Government's Fiscal Stabilisation On Course - Finance Minister

Dr Kwabena Duffour, Minister for Finance yesterday gave a positive assessment of the economy, saying confidence is gradually being restored due to the positive impact of Government's fiscal policies, macroeconomic stability measures and injection of external resources.

"The first five months of 2009 has witnessed a positive primary fiscal balance, gradual stabilisation in the cedi exchange rate, sound, well capitalised and fairly liquid financial sector, decline in the movement of the rate of inflation and improvement in the trade balance, all as a result of the prudent fiscal and macroeconomic measures being implemented," he told members of the Association of Ghana Industries (AGI) at a luncheon in Accra.

This, Dr Duffuor said has raised confidence in the economy and paved the way for positive negotiations with development partners for financial support, adding that negotiations with multilateral institutions such as the World Bank will soon yield dividend.

Ghana is expecting an inflow of $1.2 billion budget and project support from the World Bank while the IMF can also provide balance of payment support of $1 billion.

Dr Duffuor said provisional data on the implementation of the 2009 budget shows that government's fiscal stabilisation strategy is on track. The overall balance shows a deficit of GH¢608.9 million, equivalent to 2.8 per cent of Gross Domestic Product.

"This shows that the deficit target of 2.8 per cent of GDP for the first five months of 2009 was successfully achieved," he said, adding that there has been gradual decline in the exchange rate of the cedi.

The rate of depreciation of the dollar/cedi rate at the inter-bank market fell from 5.1 per cent in January this year to 1.4 per cent at end of May. In the Forex bureau it went down from 6.8 per cent in January to 0.8 per cent in May 2009.

The Finance Minister said inflation has stabilised in the last two months but expects to go up in June as a result of the adjustment in petroleum prices and assumed a downward trend thereafter.

However, Dr Duffuor said despite the positive fiscal balance there are inherent risks that posed difficulties in realising fiscal consolidation. Other areas of concern are poor performance of the state owned enterprises (SOEs), which has resulted in huge losses and accumulation of excessive debts that pose significant risks to economic consolidation.

He said ineffective public sector wages is another major risk that has the potential of derailing the economy.

Dr Duffuor said despite the enormous challenges that the risks presented, government is in a position to manage them and bring fiscal consolidation for the growth of the economy.

Mr Tony Oteng-Gyasi, President of AGI, stressed the need for intervention in meeting the financing needs of Small and Medium Scale Enterprises, which are unable to access funds for growth.

Source: GNA