…A comprehensive analysis of sector performance and industry focus in the economic blueprint
Ghana’s 2023 budget, as presented by the finance minister, is a comprehensive plan aimed at restoring and sustaining macroeconomic stability and resilience through inclusive growth and value addition. This article provides an in-depth analysis of the budget, breaking down the complex financial jargon into understandable terms for the everyday citizen.
The overall Gross Domestic Product (GDP) for Ghana is projected to grow by 2.8% in 2023, down from 3.7% in 2022. This projected GDP growth is higher than the projected global GDP growth of 1.6% in 2023. Non-oil GDP growth is estimated at 3.0% in 2023. Overall, GDP growth is expected to average 4.3% per annum over the period 2023-2026. This suggests that the total value of all goods and services produced in Ghana is expected to increase by 2.8% in 2023. But what does this mean for the various sectors and industries in the country?
Revenue and Expenditure
Total Revenue & Grants for 2023 is projected at GHS 144 billion compared to a projected outturn of GHS 98 billion in 2022, representing a 47% increase. Tax Revenue will constitute 78% of the 2023 budgeted revenue as compared to 77% in the 2022 projected outturns. This means that the government expects to earn GHS 144 billion in 2023 from various sources such as taxes, grants, and other revenues. This is a significant increase from the previous year, which may be due to new tax policies, improved tax collection, and increased grants.
On the other hand, total Expenditure for 2023 is projected at GHS 205 billion compared to a projected outturn of GHS 153 billion in 2022, representing a 34% increase. Interest Payment will constitute 25% of the 2023 budgeted revenue as compared to 28% in the 2022 projected outturns. This means that the government plans to spend GHS 205 billion in 2023 on various expenditures such as infrastructure, social services, debt servicing, and others.
Budget Deficit and Public Debt
The Government of Ghana recorded a cash deficit of GHS 44 billion (7.4% of GDP) in the first three quarters of 2022 against a revised target of GHS 36.7bn (6.2% of GDP). The budget deficit is expected to decrease to 6.6% by the end of 2022, down from 7.4% as at September 2022, and is projected to increase to 7.7% by the end of 2023.
As at the end of September 2022, total public debt stood at GHS 467.4 billion, representing a growth of 32.7% from the previous year’s GHS 352.1 billion as of December 2021. This means that the government’s total debt increased significantly in 2022. The debt to GDP ratio, which is a key indicator of the country’s ability to repay its debt, decreased slightly. This suggests that while the total debt is increasing, the country’s economic output is growing at a faster rate.
Tax Policy Proposals
The 2023 budget introduces several tax policy proposals aimed at increasing revenue and ensuring fiscal stability. These include an increase in the standard VAT rate by 2.5% from 12.5% to 15%, a reduction of the electronic transfer levy from 1.5% to 1%, and a review of the VAT threshold and VAT exemption regime.
This means that consumers will pay more for goods and services due to the increased VAT rate. However, the reduction in the electronic transfer levy could encourage more digital transactions, which are easier to track and tax. The review of the VAT threshold and exemption regime could lead to more businesses being eligible to pay VAT, thereby increasing tax revenue.
The budget also proposes a revision of personal income taxes with the introduction of an additional income tax band of 35% for a specified level of income. It also proposes a tax waiver on withdrawals from tier 3 provident funds and personal pension schemes in 2023 due to permanent job loss or capital loss.
This means that individuals with higher incomes will pay more taxes, while those who withdraw from their pension schemes due to job loss or capital loss will get some relief.
But how will these changes impact on the key sectors of the economy?
The performance of various sectors in the economy is a critical factor in understanding the overall economic health of a country. In the context of the 2023 budget, it is essential to consider the performance of different sectors and their contributions to the overall budget.
Education: A Leap Towards Quality and Accessibility
The education sector is a key focus in the 2023 budget. The government’s implementation of the Free Senior High School (FSHS) policy is set to revolutionize education in Ghana. This policy aims to increase access to high school education and alleviate the financial burden on parents. With more students having the opportunity to receive a high school education, the nation is set to experience a surge in its educated workforce, which could have far-reaching positive effects on the economy.
Health: Investing in Infrastructure and Human Resources
The health sector is another area that is set to see significant improvements. The government plans to construct new hospitals and health centers across the country, which will undoubtedly enhance healthcare delivery. But infrastructure is not the only area receiving attention; the budget also allocates resources for the training of more health professionals. This dual approach of improving both infrastructure and human resources is a comprehensive strategy to boost the health sector.
Information Technology: Digitizing Ghana and Its Economic Impact
The IT sector in Ghana is experiencing significant growth, with total revenue and grants for 2023 projected to reach GH¢ 134,912,606,013. This represents a substantial increase from the previous budget and contributes 15.8% to the nation’s GDP, underscoring the sector’s robust economic contribution.
In terms of expenditure, the sector is expected to account for 21.5% of the GDP in 2023, amounting to GH¢ 183,864,039,275. This expenditure encompasses various aspects including employee compensation, which alone is projected to be GH¢ 51,346,295,029, a significant portion of the total expenditure.
Despite the projected overall balance showing a deficit of GH¢ -48,951,433,261, or -5.7% of the GDP, this is not uncommon in government budgeting. It is especially understandable given the substantial investments being made in the IT sector.
In the sectoral distribution of bank outstanding credit, the IT sector, categorized under ‘Services’, had a credit of GH¢ 21,235.79 million as of end-June 2023. This shows a year-on-year increase of 11.27%, indicating the sector’s growing financial support.
These figures collectively demonstrate the government’s commitment to investing in the IT sector. The increase in expenditure and credit allocation to the sector is a clear indication of its potential for growth.
Economic Outlook: Steady Growth Amid Global Uncertainties
On a broader scale, despite a slight decrease from the growth experienced in 2022, Ghana’s economy continues to outpace global projections, indicating a diversified economy not solely reliant on oil. This suggests a positive economic outlook for the country. Ghana’s 2023 budget paints a promising picture for the nation’s key sectors. The strategic investments in education, health, and IT are set to drive growth and development, positioning Ghana for a prosperous future. The budget’s focus on these sectors, combined with the projected economic growth, signals a bright future for Ghana and its people.
As we delve into the intricacies of Ghana’s 2023 budget, we are left to ponder its implications for the average Ghanaian. How will the projected economic growth translate into tangible benefits for the citizens? Will the increased investments in education, health, and IT sectors lead to improved quality of life and greater opportunities?
The increased revenue and expenditure, coupled with the strategic focus on key sectors, paint a picture of a nation poised for growth and development. But growth on paper is only one part of the story. The real test lies in how these projections and plans will materialize into real-world benefits for the people of Ghana.
The increased VAT rate may mean higher prices for goods and services, but it also signifies greater revenue for the government, which could be channeled into public services and infrastructure. The reduction in the electronic transfer levy could encourage more digital transactions, fostering a more digital-savvy population and potentially paving the way for a digital economy.
The investments in education and health sectors could lead to a more educated workforce and improved healthcare services, respectively. The focus on the IT sector could spur innovation and create job opportunities in a rapidly evolving digital world.
However, the journey to these potential benefits is not without its challenges. The projected budget deficit and increasing public debt are reminders of the delicate balancing act between growth and fiscal responsibility.