Warning on Fiscal Deficit

The IMF sounded a warning on Ghana’s fiscal deficit on Friday, saying the West African oil-producer would post an above-target deficit of 10 percent of gross domestic product (GDP) this year and plans for reducing it were inadequate. “The IMF projects a reduction in the budget deficit to 10 percent this year,” said Christina Daseking, leader of the IMF mission to Ghana. “Excessive government borrowing is raising the cost of credit to the private sector.” President John Dramani Mahama’s government aims to cut the deficit to 9 percent of GDP this year from 12 percent in 2012, and to further reduce it to 6 percent of GDP by 2015 so as to protect growth. “The government’s deficit target of 6 percent of GDP by 2015 will keep public debt high and buffers low so the mission recommended an additional fiscal adjustment of 3 percent of GDP by 2015,” Daseking said. “A ballooning wage bill, if untamed, will bring debt to levels that could endanger government’s transformation agenda.”

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