|Finance Minister Seth Terkper (left) and Dr. Henry Wampah (Right)|
“The instability in electricity continues to play considerable havoc with productive economic activities, with negative implications for employment via decreased derived demand for labour,” the ISSER said.
State of economy
The position of the ISSER was contained in the annual State of the Ghanaian Economy Report, 2014, which was launched in Accra Wednesday.
It said inflation and interest rates were very high even by African standards, while domestic fiscal and external current account deficits were large in addition to the government debt, which was huge by historical standards.
The ISSER said “these challenges suggest that Ghana needs to undertake a serious prioritisation of its public finances. Such an undertaking would entail major political decisions,” it added.
High government expenditure
“While increased efforts to mobilise revenue through an expanded tax base should be pursued, the main culprit for recent huge deficits is the expenditure by government, which should be reined in over the short-to-medium term,” the report said.
It identified key risks to monetary policy to include adverse developments in world commodity prices and foreign investment inflows.
The report said the Bank of Ghana scaled up its policy rate in 2014, prompting slight increases in the money market and bank rates with average base rates increasing marginally.
It pointed out that the risk associated with the developments was that those rates might go even higher as the inflation rate had picked up, further raising inflationary expectations.
Such a development, the report indicated, would likely adversely affect private sector investment, adding that the country’s weak infrastructural systems, particularly in the energy and transportation sectors, and ineffective public administration structures undermine efforts to make investing in Ghana a worthwhile venture.
Presenting an overview of the report, the Director of ISSER, Professor Felix Asante, said there had been a substantial proliferation of private tertiary institutions in the country, while the share of the public budget spent on education, especially tertiary education, was currently high.
He noted, however, that backed by strong investment in the oil and gas sectors, as well as by public infrastructure and favourable commodity prices, the country could sustain continuous economic growth well into the future, provided it improved macroeconomic management.
Prof. Asante said this required bold efforts to reduce budget imbalances, adding that in order to ensure that medium-term growth targets were met, there was the need for massive investment in productive infrastructure and also stressed on the need to prioritise non-traditional exports.
On the fiscal side, he said there was the urgent need for the prudent management of government resources.