The 2022 Budget focused on the continuation and consolidation of economic plans the government of Ghana had put into place in 2021 to consolidate the economic, social, infrastructural and financial gains made over the years in the economy. The Budget also focused on ensuring sustained recovery of the Ghanaian economy from effects of the COVID-19 pandemic in 2020/2021.
Government’s response was bold, decisive and compassionate, but also costly. Government had no choice but to implement critical interventions to save lives and jobs. Under the Coronavirus Alleviation Programme Business Support Scheme (CAPBuSS), Ghana Enterprises Agency provided 302,001 successful applicants, across various sectors and regions, with loans amounting to GH¢523.11million. The fiscal policies implemented to provide relief during the pandemic however led to an increase in total public debt.
Other containment measures being undertaken by government include:
- Developing Ghana’s infrastructure, with priority focus on roads, railways, water and sanitation, hospitals and housing;
- Diversifying productivity and high-value services;
- Implementing bold reforms to increase revenue mobilisation and the efficiency of public expenditures;
- Deepening structural reforms to make the machinery of government work better for the people; and
- Rolling out digital technologies to improve service delivery.
Summary, Highlights and Review of the 2022 Macroeconomic Indicators
- Total Revenue and Grants is projected at GH¢89.1billion (17.9% of GDP) for 2022 and represents a nominal growth of 23 percent over the projected outturn for 2021; and is expected to increase to GH¢100.6billion (17.9% of GDP) in 2023 and GH¢112.5billion (17.7% of GDP) in 2024 – reaching GH¢126.3-billion (17.7% of GDP) by 2025.
- Of the 2022 projected Revenue, gross non-oil Tax Revenue is estimated at GH¢70.5billion (14.2% of GDP) and represents a per annum growth of 23.5 percent. On net basis (i.e. excluding tax refunds), non-oil Tax Revenue is estimated at GH¢66.96billion (13.5% of GDP).
- Non-oil Non-Tax revenues from MDAs that produce Internally Generated Funds (IGFs) will amount to GH¢8.41billion in 2022 and increase by about 14.8 percent thereafter.
- Grant disbursements will be project-related and are expected to dwindle from GH¢599.89million in 2022 to GH¢157.71million in 2025.
- Total Expenditure (including payments for the clearance of arrears) is projected at GH¢128.3billion (25.8% of GDP) in 2022, GH¢135.6billion (24.1% of GDP) in 2023 and GH¢157.1 billion (22.1% of GDP) in 2025. Combined resources available for Goods and Services, COVID-19-related expenditures and Domestically Financed CAPEX amount to GH¢12.5billion in 2022. Payments to Independent Power Producers (IPPs) is projected at US$1billion per year.
- Additionally, Compensation of Employees is projected to increase from GH¢31.5billion (7.2% of GDP) in 2021 to GH¢34.6billion (7.0% of GDP) in 2022; and further to GH¢38.5billion (6.8% of GDP), GH¢42.3 billion (6.7% of GDP) and GH¢46.9million (6.6% of GDP) in 2023, 2024 and 2025, respectively. Goods and Services are projected at GH¢5.2billion (1.1% of GDP) in 2022, increasing to GH¢4.9billion (0.9% of GDP), GH¢5.4million (0.9% of GDP) and GH¢6.7million (0.9% of GDP) in 2023, 2024 and 2025, respectively.
Interest payments are projected at GH¢37.2billion (7.5% of GDP) in 2022, GH¢38million (6.8% of GDP) in 2023, GH¢38.7billion (6.1% of GDP) in 2024 and GH¢41.3billion (5.8% of GDP) in 2025. Capital expenditure is projected at GH¢11.8billion (2.4% of GDP) for 2022, increasing to GH¢12.2billion (2.2% of GDP) in 2023, GH¢11.4billion (1.8% of GDP) in 2024 and further to GH¢12.1billion (1.7% of GDP) in 2025. Domestically financed Capex is projected at GH¢11.8billion (2.4% of GDP) for 2022, rising to GH¢12.2billion (2.2% of GDP), GH¢11.4billion (1.8% of GDP), and GH¢12.1million (1.7% of GDP) in 2023, 2024 and 2025, respectively.
The overall budget deficit is projected at GH¢39.2billion (7.9% of GDP) for 2022, and expected to moderate downward to GH¢30.3billion (4.8% of GDP) by 2024 and finally to GH¢30.8billion (4.3% of GDP) in 2025. The corresponding primary balance is estimated to be at a deficit of GH¢2.1billion (0.4% of GDP) for 2022, returning to a surplus of GH¢2.6billion (0.5% of GDP), GH¢8.4billion (1.3% of GDP) and GH¢10.5billion (1.5% of GDP) for 2023, 2024 and 2025, respectively.
A careful review of the 2022 Budget reveals that it is anchored/focused on the achieving the following broad macroeconomic objectives for the medium-term:
- Government of Ghana has recognised it will be at the forefront of promoting the building blocks for an inclusive and sustainable recovery that’s COVID-19-adjusted. Hence, the focus of the 2022 budget and the medium-term is to create opportunities and provide solutions toward achieving sustainable and broad-based economic growth without harming the environment or leaving families in poverty.
- Government is focusing on revitalising and transforming the economy. The approach is to catalyse the private sector in targetted areas to fast-track industrialisation, competitive import substitution, digitalisation, export expansion and the creation of decent jobs – particularly for the youth.
