Discretionary expenditure, spending that government can decide whether to undertake or not, continues to dominate the government’s spending patterns over the years, accounting for 86% of the government’s total spending in the first quarter of 2021. In the first three months of the year, government expenditure and net lending totaled GH¢23,450.3 million (5.4% of GDP) of which capital expenditure was GH¢3,315.10 million.
This suggests that discretionary expenditure for the period was GH¢20,135.20 million. This means that majority of the government’s resources are channeled into areas that may be necessary but without any direct long term benefits to the state.
Nevertheless, government’s total expenditure in the first quarter of the year was lower than the programed target of GH¢26,196.2 million (6.0% of GDP). This was however, higher than the payments of GH¢22,977.9 million in Q1 2020 by 2.1 percent.
Overall, government’s spending for the period was dominated by three expenditure components: compensation of employees, goods and services and interest payments. Nevertheless, these expenditure components were below their respective targets by 3.0 percent, 30.6 percent and 7.0 percent, respectively.
Notably, compensation of employees, interest payments, and grants to other government units together constituted 76.7 percent of total expenditures during the period under review.
Compensation of Employees
More specifically,compensation of employees, comprising wages and salaries and social security contributions, summed up to GH¢7,351.9 million. This was 3.0 percent lower than the programmed target of GH¢7,578.4 million but higher than payments of GH¢6,499.8 million made in the corresponding period of 2020 by 13.1 percent.
Interest Payments
Another major expenditure component is the payment of interest on government loans. In the first three months of the year, interest payments totaled GH¢8,286.6 million and was 7.0 percent below the programmed target. A further breakdown shows that domestic interest payments accounted for 80.9 percent of the total interest payments and registered a year-on-year growth of 27.5 percent. External interest payments accounted for the remaining 19.1 percent and recorded a year-on-year growth of 37.5 percent.
Grants to Other Government Units
Also, grants to Other Government Units totaled GH¢2,357.1 million but fell below the programmed target by 41.6 percent. According to the Bank of Ghana, payments of GH¢210.0 million to National Health Fund and GH¢316.0 million to District Assembly Common Fund were below their programmed targets. Meanwhile, Internally Generated Funds retained by MDAs amounted to GH¢1,106.2 million, falling below the programmed target by 24.8 percent.
Other Expenditures
According to the Bank of Ghana, other Earmarked Funds totaled GH¢312.9 million, while ESLA transfers amounted to GH¢474.2 million with COVID-19-related expenditures totaling GH¢696.0 million. Other earmarked funds and ESLA transfers fell short of their budgetary targets by 59.4 percent and 37.3 percent, respectively. COVID-19-related expenditures, however, exceeded the target of GH¢271.4 million by 156.1 percent.
Capital Expenditure
Furthermore, government acquisition of non-financial assets during the first quarter of 2021 was GH¢3,315.1 million. This was above its budgetary target of GH¢3,137.2 million by 5.7 percent. Of the total capital expenditure for the period, total domestic financed capital expenditure was GH¢435.8 million, representing 13.1 percent of total capital expenditure. So, clearly, majority of the government’s capital expenditure is foreign-financed. According to BoG, foreign-financed capital expenditure was GH¢2,879.3 million and made up 86.9 percent of the total capital expenditure for the period.
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