Wednesday, November 16, 2011

Budget 2012:Infrastructure for job-creation

The Finance and Economic Planning Minister, Dr. Kwabena Duffour, will talk about a wide range of initiatives in his budget statement to Parliament today, but the one with the real impact on families will be the massive infrastructural projects which will be undertaken next year.

Although the country’s infrastructure has improved over the years, the Minister in an interview with the B&FT said there is the urgent need to focus on upgrading its infrastructure indicators in tune with the rebased middle-income status.

Government has spent the past few years stabilising the economy, and the path is now set to build the requisite infrastructural and social projects to create jobs, Dr. Duffour said Ghanaians must benefit from the sacrifices they have made over all these years, he said.

Government is struggling to keep spending under control and avoid a repeat of 2008 when the then-ruling party boosted expenditure ahead of an election that it failed to win. The deficit soared to 24.2 percent of GDP at the time, sparking a slump in the cedi and pushing inflation to a five-year high, Standard & Poor’s said on Nov.

3. But the minister was quick to point out that government will be responsible enough not to throw the economy out of gear because of a looming election next year.

“I can tell you that we are continuing the fiscal consolidation, and that means the deficit will trend down next year. We in government are Ghanaians; why should we destroy the economy because of elections and come back to correct it? We will spend wisely and deliver the people’s aspirations,” he assured.

Dr. Duffour explained that embarking on the infrastructural drive is to correct the weak supply side that has characterised the economy all this while, making it possible for people to benefit from the sacrifices made in stabilising the economy.

The economy has made remarkable gains this year, with the budget deficit expected to reach a record 5.1 percent of Gross Domestic Product (GDP), the lowest in more than 5 years.

Statistics available indicate that the GDP growth rate will close the year at about 13.6 percent, with inflation at a single digit of 8.56 percent for October and international reserves settling at over US$5billion.

“Having achieved appreciable success on the macroeconomic front, the government wants to sustain infrastructure,” the minister said.

The GH¢3billion commercial loan from the China Development Bank is expected to feature prominently in the execution of next year’s budget to finance the Western Corridor roads project, railways and gas-processing facilities.

Parliament has already given the go-ahead for signing the loan agreement, but the International Monetary Fund (IMF) is expected to okay the deal in December.

The loan will be signed before the end of the year to enable disbursement to be done in January, 2012.

Besides the Chinese loan, government is expected to dig deep into its coffers to firm-up contracts for the Eastern Corridor roads and also fund social infrastructure: such as building new hospitals and clinics and refurbishing others, continuing with the policy to remove more schools under trees, and also irrigating the Accra Plains for farming purposes.

The 2012 budget will also announce the building of landing sites for fishing activities in the coastal belt with funds from the Chinese loan.

Duffuor mentioned, particularly, the massive injection of funds into resuscitation of the rail lines. The Ghana Railway Company is purely a national operation without any connections to rail services in other countries and is unable to carry the full volume of mining and passenger traffic, which has diverted a growing share of mineral traffic to the road network. This, he said, must be corrected.

Although rural road quality is remarkably good, the physical extension of the rural networks appears inadequate.

It is estimated that only 24 percent of Ghana’s rural population lives within two kilometres of an all-season road, which is below the 60 percent found in Africa’s middle-income countries.

GHOST NAMES

Another initiative is the cleaning-up of the government payroll. Early this year, government started cleaning the public-sector payroll, beginning with pensioners.

This has been reported to be very successful with a lot of savings.

“As we speak today, work on the pensioners’ payroll in the Eastern, Volta, Western, Greater Accra and Central Regions has been completed.”

The exercise, he said, will continue in 2012 and it is expected that a lot of savings will be made to finance the migration of public-sector workers onto the Single Spine Salary Structure, which according to officials is about 80 percent complete.

Government also intends to link up the Single Spine Salary Structure with productivity to ensure that government’s money does not go to waste.

REVENUE MOBILISATION

On the revenue side, the domestic revenue agencies markedly exceeded their targets. In the next budget, there will be more innovative ways of expanding the tax-net, while some of the tax measures introduced last year will be continued.

“There will be measures to widen the tax-net, and some of the measures currently on the ground will improve tax administration and make it more efficient.”

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