Ghana cuts spending to meet budget deficit target

Ghana's Finance Minister, Ken Ofori-Atta, has recently unveiled a series of measures aimed at reducing government spending and cutting the country's budget deficit to 7.4% of GDP. This announcement comes on the heels of the government's successful raise of $2 billion to support the 2022 budget. The move comes at a crucial time for Ghana as the economy grapples with a steady decline in the value of its currency and a recent downgrade of its sovereign credit rating. Kenneth Brai, Head Asset Management at Comercio Partners, shared his insights on these developments in a recent interview on CNBC Africa. Brai highlighted the importance of restoring investor confidence in the Ghanaian economy, particularly following the credit rating downgrade. He emphasized the need for the government to demonstrate a commitment to fiscal discipline through significant spending cuts and other austerity measures. The government's decision to reduce the monthly allowances of council members and the salaries of appointees by up to 30% is seen as a step in the right direction, signaling a shared burden in addressing the economic challenges. The main focus of the austerity measures is on reducing expenditures by around 20% and increasing revenue through measures like the introduction of an electronic levy on digital transactions. The implementation of the levy is expected to generate $1.5 billion in additional revenue, providing a much-needed boost to the country's finances. However, there are concerns about the potential impact of the levy on digital transactions and the overall economy. Despite these challenges, Brai remains optimistic about Ghana's ability to stabilize its currency and prevent further depreciation. He believes that a combination of fiscal discipline, revenue-enhancing measures, and international support can help Ghana weather the current economic storm. While there are fears of a full-blown fiscal debt crisis if revenues do not improve, Brai is confident that timely interventions can avert such a scenario. The government's decision to reject approaching the IMF for financial assistance reflects its commitment to managing its fiscal affairs independently. Overall, the road ahead for Ghana remains challenging, but with concerted efforts and prudent economic policies, the country can navigate through the current economic turbulence and emerge stronger in the long run.