The government has reviewed its economic targets for 2020 after the COVID-19 pandemic, which has brought economic activities to a standstill, threw its 2020 budget out of gear.
Presenting the mid-year budget to parliament, the Minister of Finance, Mr. Ken Ofori Atta, reviewed the country’s economic growth rate, expenditure and revenue targets, the fiscal deficit target, and also made a request for parliament to approve an additional spending of GH¢11.89 billion due to COVID-19 related expenses.
GDP growth, which was estimated at 6.8 percent, has now been revised down to 0.9 percent, with non-oil GDP also revised downwards from 6.7 percent to 1.67 percent.
These revisions were as a result of a slowdown in economic activities as a result of COVID 19.
“Speaker, in line with Government’s strong commitment to address the damage being caused by the COVID-19 pandemic, and to protect lives, protect livelihoods, save jobs, and return the economy to a sustainable growth and fiscal path, the 2020 macroeconomic framework has been revised to reflect the impact of the COVID-19 pandemic and developments in the first half of 2020,” Mr. Ofori Atta stated.
Mr. Ken Ofori Atta
Revisions to expenditures
Total Expenditure (including clearance of arrears) for the year is now estimated at GH¢97.7 billion (25.4% of GDP), about 13.7 percent higher than the 2020 Budget estimate of GH¢86.0 billion (21.6% of GDP).
The upward revision in expenditures is largely influenced by provision for additional expenditures for COVID-19 programmes and activities (including COVID-19 Preparedness Plan, COVID-19 Alleviation Programmes, and health infrastructure) amounting to GH¢11,660 billion.
Interest Payments have also been revised upwards by nearly 21.1 per cent from GH¢21.7 billion (5.4% of GDP) to GH¢26.3 billion (6.8% of GDP), mainly reflecting the effect of higher net domestic borrowing to meet additional COVID-19 related expenditures.
Capital Expenditures are expected to remain relatively unchanged at GH¢9.3 billion (2.4% of GDP).
The Minister pointed out that even though overall expenditures had been revised upwards mainly as a result of COVID-19 expenditures, the original provision for MDAs for Goods and Services and Domestic Capex was revised downwards by GH¢738.4 million through re-prioritisation to create fiscal space to accommodate more critical expenditures induced by the pandemic.
The expenditures that were stepped down to create the needed fiscal space include travels, workshops, and conferences.
Revenue revisions
Total Revenue and Grants have also been revised to GH¢53.7 billion (13.9% of GDP) in 2020, representing a 20.0 per cent decrease over the original 2020 Budget target of GH¢67.1 billion (16.9% of GDP), and 0.5 percent higher than the 2019 outturn of GH¢53.4 billion (15.3% of GDP).
Total Non-Oil Tax Revenue has been revised to GH¢40.7 billion (10.6% of GDP), which is GH¢4.3 billion lower than the original budget target of GH¢45.0 billion (11.3% of GDP).
This is on account of a significant shortfall in import duties as well as shortfall in both the domestic direct and indirect taxes.
As a result of the significant decline in crude oil prices on the international market, oil revenue was also revised downwards to GH¢3.8 billion (1.0% of GDP) from GH¢8.9 billion (2.2% of GDP) in the original 2020 Budget.
This represents a shortfall of GH¢5.1 billion (1.3% of GDP).
Non-Tax Revenues (Non-Oil) have also been revised downwards to
GH¢4.5 billion (1.2% of GDP) from GH¢8.5 billion (2.1% of GDP), with grants also revised downwards by 1.3 per cent from GH¢1.24 billion to GH¢1.22 billion.
Fiscal Deficit
Mr. Ofori Atta said the revisions in the Total Revenue and Grants and Total Expenditures resulted in a fiscal deficit (on cash basis) of GH¢44.1 billion (11.4% of GDP) for 2020, up from the original 2020 Budget target of GH¢18.9 billion (4.7 per cent of GDP).
He said the deficit was expected to be financed from both foreign and domestic sources.
Net Foreign Financing of the deficit will amount to GH¢18.5 billion (4.8 percent of GDP), equivalent to 41.9 percent of the total, while total Domestic Financing will amount to GH¢25.6 billion (6.6% of GDP), or 58.1 per cent of the total for 2020.
The corresponding primary balance worsens from a surplus of GH¢2.8 billion (0.7% of GDP) in the original 2020 Budget to a deficit of GH¢17.8 billion (4.61% of GDP).
Requests additional GH¢11.89 billion
The Finance Minister also made a request to Parliament for approval to spend an additional GH¢11.89 billion to support the government’s expenditure for the rest of the year.
The additional money is as a result of revisions made to the 2020 budget and will bring the overall budget expenditure for the year to GH¢109.93 billion, up from the GH¢93 billion earmarked in the 2020 budget.
The increase in expenditure is as a result of COVID-19 related expenditures which is estimated at GH¢11.6 billion.
“Mr. Speaker, the revisions made to the 2020 fiscal framework have resulted in an increase in the 2020 Appropriation of GH¢98 billion that was approved by this august House in December 2019.
“Mr. Speaker, the aim of this Supplementary Estimate is to seek parliamentary approval to commit additional resources, amounting to GH¢11.89 billion outlined in this Mid-Year Review,” he stated.
