A renowned Chartered Economist, Dr. John Gatsi has advised the managers of the Ghanaian economy to cut expenditure on executive travels in the revised budget of 2015.
According to him, travel expenditures of the President, ministers, deputy ministers, chief directors and other government appointees should be cut down and be invested into productive ventures.
Dr. Gatsi, who is also a Senior Lecturer at the University of Cape Coast (UCC) made the call in a telephone interview on the revised 2015 budget, which is being presented to Parliament by the Minister of Finance, Seth Terkper today.
The revision of the budget is occasioned by a $700 million decline in government’s revenue, as a result of the plummeting crude oil prices on the international market.
The government last year benchmarked oil price at $99.38 per barrel in the 2015 budget, which was read in November 2014.
The budget estimates total revenue from oil at $1.24billion (GHc4.2billion), equivalent to 3.1% of Gross Domestic Product (GDP) and representing a benchmark price of $99.38 per barrel and output of 37.2 million barrels, according to the government.
Total expenditure in the 2015 budget is estimated at GHc41.2 billion (30.5% of GDP) of which comprises compensation of public sector employees: GHc12.3 billion (29.7% of total expenditure, 36.3% of domestic revenue, and 9.1% of GDP); Interest payments: GHc9.6 billion or (24.4% of total expenditure) (7.1% of GDP); capital expenditures : GHc7.0 billion (or 17.8% of total expenditure) (5.2% of GDP), arrears payments: GHc1.6 billion (3.8% of total expenditure) and subsidies: (GHc50 million).
However, the revised budget could see the Minister of Finance announcing some cuts in government’s initial plan to spend GHc41.2 billion this year.
Also, Dr. Gatsi and other economists are calling for the re-alignment of projects in the revised 2015 budget to reduce capital expenditure.
Dr. Gatsi, who is a Finance Lecturer at the UCC, added “I expect further action to make the Ghana Integrated Financial Management Information Systems (GIFMIS) more robust and improvement in revenue collections. While funding measures may be announced to beef up the process of ending the energy crisis”.
Mr. Terkper is expected to use the opportunity to discuss issues bothering on the use of the stabilization funds and issues of the $1 billion 10-year Eurobond and also explain to Ghanaians the effects on debt management of the country.
JOURNEY TO BUDGET REVISION
Eight months since crude oil prices began to tumble on the international market, no concrete step has been taken by the government to mitigate the risks of the falling prices on the Ghanaian economy which the country is paying dearly.
The Institute for Fiscal Studies (IFS), a leading Accra based economic think tank, recently revealed in its latest policy brief paper titled –‘The Falling Crude Oil Prices: Mitigating the Risk’, that “the economy might not be able to withstand the impact of the looming external shock, which could lead to further macro-economic instability”.
The IFS, which is headed by Prof Newman Kwadwo Kusi, a renowned economist, further warned that the recent stability of the cedi (Ghana currency) may fall victim to the falling oil prices with evidential weak forex inflows and lower corporate tax receipts from oil.
This may have the potential to significantly affect the country’s balance of payments and foreign reserves. The effect of the falling oil prices on individuals and businesses in the country may also be devastating, the institute further warned in its 10-page policy brief paper.
It insisted: “The resultant drop in private sector investment could slow down the rate of growth of the economy further with devastating consequences”.
Ghanaians have been witnessed to the negative impact of rising petrol prices in periods of oil price surge whose knock-effect of spiraling food prices ended up creating havoc in household budgets.
In Ghana, as the institute indicated, both statistical and anecdotal evidence point to the fact that higher oil prices have serious negative impact on economic performance. Whenever there is a rise in petroleum prices, all transport related businesses face the decision of whether to raise their charges to shift the increased costs onto consumers or not.
“Now that the crude oil price has more than halved in the past seven months and predictions suggest a prolonged slump in prices, there is no doubt that, the inaction of the government has dangerously exposed the country. It is clear that the estimated oil revenue in 2015 cannot be realized,” said the IFS
Between June 2014 and the second week of January 2015, the price of crude oil plunged by about 55% to below $50 per barrel as stockpiles mounted with no sign of a cut in production. Demand for oil is also weak, with the outlook for the global economy remaining subdued. Oil analysts predict that the price could fall below $40 per barrel before it rebounds.
The fall of oil prices has been steep, prompting companies and decision makers to wonder how suddenly unpredictable the market has become, forcing them to take measures to mitigate the numerous risks presented by the fall in price.
On inflation outlook, global inflation has remained subdued on the back of falling oil prices and weak demand. In the outlook, inflation pressures are expected to remain low due to spare capacity, tighter policies and declining commodity prices.
While gold prices are projected to average $1,276 in 2015, while cocoa is projected at about US$2,995 per tonne in 2015. These developments will have implications for the domestic economy. These have awakened the government to go to Parliament for the revision of the 2015 budget.
African Eye News.com
