The government has revised its spending related to measures put in place to combat the COVID-19 for the 2021 fiscal year. COVID-19 Related Expenditures, a new component of the government’s expenditure mix, has been revised downwards by GHȼ 697,261,392 to reflect recent developments in the economy.
Data presented in the 2021 Mid-Year Budget review show that the government now plans to spend a total of GHȼ 3,812,365,669 as its COVID-19 Related Expenditures for the 2021 fiscal year instead of the GHȼ 4,509,627,061 earlier projected.
Meanwhile, government’s projected expenditure on COVID-19 related activities for the first six months of the year was GHȼ 2,023,693,714 but the actual expenditure amounted to GHȼ 1,760,639,773. This may, however, not reflect the spending that may be necessitated as a result of the third wave of the COVID-19 in the country in the second half of the year.
It can be recalled that during the presentation of the Mid-Year Budget review, Finance Minister, Ken Ofori-Atta told the House that government will not request additional funds to execute the 2021 Budget presented to Parliament in March this year. However, he indicated that some expenditure items have been adjusted to reflect developments in the first half of 2021, while also ensuring that the total envelope remains intact.
Yields from New taxes
This means that the revisions made to expenditure on COVID-19 forms part of the items that were revised in addition to interest payments and compensation of employees. Nevertheless, the government did not revise its projected revenues from the new 1% COVID-19 Health Levy it introduced earlier this year to help raise enough resources to fight the pandemic and its resultant complications on the Ghanaian economy. As such, the government still expects to raise a total of GHȼ 889,070,000 from the Health Levy in the 2021 fiscal year.
Aside the COVID-19 Health Levy, the government, after receiving an approval from Parliament, introduced other taxes in the 2021 Budget as part of measures to improve its revenues. These taxes include the Pollution and Sanitation Levy, Delta Fund Levy, and the Financial Sector Clean-up Levy with some of the taxes commencing in May 2021.
According to Ken Ofori-Atta, so far, a total yield of GH¢249.7 million has been realized from the introduction of the new taxes compared to the target of GH¢358.1 million. This means that this new revenue measures have underperformed their target by GH¢108.4 million after three months of their implementation. It is therefore, not so clear why the government did not make any revisions to its overall revenue targets including the proceeds from the new taxes.
Government to meet Revenue targets
Nevertheless, Mr. Ofori-Atta is hopeful that the gradual recovery in economic activity will do the magic for West Africa’s second largest economy to meet its revenue targets for the year.
“Mr. Speaker, although the performances of these new revenue initiatives are also below their respective targets, the gradual pickup in economic activity, complemented by other strategies being deployed by the Ghana Revenue Authority, will ensure that the programmed revenue targets will materialize by the year-end”.
To put things in perspective, the government’s revenue targets for the year is now GHȼ72.477 billion, a 0.03 percentage points higher than the original target of GHȼ72. 452 billion. Nevertheless, the revisions in this expenditure component may signal that the government is gradually winning the fight against the virus.
But the recent third wave may pose a risk, and as such the government may be forced to exceed its target on this new expenditure component in the worst case, unless it steps up its vaccination efforts.
READ ALSO: Gov’t saves GH¢3,336 million due to adjustment of interest payments
