By Justice Lee Adoboe
ACCRA, Oct. 18 (Xinhua) -- The government of Ghana needs to cut out waste in its public sector spending to deal with the current huge fiscal deficit confronting it, an analyst told Xinhua here on Thursday.
Commenting on the latest Fitch rating of the country's economy here Thursday, William Bekoe, a senior lecturer at the economic department of the University of Ghana, Legon, said the country was in a difficult situation as a result of the implementation of the Single Spine Salary Structure (SSSS) policy.
The international credit rating agency had downgraded Ghana from a B+ with negative outlook in February 2013 to B with stable outlook on Thursday.
It cited "a sharp widening in the budget deficit to 11.8 percent of GDP from 4 percent in 2011 and rising debt levels, which, in percentage of GDP, had risen to 48.8 percent between 2011 and 2012 from 38.3 percent" as the cause of Ghana's lower performance.
"The agency does not expect capital inflows to keep pace with the widening current account deficit, keeping foreign reserves under pressure. Import cover is forecast to remain at 2.9 months, leaving Ghana exposed to exogenous shocks," Fitch said.
"This Single Spine Salary policy implementation has opened the flood-gates for every public sector worker group to stake claims to their share of the 'national cake'," Bekoe observed.
He said this was the reason most governments found it difficult to muster the political will to implement such wage reforms.
Bekoe also observed that most of the donor assistance that the country depends on had not been released, leading to the worsening of the economic situation for Ghana, conceding that the rating would affect Ghana's fortunes in the international capital market.
"This (downgrading) affects you negatively because it is about your credit worthiness, so what Fitch is saying is serious. Because you are spending more than you are collecting, can you generate enough revenue to pay back your borrowing?" he asked.
The economist pointed out that the rating would worsen the country's risk profile, making it pay more for its borrowing from the international capital markets.
To deal with the situation, Bekoe urged the government to cut out the unnecessary expenditure wherever it is found in the public sector, while increasing revenue generation to meet the demands.
He urged the government to widen the tax net, seal the loop holes in the tax net and find ways of bringing on board the huge informal sector for direct taxation.
Ghana was able to raise a 1.0 billion U.S. dollars in a Eurobond late July when Fitch had rated the economy B+ with a negative outlook, while Standard & Poor maintained its B rating for the country.