Finance Minister, Ken Ofori-Atta, has told Parliament that government is expecting to achieve a fiscal deficit of 4.5 percent of Gross Domestic Product (GDP), which when achieved, will be the lowest deficit in the past 7 years.
Mr. Ofori-Atta told Parliamentarians on Wednesday that government is on course to achieve this year’s budget deficit of 6.5 percent, down from about 9 percent recorded in the 2016 fiscal year.
Thus, the 2018 fiscal deficit will be the lowest since government in 2011 recorded a deficit of 4 percent budget deficit to GDP ratio.
According to the Ghana’s three-year Extended Credit Facility with the International Monetary Fund (IMF), last year’s deficit performance clearly breached the 5.8 percent target, thus throwing government’s fiscal consolidation programme out of gear.
The three-year programme, originally scheduled to end next year with a budget deficit of 3.7 percent, is to be extended by at least a year to allow government meet the deficit target in the coming years.
Commenting on government’s focus on achieving fiscal consolidation, Mr. Ofori-Atta, presenting the 2018 Budget Statement and Economic Policy to the 275-member Legislature said: “We resolved to be fiscally disciplined and respect the limits this august House set for us within Appropriation.
Again, I am glad to report that we are well on course to end the year with a fiscal deficit of 6.3 percent; in fact, lower than the 6.5 percent contained in the budget. If I may add, this is only the second time in a decade that a government has managed to stay within its budget deficit target.”
Tough path to fiscal consolidation
Despite introducing innovations such as the paperless port system among others, revenue performance in general has not been as impressive as government envisaged. Data for the first half of the year shows that domestic revenue fell short of the target for the period by GH₵2.7 billion (13.8%), driven mainly by a sharp drop in tax revenue.
In order for government to achieve its set budget deficit in the face of poor revenue performance, government cut total expenditure by GH₵2.4 billion (9.3%) with largely the portion of domestic-financed capital expenditure the heaviest hit.
But appearing before Parliament on Wednesday, Mr. Ofori-Atta said achieving a fiscal deficit of between 3-3.5 percent is not only critical but necessary if the country is to maintain the healthy primary balance surplus required to eventually reduce the rate of debt accumulation.
This year’s budget projects that government will rake in revenue and grants of GH₵51 billion with provision for total expenditure and arrears clearance expected to reach GH₵62 billion leaving a deficit of GH₵10.9 billion, equivalent of 4.5 percent of GDP.
Boosting domestic revenues, cutting waste
According to the Finance Minister, government will have to turn to innovative ways that will boost domestic revenue to meet the rising expenditure of government.
“In addition to empowering the Ghana Revenue Authority (GRA) to bring to book tax evaders, we are equally investing in programmes and infrastructure to widen the tax net.
This will include the implementation and rollout of a National Digital Address System (to help us track tax payers especially in the informal sector), an acceleration of the implementation of the National Identification Programme, deployment of Electronic Point of Sale devices (to ensure that vendors are not under declaring VAT), and special audits, among others,” Mr. Ofori-Atta stated.
On expenditure, the Finance Minister reiterated government’s commitment to eliminate expenditure overruns, adding that: “We will remain committed to continue with the design and implementation of the Public Financial Management (PFM) reforms with the aim of eliminating inefficient and ineffective allocation of resources.”