wondered whose salary should be cut, should the government heed such calls for a cut in expenditure.

Cautious spending

In anticipation of this month’s Mid-Year Budget Review in Parliament, the head of the University of Ghana’s economics department, Professor William Baah Boateng, urged the government to adopt more cautious spending to reduce pressure on the Budget.

Professor Baah Boateng emphasised the need for the government to check excessive expenditure to align better with the country’s financial requirements.

He also called for the government to reassess its achievement of revenue targets to meet Ghana’s financial needs better.

Reporting by Wilberforce Asare in Accra

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