Ghana on track to meet 9 pct deficit target: Vice President

By Kwasi Kpodo

ACCRA (Reuters) - Ghana is on track to meet its 9 percent deficit target for 2013, Vice President Kwesi Amissah-Arthur said in an interview on Tuesday, seeking to reassure investors ahead of a $1 billion Eurobond issue expected this month.

Amissah-Arthur, the head of the government's economic management team, said positive economic data for the year to June and the removal of costly fuel subsidies made it likely the West African cocoa-, gold- and oil-exporter would hit the target.

Ghana's public utilities regulator should announce tariff adjustments next month to reflect a significant cut in power and water subsidies that will provide additional fiscal space for the government, Amissah-Arthur said.

"We are doing better now and if the trend continues, we will even do better than the 9 percent," Amissah-Arthur, a former governor of the central bank, told Reuters. "We are not going to do worse than 9 percent because of the measures we've adopted."

President John Mahama's government has taken steps to control expenditure this year, including removing fuel subsidies. It reintroduced a 5 percent fiscal stabilisation levy on certain companies after Ghana overran its 6.7 percent deficit target last year by nearly 100 percent.

Ghana is seeking to issue a Eurobond of up to $1 billion this month and needs to show commitment to trimming the deficit - a barometer for the sustainability of government finances - to allay investors' concerns.

The government has said rising public sector wages were responsible for last year's ballooning deficit, in addition to shortfalls in petroleum corporate tax and donor inflows.

Amissah-Arthur said the government would take more measures in the coming months to confront expenditure challenges.

MEASURES TO LOWER RATES

The government is also concerned that banks' high lending rates may be stifling the economy and has agreed with the central bank to tackle this.

"The central bank will soon announce some of the new measures we have agreed on to lower interest rates, which is the bane of industry at the moment," Amissah-Arthur said.

Finance Minister Seth Terkper is due to present a mid-year economic review to parliament this month. In a March annual budget, the government projected 8 percent GDP growth and year-end inflation of 9 percent, in addition to plans to pare the deficit to 9 percent of GDP from 12.1 percent in 2012.

Some economists initially voiced disappointment with the 9 percent target, arguing it was too modest. However, in recent weeks, most have recognised deficit reduction will be a multi-year task and the priority must be on achievable interim goals.

Rating agency Fitch has cut Ghana's outlook to negative and warned it to take appropriate steps to restore fiscal control.

Amissah-Arthur said most economic targets would remain unchanged except inflation because the statistics office had introduced a rebased consumer basket.

"Inflation could go up slightly to the 11 percent touchline. Even that will be within the projected range of plus or minus two percentage points of 9 percent," he said. The harvest season next month would have a cooling effect on inflation, he said.

Amissah-Arthur said the cedi currency's weakening against the dollar would end in September as bond inflows kick in. The cedi slid 6 percent year-to-date compared with 15 percent a year ago.

"I don't think that it will depreciate to the extent that it did last year," he said. "The central bank is in control and I believe it will manage the depreciation."

Source: http://news.yahoo.com/ghana-track-meet-9-pct-deficit-target-vice-140757147.html

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