- Growth trimmed to 3.7%
Finance Minister Ken Ofori-Atta has indicated that government will keep to its programmed appropriation for the remaining part of the year, as he didn’t present any supplementary budget to Parliament for approval.
The decision was quite expected as challenges in the economy has taken a toll on revenue mobilisation, resulting in government missing its target. Consequently, total revenue and grants have been revised to GH¢96.84billion, equivalent to 16.4 percent of Gross Domestic Product (GDP) down from a target of GH¢100.52billion, 20 percent of GDP.
The minister said rather than ask for more, which can obviously be financed through borrowing, as the economy is currently cash-strapped, government will rather efficiently use the windfall from the upstream petroleum sector arising from the increase in crude oil prices.
“We have seen some major shifts in our budget assumptions compared to November 2021 when we presented the budget. These changes have led to reduced revenues, increased interest payment and changes in interest rates and exchange rates. However, we are committed to staying within the appropriation for 2022. In spite of the underperforming revenues and strong external headwinds, we are not seeking additional funds in this mid-year review.
“We are determined to efficiently use the windfall from the upstream petroleum sector to make up for our revenue shortfall, and aggressively improve our revenues even as we rationalise expenditures,” he said when he presented the mid-year budget in Parliament yesterday.
Government has further revised its 2022 growth target downward to 3.7 percent on the back of significant adverse domestic and external economic developments. The revision from 5.8 percent in the 2022 Budget signals significant slowdown in economic activity as the Ghana Statistical Service (GSS) reported the first quarter grew by 3.3 percent compared to 3.6 percent recorded in the same period in 2021.
“In the light of the significant changes in the global environment and our own unique challenges, we have revised our economic growth estimate for 2022 to 3.7 percent, down from 5.8 percent as stated in the 2022 Budget.”
In addition, the non-oil GDP growth rate has been revised to 4.3 percent down from 5.9 percent, while the end of year inflation of 28.5 percent up from 8 percent; and an overall fiscal deficit of 6.6 percent of GDP, down from 7.4 percent.
Economic activity in the first quarter, according to the GSS, showed moderation in GDP growth to 3.3 percent for the first quarter of 2022, compared with 3.6 percent in the same period of 2021, and 7 percent in the fourth quarter of 2021. The deceleration in growth was driven by slower activity in the agriculture and services sectors. Non-oil GDP growth was 3.7 percent, down from 5.3 percent recorded for the comparative period in 2021.
Due to the significant macroeconomic developments for the first six months of 2022, the minister also noted that government has revised the macro-fiscal targets for the rest of the year. The minister stated that government has revised the 2022 fiscal framework as the total revenue and grants is reviewed to GH¢96.84billion, equivalent to 16.4 percent of GDP in 2022, down from a target of GH¢100.52billion, 20 percent of GDP.
Total expenditure, including payments for the clearance of arrears, has been revised downward to GH¢135.74billion, 22.9 percent of GDP, from the original budget projection of GH¢137.53billion, 27.4 percent of GDP.
Interest payment has also been revised upward from GH¢37.45billion, 7.5 percent of GDP, to GH¢41.36billion, 7 percent of revised GDP, mainly on account of inflationary pressures and exchange rate depreciation resulting in higher cost of financing. These revisions in the fiscal operations are expected to result in a fiscal deficit (on cash basis) of GH¢38.9billion, thus 6.6 percent of revised GDP, up from the previous target of GH¢37billion, but lower in terms of GDP portion.
Accordingly, this will result in a primary balance surplus of GH¢2.46billion, 0.4 percent of revised GDP, up from the GH¢435million, representing 0.1 percent of GDP. “Although the deficit is expected to be financed from both foreign and domestic sources, domestic financing will be the key driver while government works to regain external market access,” the finance minister indicated.