Seth-Terkper-Finance-MinisterPolicy think tank Centre for Policy Research (CPR) has underscored the need for fiscal austerity to enable the country to achieve its economic targets and reduce fiscal deficit in 2014 and beyond.

CPR notes that “with about 70% of income used to pay public sector salaries, Ghana has one of the highest budget deficits on the continent.”

The policy research organisation says through public-private partnership, government must engage private financial means to build infrastructure and improve service delivery, adding a “massive investment in infrastructure could create about 400, 000 jobs”.

CPR cited recent fuel price adjustments, plummeting global prices of export commodities (such as gold) and the eight-month presidential petition as factors that culminated in economic challenges of the 2013 fiscal year.

On ways to improve revenue mobilization, the policy research organisation has asked government to extend the tax bracket and improve tax collection efficiency.

“The Ghana Revenue Authority must take giant steps in this regard”, the organisation noted.

In a release signed by its Executive Director, Gloria Edusei, CPR also says government must take steps to manage subsidies to state agencies and utilities.

CPR has urged Ghanaians to take a serious interest in proposals raised in the 2014 budget statement and hold government accountable for speedy economic progress.

Below is the unedited release from the policy think tank:

GOVERNMENT REQUIRES AUSTERE FISCAL DISCIPLINE TOWARDS 2014 AND BEYOND

The Centre for Policy Research (CPR) has observed that austere fiscal discipline will be sine qua non to reduce fiscal deficit and achieve greater economic targets within the 2014 fiscal year and beyond.

Aside from earlier fuel price adjustment, and plummeting of export commodity prices such as gold in the global arena, the eight-month presidential petition hearing also culminated in the general economic challenges of fiscal year 2013. Since December 2012, inflation has been rising steadily to 13.1% in October 2013. Additionally, government budget deficit was 12.10% of GDP in 2012. In the first quarter of 2013, Ghana’s economy grew by 6.7% year-on-year. With about 70% of income used to pay public sector salaries, Ghana has one of the highest budget deficits on the continent.

Ghana?s emerging middle class too is beginning to have influences on the quest for policy directive in universal healthcare coverage and poverty reduction from bottom to top rather than, as in the past, top to bottom. The government therefore has a daunting, but a possible, task to honour its social contract of improving the lives of the good people of Ghana.

We anticipate that gradually efficient approach to reducing fiscal deficit and inflation won?t incur other social disturbance or hamper private sector participation. Through public-private partnership, government must engage private financial means to achieve public ends of infrastructure and service delivery. CPR believes massive investment in infrastructure could create about 400, 000 jobs.

Toward improving revenue mobilization, government must extend the tax bracket and improve the efficiency of tax collection while taking steps to manage subsidies to state agencies and utilities. Total taxes and other revenue marked 20.9% of GDP in 2012. The Ghana Revenue Authority must take giant steps in this regard. The central bank?s new formula for calculating interest rates is expected to increase loan acquisition by local businesses while the Bank of Ghana takes pragmatic measures to stabilize the cedi through reinforcement of foreign exchange rate policy and liquidity management.

With the collaboration of the various social partners, government must place a moratorium on salary increases in the public sector for at least two years. CPR expects government to announce major strategies aimed at eliminating ghost names from the ballooned public payroll as well as completion of public sector wage negotiation, particularly removal of the percentile quotient of the market premium from the Single Spine Salary Scheme. Government must continuously audit the performance of employees in the public sector, and take steps to ensure the state obtains value for money for every salary paid.

In managing subsidies, for instance, it will be necessary to scrutinize the financial operations (especially the internally generated funds) of public tertiary educational institutions and liberate them from reliance on government subventions.

Furthermore, we call on government to negotiate a reduction in the wages and salaries of all Article 71 office holders by 15%. While government must abolish payment of rent to officers not in official residences, all public officers (elected, appointed and recruited) residing in state official accommodation must pay the appropriate rent to the state. The official utility regimes for these officers must be scrapped forthwith so that they bear the cost of all utility services in the same manner as it is the case for ordinary citizens.

Government must also increase funding for social intervention programmes to support the downtrodden in society. NHIS must scale up from its current 36% national coverage. Indicators for the school feeding programme must also go beyond mere increment in enrolment to impact of each enrolment. Low income households must be further supported with efficient interventions which correlates the gains of the economy.

Furthermore, CPR has observed that there is increasing public perception that the political class is plundering state resources, feeding fat at the expense of the ordinary people. It will therefore be in the interest of senior public officials and politicians to overtly tighten their belts. This will mean cutting down on profligacy and reducing the perks that public officials have.

Government should also be more focused on?improving Ghana?s economic situation, and not necessarily looking to existing global powers and institutions for the provision with the best economic model. Our research indicates many a Ghanaian has high interest in the revenues of the country?s oil and gas sector.

The Centre for Policy Research will further urge the general public to take a serious interest in issues of the 2014 budget statement, to increase their understanding of same and help place this country on a trajectory of speedy economic progress.

Signed

Gloria Edusei

Executive Director?

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