Govt’s 2014 macroeconomic targets not ambitious - IEA

The Institute of Economic Affair has described government’s 2014 targets set as unambitious.

Government in the 2014 budget set an inflation target of 9.5%, budget fiscal deficit of 8.5% and an 8% growth in GDP.

Senior Economist at the IEA, Dr J K Kwakye speaking at the institute’s post budget press conference said most of the targets are not ambitious enough.

Government’s target of 9.5% for the year 2014 is 0.5 percentage points above this year’s target of 9 percent. Inflation currently stands at a record high of 13.1 percent, the highest in 3 years.

Dr Kwakye indicates Ghana has constantly breached the West African Monetary Zone (WAMZ) of 5% inflation target in the wake of a fall in inflation globally.

“It will take a fundamental transformation of the economy to address supply constraints and sustained macroeconomic stability to tame inflation in the country,'' he said.

On the Budget deficit target of 8.5% of GDP, the institute said this is not ambitious enough and will entail a high level of borrowing and further escalate the public debt and interest payments.

Dr Kwakye said this also is far away from WAMZ convergence target of 3%. “We will not even get to this target by 2016 as we are aiming at 6% by that year.”

The institute however said the oil –inclusive economic growth of 8.5% seems to compare favourably with the 7.4% achieved this year.

The institute also condemns government’s move to impose an additional Value Added taxes in order to raise revenue. Government intends to generate tax revenue of about 19.3% of GDP. IEA said raising the tax effort from 17.3% to 19.3% in 2014 is un-ambitiously feasible.

Dr Kwakye also said government has simply taken the easy way out in generating revenue. It should focus on improving collection of rental and property tax, broaden the tax net and rope in the informal sector.

On Expenditure, Dr Kwakye expressed marvel at how Capital expenditure almost equaled interest payments. Government says it intends to spend about GHS6 billion on capital expenditure which translates to 5.7% of GDP while interest payments 5.9%.

The institute however welcomed the executive arm’s 10% pay cut, scrap of subsidies and the Infrastructure fund.


SOURCE [citifmonline.com/Ghana]