November 24, 2013

A former Minister of Finance is predicting Ghana’s 2014 economic performances will not be different from 2013 because managers of the economy are still persisting in setting unrealistic targets since 2009.

Dr. Akoto Osei described the bane of government’s handling of the economy as a “systematic over-estimation of revenue and under-estimation of expenditure”. He was speaking on Joy FM’s Newsfile aired on Multi TV last Saturday where the panelist were discussing the 2014 budget statement presented last Tuesday in Parliament by the Finance Minister, Seth Terpker.

Terkper acknowledged Ghana would miss its 9 percent deficit target this year, posting a gap of 10.2 percent of GDP. Terkper also announced the country failed to maintain inflation under 11 percent in 2013 as planned.

The Finance Minister is however predicting a 2014 inflation target of 9.5 percent, plus or minus 2 percentage points. Moving forward, he says Ghana will also target economic growth of 8 percent in 2014 and will seek to trim its budget deficit to 8.5 percent of gross domestic product.

But Dr. Akoto Osei is not convinced this is realistic. “The fundamental problem I have had with the budget since 2009 is that there is always over-optimism. We will achieve this when you know you cannot” , he analyzed.

He said governments plan their development agenda based on revenue projections. It is therefore forced to cut back on its plans and programs if it fails to raise the intended revenue.

Citing examples of unrealistic targets,Dr Akoto Osei said government failed to meet every projection on a tax type by at least 16%.

“Personal income tax fell by 17%, company tax by 21% and VAT by 14%”, he observed. He said government got 15 billion Ghana cedis in revenue after it had projected it will raise 17 billion Ghana cedis.

Dr Osei, who is also the MP for Tafo Pankrono, noted that the failure in raising enough revenue did not prevent government from spending more. He said government cleared 1.9 billion Ghana cedis in arrears when it had promised to pay only 140 million Ghana cedis.

“Whoever is doing the estimation must be very careful…you cannot miss it [the targets] by such an unacceptable margin…it doesn\’t help in proper planning”, the former Minister said.

According to Dr. Akoto Osei, this is why state agencies such as Parliament and Ministries have been cash strapped for the better part of the year.

He said wrong projections and assumptions is the reason why Ghanaians are suffering.

In the 2014 budget, Akoto Osei noted the same canker has repeated itself. Ghana is having to deal with a hurtful 12% budget deficit and Akoto Osei believes that this kind of hit and miss projections since 2009 is the cause of a widening deficit.

“This has been there from day one that is why the deficit is so big”, he concluded.