- Supporting the health sector and expanding social safety nets;
- According to the Budget Statement, Real GDP is projected to expand by 5.1 percent y/y in 2021 – driven by the Services, Agriculture and Industry sectors with growth rates of 7.3, 5.3 and 2.6 percent respectively.
- Headline inflation is projected to remain within the medium-term target band of 8±2 percent, supported by easing food price pressures, base-drift effects, relative stability of the exchange rate, and well-anchored inflation expectations.
- Fiscal operations are expected to result in a fiscal deficit (on cash basis) of GH¢41,273million (9.4% of GDP) – slightly lower than the original deficit target of GH¢41,298million (9.5% of GDP).
- Government will ensure restoration and sustainability of macroeconomic stability with a focus on fiscal and debt sustainability;
- Government will maintain a good balance between implementation of the revitalisation and transformation programme through the Ghana CARES (Obataanpa) Programme and fiscal consolidation to promote fiscal sustainability;
- Government will provide a supportive private sector environment (including promoting entrepreneurship) for domestic businesses and for FDI to thrive;
- Government will build a robust financial sector to support growth and development; and
- Government will deepen structural reforms to make the machinery of government work more efficiently and effectively to support socio-economic transformation.
2022 Budget promises to Livelihood Initiatives
Many stakeholders have observed that the economy of Ghana is beginning to show signs of recovery from impact of the COVID-19 pandemic, and to sustain this recovery phase will be happy to work with government to continue support the productive and services sectors of the economy – as well as the vulnerable through the implementation of various livelihood initiatives that government will roll out; including the Ghana CARES (Obatanpa) Programme and other flagship intervention programmes to advance the lives of Ghanaian youths and their talents and skills.
Corporate watchers believe that there is a war for talent. The war for talent is creating an increasingly competitive landscape for recruiting and retaining talented employees. Winning the war for talent means more than simply attracting workers to your company. It means attracting the right workers – the ones who will be enthusiastic about their work. Similarly, companies need to develop a profile for the type of workers they want to attract.
The government of Ghana announced the YouStart initiative in the 2021 Mid-Year Review. This initiative forms part of the ‘Obaatan Pa’ programme launched in November 2020 to spearhead our revitalisation and recovery from the pandemic. The government of Ghana is challenged to ignite and unleash the innovative and entrepreneurial spirit of our young people. These initiatives are intended to mark a conscious departure from job-seeking toward job creation and job ownership. The initiative is also targetted at nurturing a self-confident and business-savvy generation that will leverage on the AfCFTA for economic transformation.
With the anticipated multiplier effect of YouStart, the government of Ghana expects the nation to become an entrepreneurial one with a great army of curious, competent and compassionate actors empowered to conquer opportunities at home and beyond. A careful study of the 2022 Budget also reveals that government means to support other targetted youth employment-focused interventions – such as the Community Improvement Initiative and National Alternative Employment and Livelihood Programme (NAELP) which were launched by the president on 25th October 2021.
Through the NAELP, the country will protect its environment and water-bodies from illegal mining activities by providing alternative support and skills training for small-scale illegal miners and other people affected by illegal mining. This programme will help conserve our natural environment now and for future generations. It will also support efforts to leverage the natural environment as an asset to access climate finance for programmes at both local and central levels of government. Government has promised it will continue to work with Parliament as a partner for development to make this endeavour a success.
The Way forward
Having perused the 2022 Budget, it can be said that it has covered a lot of concerns – not only for the banking sector, but also for the economy and social infrastructure of the nation. A few of such concerns are the national property rate measures, increases for large and expensive homes in Ghana – especially in the commercial municipalities and district Assemblies, and some concerns on the rates of banking services.
- People have big homes in Ghana while paying little for property tax; but it is not the same for commercial properties of businesses. In other jurisdictions, they use some of this money to build schools, sponsor free education and improve services.
- On NPL ratio, perhaps BoG/BSD should consider extending the regulatory reliefs – given that COVID-19 has refused to go away. Omicron may slow down businesses again and in turn the economy, with some countries being placed on red lines already.
- Government should consider Public Private Partnerships (PPPs) a lot more in the development projects, to reduce its borrowings for funding projects. Government should leverage on the goodwill-rally it enjoyed from all stakeholders in the economy with the onset of COVID-19, to collaborate more with the public in achieving even development of the various regions. This will help reduce pressure on the cities and reverse rural-urban migration, and also improve standards of living in those communities.
- In the area of youth employment, government should consider developing a Digital Technology Incubator Centre (similar to Silicon Valley) to harness the skills of the youths and promote innovation and self-employment. They could develop one in each region to be funded by public-private arrangement.
- On reduction of WHT on sale of unprocessed gold from 3% to 1.5%, I think there should also be incentives for those who process the raw gold; as that will increase business and in turn employment for small-scale processors in that space.
- There is a need for government to also look at a national housing scheme to address the huge housing deficit.
- The nation’s tax-to-GDP ratio is forecast at 12.9% this year, compared with 24% in a peer country such as South Africa for 2021-22 and 40% among high-income nations. The budget will need to outline measures to change these narratives.
Although the negative impact of COVID-19 pandemic is still being felt in 2021 from a public health, livelihood and economic perspective, the global economy is forecasted to grow in 2022 due to supportive macroeconomic policies and increased access to COVID-19 vaccines, both globally and in Ghana. As government solicits approval and appropriations for the 2022 Economic and Fiscal Year, there is a need to consider interventions aimed at managing the fiscal deficit, skills and capacity development, enhancing digitalisation and continuing the economic recovery per COVID-19 era.