Oil revenue not panacea for country’s growth

Page 15, Feb 18, 2010
Story: Emmanuel Adu-Gyamerah

THE First Deputy Managing Director of the International Monetary Fund (IMF), Mr John Lipsky, yesterday told Parliament that unless Ghana’s fiscal affairs were managed carefully, even austerely, oil revenue would not be able to make real difference in growth, job creation and living standards.
He said it was thus important for the country to prune its budget deficit down, adding that it was important for the country to stabilise its indebtedness and bring it down to a manageable level.
Addressing the Committee of the Whole of Parliament as part of his two-day visit to the country, Mr Lipsky noted that there was the need for sound financial management so that future oil revenues could support an expanded public investment programme.
“Investment spending at current levels simply cannot deliver the quality of infrastructure- from power to roads- that is needed to boost economic growth,” he said.
Mr Lipsy said while oil resources could finance these investments, that would require a disciplined non-oil budget.
He said unless the country could mobilise more revenue and better contain recurrent spending costs, a fiscal deficit of the magnitude Ghana had been recording recently would absorb all of its future revenues, leaving nothing for increasing capital expenditure.
Mr Lipsky said the challenge for policymakers and legislators was to ensure Ghana’s future by encouraging a rich and active debate on the merits of sound budgeting and best ways to wisely use the country’s prospective oil wealth.
He said that should be the central economic policy challenge for the country some time to come, stating that the IMF looked forward to a close and productive dialogue with Ghanaian authorities to ensure a healthy and prosperous country for future generations.
On the recent global recession, Mr Lipsky said though Africa was far from the epicentre of the crisis, Ghana and other countries in the region were hit hard by its aftershocks.
He explained that falling global demand reduced prices for many commodity exports and resulted in slumping sales for many non-traditional exports.
Mr Lipsky said the response of the IMF to the financial crisis was to ensure that low-income countries had rapid access to IMF financing in order to strengthen their balance of payment to help them to avoid the sort of contradictory economic impact that would only make the downturn more severe.
Thus, last year alone, the new IMF lending to sub-Saharan Africa was up almost five-fold from 2008, reaching US$5 billion.
He said Ghana had benefited considerably from the IMF’s new policies, adding that one of the largest IMF operations in Africa in 2009 was the $600-million three-year arrangement with Ghana.
Mr Lipsky later answered questions from MPs and told the House that sourcing monies from the IMF was not compulsory but an option made by countries to address their economic problems.