The International Monetary Fund (IMF) expects the country’s deficit to widen to 12.6 percent at the end of 2021. This means that the IMF expects Ghana to spend more than its revenues in the 2021 fiscal year. More specifically, the excess expenditure, that is, expenditure minus revenues, expressed as a percentage of GDP will be equal to 12.6 percent. However, the Fund expects this to ease gradually to 10.4 percent in 2022.
Meanwhile, the IMF expects Ghana’s fiscal deficit to return to single digits from 2023. The Bretton Woods institution forecasts a fiscal deficit of 9.3%, 9.1%, and 8.9% respectively for Ghana in 2023, 2024, and 2025. Also, the Fund forecasts that the gap between revenues and expenditure will fall to 6.8% in the year 2026.
Data from the Bank of Ghana show that Ghana’s overall deficit in 2020 was 11.7 percent of the country’s GDP. However, the IMF’s data show that the country’s deficit was far higher than the figure reported by the central bank. The IMF in its April 2021 forecast, indicated that the country ran a deficit of 16 percent of its overall output in 2020.
The source of the discrepancy of 4.3 percent of GDP is still yet unknown. Moreover, per the data from the IMF, Ghana is one of the countries that recorded the highest fiscal deficit among the low-income developing countries in 2020. The only country that also recorded a high budget deficit in 2020 among the low-income countries is Zambia. The IMF noted that Zambia ran a fiscal deficit of 13.9 percent last year.
Overall Budget Balance
Earlier this year, the government stated in the 2021 Budget and Economic Policy that its fiscal operations resulted in a cash basis deficit of GH¢44.898 billion. This was higher than the revised target of GH¢44.074 billion. As a result, the government ran a deficit of 11.7 percent of GDP as against the revised target of 11.4 percent.
As such, the corresponding primary Balance recorded a deficit of GH¢20.299 billion, equivalent to 5.3 percent of GDP. This was 14.0 percentage points higher than the programmed deficit of GH¢17.806 billion, equivalent to 4.6 percent of GDP. However, in the corresponding period of 2019, the government’s primary balance recorded a surplus of 0.8 percent of GDP. Throughout 2020, the primary balance was in the negative.
Nevertheless, the government exceeded its revenue targets in 2020. This is because, its Total Revenue and Grants for the fiscal year 2020 amounted to GH¢55.128 billion against a target of GH¢53.6 billion. Accordingly, the 2020 outturn exceeded the 2019 performance by 3.3 percent and the target for the year by 2.7 percent.
Also, Non-oil tax revenue amounted to GH¢42.4 billion, 11.1 percent of GDP. This amount exceeded the revised Budget target of GH¢40.7 billion by 4.1 percent. The Non-oil tax revenue comprises taxes on non-oil Income and Property, Domestic Goods and Services, and International Trade.
Akin to the development in government’s revenues, the execution of expenditures for the period also exceeded the program target by 2.3 percent. The government attributed this to the unanticipated expenses incurred to mitigate the negative impact of COVID-19.
Meanwhile, Total Expenditures for the period amounted to GH¢100.026 billion compared to a program target of GH¢97.740 billion. This, according to the government, represents a year-on-year growth of 42.3 percent.