- Due to general slowdown across economy’s three major sectors
Finance Minister Ken Ofori-Attah has made an announcement regarding the revision of the projected Real GDP growth for 2023.
The overall growth rate has been adjusted downward to 1.5 percent from the previous estimate of 2.8 percent, and the non-oil Real GDP growth has also been revised to 1.5 percent from the previous 3.0 percent.
The reason cited for this downward revision is a general slowdown observed across the three major sectors of the economy. Factors contributing to this slowdown include the implementation of the fiscal consolidation plan and challenging global economic conditions.
Presenting the 2023 mid-year budget review, Mr. Ofori-Attah noted that overall GDP Growth is, however, projected to rebound to 2.8 percent, 4.7 percent, and 4.9 percent in 2024, 2025 and 2026, respectively.
“This is a result of implementation of growth-oriented and structural transformation strategies in the PC-PEG. We have, however, been charged in the PC-PEG to develop an enhanced Growth Strategy supported by crowding in of private domestic and foreign investments to further boost growth. We are confident of a private sector outlook to boost growth and jobs,” he stated.
Revisions to the 2023 Fiscal Framework
The finance minister also announced the revision of the 2023 revised fiscal framework to fully align with the IMF programme fiscal objectives in terms of primary balance (cash and commitment), revenue path, and trajectory of primary expenditures.
The drivers of the revisions to 2023 Fiscal Framework, he said includes fiscal developments for Jan-June 2023 reflecting shortfalls in revenues and lower spending; increase in base pay on Single Spine Salary Structure of 30 percent compared to the assumed 20 percent for the 2023 Budget; partial restoration of capped transfers to the NHIS and GETFund; the impact of the completed Domestic Debt Exchange Program (DDEP) on debt service cost as well as on revenue mobilisation; IMF ECF Programme disbursements for 2023 of US$1.2 billion and reflection of other catalytic financing including the World Bank US$530 million (DPO – US$300 million and Emergency Projects – US$230 million) and expected disbursements of US$103mn from the AFDB; revision in exchange rates, interest rates, crude oil prices, crude oil volumes, and GDP projections; and he need to align 2023 Mid-Year Review to the approved IMF-supported PC-PEG.
“These realignments in the 2023 fiscal framework results in a revised primary balance on commitment basis of a deficit of 0.5 percent of the revised GDP. This is an adjustment of 3.2 percent from 3.7 percent of GDP, lower than the initial target of a surplus of 0.7 percent of GDP set in the 2023 Budget. This aligns with the IMF-supported PC-PEG fiscal consolidation path,” he stated.
Revisions to Petroleum Revenues
Mr. Ofori-Atta also said the average crude oil price has been revised to US$74.0 per barrel down from the price of US$88.55 per barrel used in the 2023 Budget.
Accordingly, the total petroleum receipts have been revised downwards from US$1,484.47 million to US$1,008.65 million, representing a 32 percent decline.
At the time of presenting the 2023 Budget, a Benchmark Revenue crude oil price of US$88.55 per barrel was used to project petroleum revenues for 2023, in line with provisions of the Petroleum Revenue Management Act (PRMA) 2011, (Act 815) as amended. But recent global economic developments have led to a decreased demand for crude oil.
“Therefore, consistent with Section 7 of the Petroleum Revenue Management (Amendment) Act 2015, (Act 893), the average crude oil price has been revised to US$74.0 per barrel down from the price of US$88.55 per barrel used in the 2023 Budget,” he said.
Economy recovering
On the economy, he said it is “showing signs of recovery”. During the presentation of the 2023 mid-year budget review, he highlighted the stabilization of the exchange rate, accompanied by a decrease in inflation and interest rates since December 2022 as evidenced of recovering economy.
“These outturns are the result of focused implementation of all the measures we presented in the 2023 Budget and the positive sentiments arising from the progress with the IMF Programme,” he stated.
Towards addressing the macro-fiscal challenges the economy faced in 2022, the government engaged the IMF to support the implementation the country’s recovery efforts.
As a result, on 17th May, 2023, the Executive Board of the IMF approved a 36-month Extended Credit Facility (ECF) in an amount equivalent to SDR 2.242 billion (approximately US$3 billion).
The Programme which is designed to restore macroeconomic stability and debt sustainability includes extensive reforms to strengthen resilience and lay the foundation for stronger and more inclusive growth.
He said: “Mr. Speaker, the macroeconomic environment has changed significantly since the 2023 Budget was presented to this august House in November 2022.
“Mr. Speaker, although pressures still exist, and there are formidable risks in the horizon, our economy is in a better position than it was seven months ago as the macroeconomic environment has seen relative stability since the beginning of the year.
“This is largely explained by factors, including the positive sentiments following the Staff Level Agreement reached in December 2022 and the subsequent approval of the 3-year US$3.0 billion IMF-ECF; the eventual passage of all fiscal measures in the 2023 Budget; the completion of the DDEP; and China’s agreement to co-chair the OCC.”
