Ensuring and sustaining macroeconomic stability

Response from DPs to the Ghana Shared Growth and Development

Agenda 2010-2013

GSGDA’s macro-chapterWe see:• Broad policy orientations• Little analytical underpinning• Little interlinkages between macro-issues and other

policiesWe would expect:• Macroeconomic framework that establishes the scope

for increased spending on development priorities (fiscal space), by:– Getting the basics right (analytical framework +

assumptions)– Addressing current challenges that constrain

development potential– in order to understand the viability of

development policies in the sectors.

Analytical underpinning needed to establish fiscal space

The macroeconomic framework should guide us to understand:

• Assumptions on sources of growth and employment• Scope for increased revenue collection, domestic

(efficiency, coverage) and external• Timing and volume of new revenue from oil&gas

(leap in GDP may lead to false expectation regarding availability of revenue)

• Meaningful costing of policy priorities, and translation into the 2011-2013 budget (currently under preparation)

• Analytical framework after GDP rebasing incl. new financing options

Addressing challenges to create fiscal space for development

• The following challenges – if not properly addressed – risk to eat up most of the room for development spending:

• Reduction of fiscal deficit• Arrears• Expenditure controls• Wagebill• Financial sector• Energy sector• Debt sustainability

Linking in with sectoral development • Sectoral policy orientations need to be considered

against macro-policy, e.g.:– Agricultural development (prone to Dutch

disease)– Access to affordable credit (linked to viability of

banking sector, linked to arrears and energy-sector problems)

– Gas sector development (linked to arrears in energy sector which constrain financial sector)

– PFM reforms (revenue and expenditure) in view of fiscal deficit but also increased government efficiency

Some issues for discussion and follow up

• After having established the policy orientations through the GSGDA, how is GoG planning to work out the forward-looking analytics which will determine fiscal space?

• What comprehensive policy actions to address key constraints?

• How can we deepen the linkages between macroeconomics and sectoral policy priorities? What role to play for DPs?