'MIDDLE INCOME STATUS HAS CONSEQUENCES'

Finance Minister Seth Terkper on his way to present the 2014 Budget statement

Posted on: www.dailyguideghana.com

By William Yaw Owusu

 Wednesday, December 4, 2013

The Minister of Finance Seth Terkper says Ghana’s lower middle-income status has affected the country’s ability to borrow on very soft terms.

“From the perspective of the world financial institutions, we are no longer going to be treated as a developing country.

The Finance Minister disclosed this last Friday at the maiden edition of “The Forum” put together by Channel Two Communications to explore solutions to national challenges.

“It is a good thing if you want to look at it positively however, we are no longer going to get loans which will be paid over 40 years, the most will be 25 years and if the pace of the economy continues we cannot even borrow at 25 years, we will get it at say 10, 12 or 15 years.

“Even for the World Bank, we now have to go to what is called their Commercial Window as opposed to what we get now. We just have to respond to the challenges with appropriate strategies. We should think through what is happening and respond appropriately with our socio-economic strategies.”

In this regard, value addition and diversification of our economy is crucial.

“Currently, the services sector controls about 60 per cent of the economy despite the well known fact that Ghana is a natural resource and agricultural country.”

He said commodities like cocoa and gold still remain strong and that will make the economy less volatile on account of resources from oil and gas.

He said all stakeholders agreed on how the oil revenue must be used to avoid mistakes of some other countries and that agenda must be pursued

“Because oil is a major resource, you always isolate the revenue and look at how the economy without oil is performing. We did that for cocoa at a point in our economic life.

The Minister said that the private sector had played a key role in harnessing the oil resources, saying “almost all the players in the oil sector with the exception of the GNPC have been major players in the offshore sector. They took the risk to invest in the sector and we are benefiting.”

He also said “in the budget we recognized the challenge that the economy has been going through. For the first time, we quantified the major causes of the overlap and the advantage is that we will be able to monitor them.

“We have made progress in about four areas since we started monitoring. We corrected the subsidies and we are in discussion with the donors. The two big issues we have now are the single spine and the interest payments.

He said the essence of re-alignment in the budget is that we have benchmarks for every budget,” adding “we are saying that if you spend a disproportionate amount of the tax revenue that is coming on only one element of the budget then the budget is aligned.”

He said when it comes to capital investment, the government should borrow long-term, adding “that is why we have a policy of financing the capital aspect of the budget with only long-term financing.”

He said the Stabilization Fund has accumulated about $250 million, adding that “we envisage it for both public and private sectors.”