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General News
Government must ensure growth of energy sector 6/19/2007
The World Bank Country Director, Mr Mats Karlsson has stated that the government has to make hard and tough choices to deal with the financing, pricing, subsidies and the overall management of the energy sector.

That, according to him, is vital in ensuring the growth of energy production in the country.

Mr Karlsson, who stated this at the 14th Consultative Group Meeting - a gathering of donor countries and agencies and the government - to deliberate on the way forward to accelerate Ghana''s growth, said energy did not only directly impact the macro-economy but was also the quickest way to help or hurt the balance sheet of Ghanaian businesses.

The two-day meeting - which is being spearheaded by the World Bank and the Ministry of Finance and Economic Planning and attended by economic experts and civil society organisations among others - will also serve as forum for the government to seek support for the 2008 budget, presently being prepared.

Mr Karlsson further outlined two other choices regarding public expenditure and decentralisation.

On public expenditure, he said "Ghana today invests 30 percent of Gross Domestic Product (GDP)", which he described as very high because the country could get more growth with such monies.

The Country Director also stated that Ghana today mobilised 23 percent of GDP in revenue for the public purse, describing it as "high by any standards'' but wondered how it was used.

He said the wage bill in particular had risen from 5.2 percent of GDP in 2000 to 9.6 percent in 2006, "far higher than any of Ghana''s peers, low or middle income" adding that "this does not leave much room for the financing of the GPRS II ambitions".

Mr. Karlsson said the answer partly lay in a broader issue of ensuring value for money in public expenditure and noted that "Ghana would win by significantly strengthening and innovatively institutionalizing a transparent, hard-nosed vetting system on how it chooses to use public resources".

"This is the stuff on which democracy thrives. This is the stuff that when dealt with well, accelerates the path to middle-income status," he noted.

On decentralisation, he said many were unduly influenced by the transformational experiences that were known at home.

He said Ghana had the hallmarks of achieving a transformation "but I do not see it happening without more genuine decentralisation":

"We recognise a financing gap - which means that both government and partners need to do more to get more value out of our finances," Mr Karlsson pointed out.

He said the development partners also believed that Ghana deserved scaled-up funding.

Giving the overview of the economy, Mr Kwadwo Baah-Wiredu, the Minister of Finance and Economic Planning, said the energy crisis that hit the country had forced many manufacturing enterprises to acquire their own power generating plants at a greater cost.

He said the government was aware of the effect the crisis was having on businesses in the country, given the increase in fuel prices in recent times.

Mr Baah-Wiredu said improved tax administration would enhance the revenue mobilisation effort of the country.

He said revenue as a percentage of GDP which had averaged about 23 percent was projected to be maintained over the medium term, adding that "the fiscal deficit which is estimated to fall from the 7.8 percent of GDP in 2006 to 4.2 percent by 2009, will be maintained over the medium term".

The Governor of the Bank of Ghana, Dr Paul Acquah, said "this 14th Consultative Group Meeting is taking place against the background of strong macroeconomic indicators".

He said the economy was now in its 7th consecutive year of sustained and broad-based economic expansion as GDP reached 6.2 percent in 2006 in an environment of relatively subdued inflation expectations and currency stability.

Culled from Daily Graphic

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