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An economic Think-tank group, The Institute of Fiscal Studies (IFS), has admonished the government to introduce additional policies that will enhance its revenue mobilization efforts for the second half of 2017.
It argued that, it has become necessary due to the central government’s failure to meet the set target for the 2017 budget in the first half of the year.
At a press conference to highlight measures that could help to meet the budget target over the next six months, if introduced by government, IFS noted that, government missed the revenue target by 1.1 percent for the period January to April this year.
“Given that the objective of the 2017 budget to achieve strong revenue mobilization is not likely to be achieved, at least for now, there is the need for the government to introduce additional measures to enhance the revenue mobilization effort,” the Executive Director of IFS, Prof. Newman Kwadwo Kusi, said.
Again, IFS has cautioned that government will miss its 2017 budget target should it fail to spend in critical sectors of the economy.
It emphasized that, government’s refusal to pay valid arrears and invest in infrastructural development for the first half of this year has impacted heavily on economic growth.
The warning comes on the back of an assessment of the economy for the first half of 2017.
Professor Kusi explained that the cut in some critical expenditure has affected economic performance so far.
“The cuts in expenditure have been affected; those that we actually need such as the capital spending, earmarked funds, payment for goods and services among others. But then again the government has its hands tied at its back because it cannot cut back on wages and salaries, interest payments, etc and these together take a disproportionate share of the revenue that is collected,” he stated.
The assessment comes ahead of the midyear budget review by Finance Minister, Ken Ofori Atta to be presented to Parliament on Monday, July 31.
He posited, “Serious reprioritizing of spending in favour of payment of valid arrears, increasing capital spending, dealing with budget rigidity caused by the wage bill and interest payments would also help.”
In general, the IFS described as encouraging, the government’s efforts to achieve economic stability.
Some key indices that the economic think tank lauded included the declining inflation rate (12.1%), increased oil exploration activities as well as increased exports among other initiatives undertaken in the first half of 2017.
On fiscal performance and real sector development, the IFS described the 1st half performance as mixed.
The revenue targets fell by 2.3 billion cedis or 17.1% with government’s expenditure target also dropping by 3.6 billion cedis or 20.5%.
This was influenced mainly by the tight fiscal and monetary policies pursued by the government.
Meanwhile Professor Newman Kusi maintains the government needs to do more to propel economic growth.
“So the government would have to look at how to clean the expenditure in such a way that the little spend will give the country the needed benefits for instance Irregular payments, unbudgeted expenditures among others must be cleaned.”
While optimistic of prospects for economic growth, the IFS warns the issues would also require strict adherence to prudent financial management in order to reduce the government’s debt burden from borrowing.
“By implementing effectively and strictly the provisions of the Public Financial Management Act (PFMA) and the Public Procurement Act (PPA). I am sure that if these two laws are implemented to the latter, there’s a lot of money that the government can save even if revenue is increasing to deal with that.”
Prof. Kusi urged the government to also enforce strictly the provisions of the Public Finance Management Act (Act 921) to deal with unauthorized, irregular and fruitless spending, as well as strengthening fiscal transparency and accountability.
“The IFS shares the view that the steps taken by the government during the first half of the year are yielding some positive results,” he said.
According to him, the macroeconomic stability during the first half of 2017 was encouraging, saying, “inflation is on the decline.”
However, the Executive Director observed that much more was required to achieve fiscal sustainability, sustained macroeconomic stability and high non-oil Gross Domestic Product (GDP) growth.
IFS, however, expressed disappointment in the rate of growth of non-oil GDP, saying, “This unfortunate development is partly due to the government’s spending retrenchment, which has severely hit expenditure on goods and services, capital expenditure and arrears payment.
“Crude oil production from the Jubilee field and the coming on stream of the Tweneboa, Enyenra and Ntomme (TEN) fields together increased oil production by as much as 58.9 percent year-on-year, which helped boost the overall GDP growth. Non-oil real GDP, however, grew by only 3.9 percent against 6.3 percent growth recorded in 2016, due largely to low activity in the services sector, which grew by 3.7 percent in the first quarter of this year, compared with 6.6 percent in the same period last year,” Prof. Kusi observed.
He averred that “the overall real GDP growth of 6.3 percent projected for 2017, reflecting largely increased production of crude oil, is encouraging.”
Source: Adnan Adams Mohammed