Ghanaians must brace themselves up for tough times in 2016 as government’s fiscal consolidation begins to take a bite, the Head of Standard Chartered Bank Africa Research, Ms. Razia Khan, has said.
Speaking with a cross-section of journalists, Ms. Khan said government’s plan to trim the budget deficit to 5.3 per cent from an estimated 10.2 per cent was an indication of the high level of expenditure tightening that would take place in 2016.
The tightening and aggressive expenditure cuts coupled with increases in utility tariffs could make things difficult for Ghanaians, she said.
“It is certainly going to be a very tough year for Ghana; we don’t know if the fiscal consolidation being suggested can actually be achieved.”
She described the deficit target of 5.3 per cent of GDP in 2016 as very ambitious.
On inflation, Ms. Khan said Standard Chartered Bank’s forecast was that the rate will rise to an average of 18.6 per cent in 2016 and that the average inflation forecast of 12.2 per cent would be difficult.
“In the medium term with the benefits of the stronger base and consistent policy it will come down to around those levels in 2017. We think it will be a very difficult target to reach in 2016 because of the utility tariff increases,” she said.
Ms. Khan said given the expectation of the weakness of the Ghanaian cedi, it was unlikely that there would be a dramatic improvement just yet.
Ms. Khan expressed the hope that the election year syndrome of over-spending would not happen because of the demand of the International Monetary Fund.
“The Bank of Ghana’s ability to finance the deficit will be limited in financing the budget deficit because of the limits set by the Fund,” she said.
She said going into 2016 and 2017, the country’s hydrocarbon development would see a boost with an increase in the production of oil and gas and this might help lift some growth.
“We are going to see an increase in crude oil production from 110,000 to 250-280,000 barrels a day as well as significant increases in gas supplies. That is going to help us. If we continue with fiscal consolidation we are going to return to 8 or 9 per cent growth,” she added.
By David Adadevoh