In a January Report signed by the bank’s Country Director in Accra, Ishac Diwan, and copied to the Minister of State at the Ministry of Finance and Economic Planning, Dr Anthony Akoto Osei, and the Governor of the Bank of Ghana, Dr Paul Acquah, it warned that the incoming administration would inherit high fiscal and balance of payment deficits that were unsustainable, given the current state of international financial markets.
Quoting mid-December data provided by the Bank of Ghana and the Ministry of Finance, the World Bank said in the coming years, the country would have to spend 14 per cent of its total Gross Domestic Product (GDP) to service its fiscal deficit, while the balance of payment deficit would be larger.
In that circumstance, the Bank predicted a “socially painful financial crisis” if urgent steps were not taken to reduce the twin deficit.
It explained that in the past, the fiscal deficit had been financed from proceeds that accrued from the privatisation of state assets and the leftovers of the Eurobonds issued in 2007, while the current account deficit was financed with foreign reserves.
However, it said, those sources were no longer available. The World Bank pledged to support the new government to, among other things, address the macro-economic imbalances, attain macro stability and protect the poor and the vulnerable in Ghana.
Towards effecting that assistance, it disclosed that Ghana had a generous IDA allocation of about $450 million per year and a large IDA portfolio that the bank could help to “front-load” for urgent use.
Furthermore, it revealed that it had developed fast-track procedures to support countries that had been hit by the international financial crisis and which could be applied to Ghana.
The World Bank also pledged its preparedness to continue the analytical work it had already started with the outgoing government for the effective use of the anticipated revenue from the country’s oil find.
Source: Daily Graphic