- Revenue shortfall hits GH¢6bn
- Fiscal deficit to hit 11.4% of GDP
It was nothing short of expectation when Finance Minister Ken Ofori-Atta in his mid-year budget presentation asked parliament to approve an extra GH¢11.8 billion to inject into the economy as he counts the cost of the coronavirus pandemic on the economy.
According to the minister, provisional fiscal data for the first half of the year show that revenue mobilisation fell short of target by 26 percent, resulting mainly from shortfalls in oil revenue, customs receipts and non-oil tax revenues. Total revenue and grants for January to June 2020 amounted to GH¢22 billion compared with a programmed target of GH¢29.7 billion.
Non-oil tax revenue, comprising taxes on income and property, goods and services and international trade, amounted to GH¢16.7 billion or 4.3 percent of GDP, 16.2 percent below the programmed target of GH¢19.9 billion or 5.2 percent of GDP. Revenue from upstream oil and gas amounted to GH¢1.9 billion (0.5% of GDP), 55.4 percent lower than the programmed target of GH¢4.4 billion, mainly on account of lower volumes and significant drop in crude oil prices on the international market.
Besides the worrying revenue figures, unbudgeted spending shot up total expenditure (including arrears clearance) for the first half of the year to GH¢46.3 billion or 12 percent of GDP compared with the programme target of GH¢41.5 billion or 10.8 percent of GDP. This, together with the US$3billion dollar Eurobond, has increased the public debt stock to GH¢255.5 billion, representing more than 66 percent of GDP.
Against this background, Mr. Ofori-Atta says the economy has been hit with a double shock, namely, a health pandemic and a global economic recession which would result in a fiscal deficit of 11.4 percent of GDP, more than double the 5 percent stated in the Fiscal Responsibility Act, hence, his request for the supplementary budget of GH¢11.8 billion to cater to the gaping deficit.
Government’s pandemic-induced spending
To account for some of the spending government has made in relation to the coronavirus pandemic, Mr. Ofori-Atta said government has, so far, procured PPEs consisting of 50,000 hospital scrubs costing GH¢6 million as well as 90,000 medical gowns and caps valued at GH¢6.7 million. A further 15 million face-masks, out of which 5 million and 10 million were supplied to frontline health workers and schools, respectively, at a cost of GH¢65 million.
Then, the Coronavirus Alleviation Programme Business Support Scheme (CAP-BuSS) of GH¢600 million has been given to specifically support micro, small and medium-sized enterprises (MSMEs. The Scheme is part of the GH¢1.2 billion CAP approved by Parliament to address the disruption to economic activities due to the pandemic.
Again, government has put together the GH¢560 million (US$100 million) National Emergency Preparedness and Response Plan (EPRP) for COVID-19 to help manage and contain the spread of the virus and strengthen the national capacity for surveillance, diagnosis, and case management.
Also, government has provided a life insurance package worth GH¢10.3 million for those directly involved in surveillance, case management, laboratory, and all other health and allied personnel who get infected.
These are not exhaustive, as electricity and water consumption were temporarily subsidized. Government fully covered the cost of consumption of the one million lifeline customers and subsidised 50 percent of the consumption of all other customers. This programme for about 4 million households and 680,000 businesses, added an unplanned GH¢1.02 billion to government expenditures. The total cost of the Water Relief Programme to Government is projected at GH¢275.5 million out of which GH¢199.3 million had been paid by end-June 2020.