Deputy Governor Upbeat About Economy Despite Downgrade Rating
Deputy Governor Upbeat About Economy Despite Downgrade Rating Website
A ratings downgrade by Fitch, an international performance rating organisations, two weeks ago only served as a "warning" to Ghana to rein in its fiscal deficit, but growth and spending are on target for 2008, Deputy Central Bank Governor Mahamadu Bawumia said in an interview on Thursday. "Our deficit target for 2008 is four percent of GDP and we are definitely on track, provided all the indicators are sustained," Dr Bawumia told the Ghana News Agency. "We are definitely on target and as I have said, we are on course to achieving the projected 6.5 percent (growth) for 2007 and moving towards seven percent this year," he said. Fitch downgraded the outlook on Ghana's B+ long-term foreign and local currency debt ratings to stable from positive, citing fiscal and current account imbalances after above-budget fiscal deficits in 2006 and 2007. "The downgrade is almost an insurance policy for us." The February 7 revised rating sounded a rare note of warning on the country's economy after a period of sound growth, debt cancellation and a successful debut international sovereign bond issue last year, which was over-subscribed. Dr Bawumia said government overspending in 2006 and 2007 was largely due to the year-long power crisis that required urgent investment in emergency generating capacity. "We had an energy crisis and not only had to respond to it, but more importantly had to do so quickly ... We had a choice to either spend money to resolve the crisis urgently, or remain in the dark in order to stay within our deficit target," he said. He said unexpected costs associated with hosting the African Nations Cup, which ended a fortnight ago, public sector wage increases and anti-poverty expenditure linked to debt relief had also added to the deficit. Ghana's fiscal deficit reached 7.8 percent of GDP in 2006 during the power crisis, triggered by low water levels in the Volta hydro dam. Dr Bawumia also play down the risk of state over spending in the run-up to this year’s elections, saying the government had proved in the past it could avoid that. "We have done it before in 2004 when everybody was screaming caution against bloated expenditure in that election year not too badly," he said. Ghana's economy was withstanding global pressures, he said. "Our economy remains resilient even in the face of current external shocks that everybody, including big nations such as the U.S. and China are suffering from," Dr Bawumia said. "Presently we have oil coming back again to around 100 dollars (a barrel) but the economy has withstood it as if nothing is happening," he said. Bawumia mentioned the Bank's plans to implement an integrated electronic cash card system soon, saying this would further strengthen the economy. "We anticipate that under the E-switch system, about 80 percent of the people will deposit money into the banking system and this would definitely make more money available to the banks for lending at competitive rates."