Finance Minister Ken Ofori-Atta
The government, through the Ministry of Finance, has begun the process of preparing the 2022 budget, which keenly focuses on promoting an inclusive and sustainable COVID-19 era recovery.
2022 to 2025 medium-term guideline directs all Ministries, Departments, and Agencies (MDAs) and Metropolitan, Municipal and District Assemblies (MMDAs) to focus the 2022 budget on creating opportunities and providing solutions toward achieving sustainable economic growth without harming the climate or leaving families in poverty.
The Guidelines provide the policy direction of government, instructions on the processes and procedures, as well as budget expenditure ceilings to guide MDAs and MMDAs toward the preparation of the 2022-2025 Budget.
“Government will therefore focus on revitalizing and transforming the economy. The approach is to catalyze the private sector in targetted areas to fast-track industrialization, competitive import substitution, digitalization, export expansion, and the creation of decent jobs -particularly for the youth,” the ministry said in a statement.
In its medium-term fiscal policy objective, the government intends to pursue a fiscal consolidation drive toward fiscal and debt sustainability to support macroeconomic stability while supporting the implementation of government’s flagship programs and the Ghana CARES Programme.
“This strategy will progressively reduce the overall fiscal balance back to the Fiscal Responsibility Act (FRA) deficit threshold of 5 percent of GDP and a primary surplus by 2024,” the guideline highlighted.
In 2022 government is projecting an overall budget deficit (including financial sector clean-up and IPPs cost) at GH¢39.2billion, equivalent to 7.9 percent of GDP. This is expected to moderate downward to GH¢30.3billion (4.8 percent of GDP) by 2024 and finally to GH¢30.8billion (4.3 percent of GDP) in 2025.
The corresponding primary balance is estimated to be at a deficit of GH¢2.1billion, representing 0.4 percent of GDP for 2022 returning to a surplus of GH¢2.6billion 0.5 percent of GDP; GH¢8.4billion 1.3 percent of GDP; and GH¢10.5billion 1.5 percent of GDP for 2023, 2024 and 2025 respectively.
Provisional data indicate that the economy is beginning to recover from the COVID-19 pandemic impact, and to sustain this recovery phase government’s plans are to support productive sectors of the economy, as well as the vulnerable, through the implementation of the Ghana CARES (Obaatanpa) Programme and flagship intervention programs.
The fiscal data show that total revenue and grants for January to June 2021 amounted to GH¢28.30billion (6.5 percent of GDP), against a programmed target of GH¢32.36billion (7.5 percent of GDP); whereas total expenditure including the clearance of arrears for the same period amounted to GH¢50.62billion (11.7 percent of GDP), against a programmed target of GH¢55.09billion (12.7 percent of GDP).
This resulted in an overall fiscal deficit of GH¢22.32billion (5.1 of GDP) against a programmed target of GH¢22.73 billion (5.2 percent of GDP). The primary balance for the period recorded a deficit of GH¢7.29billion (1.7 percent of GDP) against a programmed target of GH¢4.80billion (1.1 percent of GDP).
Priority areas
According to the guidelines, government’s priority areas for 2022 and the medium-term include: supporting the health sector and expanding social safety nets; COVID-19 containment measures; developing the country’s infrastructure, with a priority focus on roads, railways, water and sanitation, hospitals and housing.
Others include diversifying productivity and high-value services; implementing bold reforms to increase revenue mobilisation and the efficiency of public expenditures; as well as deepening structural reforms to make the machinery of government work better for the people; and rolling out digital technologies to improve service delivery.