Central bank governor, Ernest Kwamina Addison, said on Thursday that Ghana needs to raise more domestic revenue to tackle a ballooning budget deficit that could exceed 7% of GDP this year, as growth shrivels due to the coronavirus crisis.
The deficit hit 3.4% of GDP in the first quarter against a target of 1.04%.
“We cannot allow the COVID-19 pandemic to undermine all the gains we have made over the past three years,” Addison said in an online interview broadcast by Ghana’s Daily Graphic newspaper.
He said reforms over the past three years have helped to stabilise the economy, boost growth and curb inflation; but this is being threatened by the pandemic, which has hit Ghana’s oil sector, tourism and education among others.
“We are projecting to see gross domestic product (GDP) growth decline from an original estimate of over 7% to 2%. It is a significant revision of the growth outlook,” he said.
Government and the central bank have taken steps, including the purchase of government securities, to cushion impacts of the pandemic.
“I think we need to do some work in trying to revisit the mobilisation of revenue from our domestic resources, and use that to manage the growing budget deficit,” Addison said.
The central bank’s Monetary Policy Committee will meet in July and assess the impact of current measures. Addison said it will take further action if necessary.
Inflation, at 10.6% in April and 11.3% in May, is above the targetted range of 8% plus or minus 2%. But Addison said that given the current circumstances, the BoG will see how inflation progresses over the next quarter before deciding whether monetary tightening is needed:
“We believe that inflation will come back to our target range before end of the year, and there might not be a need to tighten policy in the second half of the year.”