2012 Budget will promote development – IEA
The Institute of Economic Affairs (IEA) has described the 2012 Budget as a development-oriented budget that will help address the country’s infrastructural deficit if implemented to the letter.
“The theme for the budget is appropriate. We all know that Ghana suffers a large infrastructural deficit; talk about roads, railways, water and energy supply systems, health, education and agricultural facilities. Therefore, if the budget focuses on infrastructure, it is in the right direction,” it said.
A Senior Economist at the IEA, Dr John Kwabena Kwakye, made the observation at a budget review organised by the institute to state its views on the budget and also make its recommendations towards its implementation.
The 2012 Budget is designed to address infrastructural deficit in order to sustain growth, create more employment opportunities and improve incomes and the standard of living of the populace and thereby reduce poverty.
The IEA, however, cautioned the government against excessive borrowing, saying even though the loans were to support the expansion of infrastructure, it was necessary that they were applied to projects that would generate returns to make repayment in the future very easy.
According to the 2012 Budget, while the government will raise some GH¢1,665.9 million from the domestic money market to finance the country’s development agenda, net financing from foreign sources will amount to GH¢1,572.3 million, with an estimated GH¢1,201.8 million disbursement from the Chinese Development Bank (CDB).
While admitting that the country could not cut off foreign aid altogether, Dr Kwakye said it was important that it weaned itself of foreign aid and rather used financial instruments, including Diaspora bonds, to lubricate the country’s growth.
To sustain employment generation as a result of the oil production, he noted that there was the need to ensure that the agricultural and manufacturing sectors were made vibrant to complement whatever oil and gas would bring to the Ghanaian economy.
He said the manufacturing sector was struggling because of trade liberalisation which had opened the Ghanaian market to cheap imports from Asia, particularly China, where manufacturing was highly subsidised.
He, therefore, called for the establishment of an industrial bank that would make access to credit easy for the manufacturing industry to create more jobs and reduce unemployment numbers.
While lauding the government for its measures to raise more revenue through taxes, the senior economist advised it to widen the tax net, instead of increasing tax rates.
He observed that the country was losing substantial revenue through the inability of the various metropolitan, municipal and district assemblies to collect property rates.
He suggested that as an incentive to push the assemblies to act, the transfer of funds to them should be tied to funds raised through property rates.
Dr Kwakye commended the government for its decision to scrap the National Fiscal Stabilisation Levy, saying there was no basis for maintaining it once the policy, according to the government, had achieved its purpose.
On whether Ghana needed to place a ceiling on its debts, he stated that it would be unwise to do so, as no economy was the same, adding that if the Ghanaian economy was vibrant enough to support its debt servicing, there was no need for a ceiling.
Ghana will spend some GH¢360 million at the end of 2011 on the hedging of oil, which is a risk management strategy used in limiting or offsetting probability of loss from fluctuations in the prices of commodities, currencies or securities.
The policy is to cushion the country against petroleum price hikes, but Dr Kwakye noted that it was unnecessary, as such funds could better serve the country in other priority sectors.
He explained that the best option, if the intervention was aimed at reducing the burden on the poor, was for the subsidies to reach the poor directly and leave the rich who could afford to pay more for fuel to do so.
He, therefore, called for the de-polarisation of the petroleum sector, adding that in other economies, petroleum prices could change within a day and vary from one fuel station to another but the government is not blamed.
On employment, he noted that not many jobs could be created immediately because most of the jobs would either be in the construction industry or the public sector, saying that the dividends would, however, come in due time, as most of the projects were in support of the private sector.
He noted that the country needed to find a long-term solution to the unemployment problem.
Dr Kwakye said among other things, the solution could include either increasing the number of years students spent in school or reducing the retirement age for pensioners.
Source: Daily Graphic