Databank Research has described the government’s revenue target for the 2022 fiscal year as “ambitious” in its latest Ghana Markets Review and Outlook report.
According to the Research Arm of Databank Group, historical trends in the country’s revenue mobilization do not show that the government can meet its revenue target for the year. Databank Research emphasized that a stronger push for revenue remains necessary to improve the debt service metrics of the country.
“However, we believe the Treasury’s revenue growth target of 43% in 2022 appears quite bullish compared to the historical growth trend of 16% (2014 – 2020) and 18% (excluding 2020). Given that the Treasury has missed its revenue target by an average of 5.0% per year between 2016 and 2020, we view the target for 2022 as ambitious”.
Databank Research
E-levy to anchor revenue outlook
Databank Research stated that the Electronic Transaction Levy (E-Levy) is expected to anchor the country’s revenue outlook, but there is uncertainty regarding its performance. The report highlights that the uncertainty surrounding Parliamentary approval and potential behavioral changes in the use of the digital payment ecosystem pose a downside risk to the expected yield.
The projected revenue from the E-levy of GH¢6.96 billion, according to Databank Research, represents 46% of the new revenue expectation of GH¢15 billion by the government this year.
“Against this backdrop, we view the extra revenue expectation of GH¢15bn and the total revenue target of GH¢100.5bn as quite ambitious, with a risk of budget under-performance in 2022”.
Databank Research
Despite the potential risks to budget performance in 2022, Databank Research contended that stricter enforcement of the Ghana Integrated Financial Management Information System (GIFMIS) could strengthen the expenditure controls and support budget performance this year.
According to Databank Research, persistent revenue shortfalls remain the bane of fiscal consolidation. However, it noted that the government has signaled a steady pace of reduction in the budget deficit to 9.4% of GDP in 2021 compared to 11.7% in 2020, excluding financial sector bailout costs.
In its Fiscal outlook for West Africa’s second largest economy, Databank Research forecast an overall budget deficit, including bailout costs, to range between 8.2% and 9.2% to Gross Domestic Product this year.
“The government expectedly signaled a faster reduction in the 2022 deficit. However, the underlying revenue assumptions appear doubtful. Given the steep climb in the debt-to-GDP ratio (78%) and the debt service-to-revenue ratio (73% as of September 2021), a faster compression in the budget deficit is inevitable”.
Databank Research
Fiscal operations for 2021
The Bank of Ghana disclosed that provisional data on budget execution for 2021 indicated an overall broad fiscal deficit (cash, excluding financial sector clean-up costs) of 9.7 percent of GDP, against the programmed target of 9.4 percent of GDP.
The corresponding primary balance for the period was a deficit of GH¢8.9 billion (2.0 percent of GDP), against a deficit target of GH¢8.7 billion (2.0 percent of GDP).
“Over the year, total revenue and grants amounted to GH¢67.9 billion (15.4 percent of GDP), below the projected GH¢72.5 billion (16.7 percent of GDP). Total expenditure amounted to GH¢110.4 billion (25.1 percent of GDP), below the programmed target of GH¢113.8 billion (25.9 percent of GDP)”.
Bank of Ghana
These developments, according to the Bank of Ghana, impacted the stock of public debt which increased to 78.4 percent of GDP (GH¢344.5 billion) at the end of November 2021, compared with 76.0 percent of GDP (GH¢291.6 billion) at the end of December 2020. Of the total debt stock, domestic debt was GH¢179.4 billion (40.8 percent of GDP), while the external debt was GH¢165.1 billion (37.6 percent of GDP).
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