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Ensuring and sustaining macroeconomic stability

Ensuring and sustaining macroeconomic stability. Response from DPs to the Ghana Shared Growth and Development Agenda 2010-2013. GSGDA’s macro-chapter. We see: Broad policy orientations Little analytical underpinning Little interlinkages between macro-issues and other policies

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Ensuring and sustaining macroeconomic stability

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  1. Ensuring and sustaining macroeconomic stability Response from DPs to the Ghana Shared Growth and Development Agenda 2010-2013

  2. GSGDA’s macro-chapter We see: • Broad policy orientations • Little analytical underpinning • Little interlinkages between macro-issues and other policies We 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.

  3. 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

  4. 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

  5. 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

  6. 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?

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