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Ghanaian Minister Says Plan to Halve Deficit Succeeding
Posted on: 03-Sep-2013         Source: Bloomberg
Ghana’s plan to trim its budget deficit by half over three years by containing public-sector pay increases and raising taxes is showing initial signs of success, Finance Minister Seth Terkper said.

The government is on track to achieve its deficit-reduction target of 9 percent of gross domestic production this year from 12.1 percent in 2012 when spending rose in the run-up to elections, Terkper said on Sept. 1.

“The deficit keeps improving,” he said in an interview in the capital, Accra.

As the economy grows faster than the sub-Saharan African average and the government “moderates” salary increases for public servants, the fiscal gap is forecast to narrow to 5 percent and 6 percent of GDP by 2015, he said. Expansion in West Africa’s second-largest economy is forecast at 6.9 percent this year versus 4.8 percent for the continent south of Sahara, according to estimates from the International Monetary Fund.

The world’s second-largest cocoa exporter and an oil-producing nation since 2010 is implementing austerity measures including the reduction of fuel and utility subsidies, combined with higher revenue by adding at least four new taxes. The state wants to lower the wage bill to between 30 percent and 35 percent of tax income by 2015 from 72 percent last year.

Cedi Weakening

Ghana’s cedi has weakened the most among African currencies this year, after the South African rand, slumping 11.6 percent against the dollar as a presidential election result was disputed in court, creating political uncertainty. The country’s Supreme Court last week upheld the December win of President John Dramani Mahama, rejecting a challenge by opposition leader Nana Akufo-Addo, who accepted the ruling.

“With the dispute out of the way, we expect the cedi to stabilize,” Terkper said, declining to provide a forecast. The currency traded unchanged at a record low for the third consecutive day at 2.155 per dollar by 9:10 a.m. in Accra

Ghana is moving toward lowering “political and credit risks to a more conducive investment climate,” Terkper said. “We are seeing positive signs and expect the economy to perform strongly toward the end of the year and into 2014.”