Ghana faces shortage of funds

Dr. Todd Moss, Vice President and Senior Fellow at the Center for Global Development, said the most immediate and direct impact for Ghana will be the change in its eligibility for concessional financing from the World Bank, which has been the country’s most important creditor for the past 30 years, according to the daily guide,

Presenting a paper on Ghana’s New Income Status and Implications of graduation from the International Development Association (IDA) organized by the Institute of Economic Affairs (IEA), Dr. Moss said Ghana’s transition from lower income country to lower middle income country will help the country finance future development projects, close some doors but open others such as greater access to private investment and international capital markets.

Ghana began production of oil in December 2011 which is expected to underpin 13 percent real Gross Domestic Product (GDP) growth in 2011 and bring in approximately $800 million in government revenues.

Dr. Moss explained that if revenues reach the expected $1.5 billion per year by 2015, this will be roughly at par with total donor inflows and will give Ghana some relieve.

On informal implications, Dr. Moss reiterated that while some rules will alter Ghana’s relationship with external agencies, the country’s middle income status will certainly affect perceptions and lead to policy changes.

Policy think tank, Imani Ghana recently mentioned in its analysis that donor support to the country in 2011 dropped by about 28 percent.

The policy think tank said grants from donors fell short of government’s target, indicating that there was a danger in the heavy dependence on donors to meet basic government responsibilities.

On the way forward, Dr. Moss urged the government to discuss with the World Bank management the graduation process and seek clarity on process expectations.

He also urged the government to focus on domestic revenue generation to replace any lost revenue streams while pursuing aggressive oil sector and financial management reforms to maximize revenues, improve public expenditure quality and investor confidence.

The rebasing of the Ghanaian economy generated a lot of debate in Ghana with some describing it as a mere statistical adjustment that did not reflect the reality on the ground.

Ghana reached $1,100 per capita income for the first time in 2007 to join the league of middle income countries.

Source: www.africanews.com

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