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Ghana’s fiscal and monetary policy stance is credit positive – Analyst

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Seth Terkper - Finance Minister
Seth Terkper – Finance Minister

An analyst and Assistant Vice President at rating agency Moody’s says Ghana’s fiscal and monetary policy position is credit positive.

In the 2016 budget presented to Parliament last Friday by Finance Minister, Seth Terkper, the budget aims to reduce the fiscal deficit to 5.3 per cent of GDP in 2016 from the targeted 7.3 per cent in 2015 and the 10.2% per cent deficit in 2014.

“Then, on Monday, the central bank further tightened monetary policy to suppress inflation and anchor inflation expectations. Although downside risks persist, proactive policy adjustments should help to preserve macroeconomic stability and support sovereign credit quality, a credit positive,” Elisa Parisi-Capone, Assistant Vice President said in a research note copied to ghanabusinessnews.com.

According to Parisi-Capone, the comparison of fiscal results over the first nine months of the year with the budget targets and with 2014 budget execution data over the same period shows outperformance in particular on the revenue side: revenues and grants to GDP were 17.0 Per cent of GDP as of September 2015 as compared to the 16.3 per cent target in the revised budget and in contrast to 15.6 per cent over the same period last year.

She writes, total expenditures and arrears clearance at 22.1% per cent of GDP was broadly in line with the target and with last year’s performance, whereas the fiscal deficit registered 5.1 per cent of GDP over the first nine months this year against a deficit target of 5.7 per cent of GDP and the 6.4 per cent of GDP deficit recorded over the same period last year.

“Ghana’s fiscal deficit targets of 7.3 per cent of GDP and 5.3 per cent for 2015 and 2016, respectively, compare to our expectation of a more muted fiscal deficit reduction of 8.0 per cent in 2015 and 7.5 per cent in 2016,” she says.

According to her, despite the better-than-expected performance, risks to the fiscal consolidation path for the rest of this year and for 2016 remain.

By Emmanuel K. Dogbevi

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