The government has revised its expenditure and revenue targets for the 2022 fiscal year which resulted in a fiscal deficit of 6.6% of GDP compared to the 7.4% targeted at the beginning of the year.

Data presented by the Ministry of Finance, contained in the 2022 mid-year budget review, showed that government cut its revenue target for the year by GH¢3.7 billion to GH¢96.8 billion. The revised revenue target accounted for 16.4% of GDP compared to the initial target of GH¢100.5 billion which represented 20% of GDP.

Similarly, total expenditure was also slashed to GH¢133.8 billion which now accounted for 22.6% of the country’s GDP. Government decided to reduced its planned expenditure for the year by GH¢1.8 billion, down from the initial target of GH¢135.6 billion which accounted for 27% of GDP.

The changes resulted in a wider overall deficit of GH¢38.9 billion compared to GH¢37.0 billion earlier targeted by the government. This means the targeted deficit has widened by GH¢1.9 billion for the 2022 fiscal year.

In late March 2022, the Ministry of Finance announced additional public spending cuts in a bid to strengthen fiscal consolidation and restore investor confidence though the government had already announced a 20% reduction to discretionary spending in January. The latest retrenchment extended the cuts to 30%.

Election-related outlays to increase spending in 2024

In a recent forecast, the Economist Intelligent Unit (EIU) stated that it expects spending to fall as a proportion of GDP in 2022-23 before rising in 2024, driven by election-related outlays. Spending will decline again in 2025-26 but remain high as a percentage of GDP as ongoing and planned infrastructure (mainly road and rail) development prevents further public spending cuts, the EIU stated.

“We expect the fiscal deficit to narrow to 7.4% of GDP in 2022, from 9.3% of GDP in 2021, and then to expand again around the elections in 2024. The deficit will shrink to 4.8% of GDP in 2026, reflecting our core forecast that the Fiscal Responsibility Act (which limited fiscal deficits to 5% of GDP and has been suspended until 2024) will be reimposed once election-related fiscal pressures abate”.
EIU

According to the EIU, government will remain heavily reliant on domestic borrowing in the near term, reflecting tightening external financing conditions. Downside risks to future Eurobond issuances and accessibility stem from rising international bond yields in recent months (reflecting rising investor risk‑aversion), it noted.

Provisional data on budget execution

Provisional data on budget execution for January to May 2022, indicated an overall broad fiscal deficit on a cash basis of 5.0 percent of GDP, against a programmed target of 3.5 percent of GDP. The corresponding primary balance for the period was a deficit of 1.4 percent of GDP, against a deficit target of 0.2 percent of GDP.

Over the period, total revenue and grants amounted to GH¢29.5 billion (5.9 percent of GDP), below the projected GH¢34.8 billion (6.9 percent of GDP). Total expenditure was GH¢48.9 billion (9.7 percent of GDP), below the programmed target of GH¢51.8 billion (10.3 percent of GDP).

The 2022 budget continued to prioritize strengthening economic diversification, infrastructure development, fiscal governance and public health.