Ghana proposes $13.9bn (N4.2trn) budget in 2018 with deficit of 4.5% of GDP

The Ghanaian government has proposed to spend $13.9 billion (62 billion Ghana cedis) about N4.2 trillion in its 2018 fiscal year, Kenneth Ofori-Atta, the country’s finance minister said Wednesday.

The budget themed “Putting Ghana Back to Work”, according to Ofori-Atta, would continue and expand programmes that began in 2017 and initiate new strategic programmes in 2018.

The minister said the expenditure plan would be financed from revenue and grants expected to reach 51 billion cedis in the 2018 fiscal year and is expected to result in an overall budget deficit of 10.9 billion cedis or 4.5 percent of GDP to be financed from both domestic and foreign sources.

Ghana’s domestic revenue for 2018 is estimated at 50.5 billion cedis, representing an annual growth of 26.9 percent, while non-tax revenue is estimated at 8 billion cedis, equivalent to 3.3 percent of GDP. From development partners, the government expects to receive 586.8 million cedis.

The West African cocoa, gold and oil exporter experienced lower revenue performance in the first half of 2017. During the period, domestic revenue fell short of the target by 13.8 percent, driven mainly by a sharp drop in tax revenue.

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Tax revenue fell short of target and accounted for 75.8 percent of the drop in total revenue, caused mainly by shortfalls in income taxes and import duties.

One of the programmes to maximise tax revenue, according to the minister, will be the employment of tertiary graduates in a “Revenue Ghana” programme aimed at employing 100,000 tertiary graduates into various sectors.

Razia Khan, Chief Economist and Managing Director for Africa and Global Research at Standard Chartered Bank, said it “is a consolidation budget largely as had been expected, given the International Monetary Fund (IMF)’s likely input into the process”.

She added that Ghana was favoured by the rise in hydrocarbons production, which provides a boost to nominal growth, although our expectation is for a pick-up in non-oil GDP as well.

“The 23 percent projected a rise in total revenue and grants in 2018 will nonetheless still be scrutinised closely, as will the ability of the authorities to keep spending and arrears clearance within the limits outlined.

“The plan is for a reduction in the budget deficit (on an overall basis) to 4.5 percent of GDP, from a projected 6.3 percent of GDP this year,” she stated.

Given the revenue disappointment to date, Khan pointed out that there might be a case for Ghana to control spending much more stringently in order to achieve a primary surplus in 2018 of the 1.6 percent magnitude suggested.

While Ghana has made significant improvements in debt management, the economist maintained that it was still going to require years of primary surpluses to reduce debt ratios meaningfully, adding that the key test would be the political will to do what was needed, even when the IMF programme came to an end.