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Fiscal deficit worsens by 0.3% of GDP

Adnan Adams Mohammed

The Bank of Ghana’s provisional data for the first quarter of 2022, indicated an overall broad fiscal deficit (cash, excluding energy sector payments, financial sector clean-up costs) of 2.6 percent of Gross Domestic Product (GDP).

This is against the programmed target of 2.3% of GDP.  The corresponding primary balance for the period was a deficit of GH¢2.3 billion (0.5% of GDP), against a deficit target of GH¢1.4 billion (0.3% of GDP).

Over the period, total revenue and grants amounted to GH¢16.7 billion (3.3% of GDP), below the projected GH¢19.3 billion (3.8% of GDP).

Total expenditures amounted to GH¢27.0 billion (5.4% of GDP), below the programmed target of GH¢30.5 billion (6.1% of GDP).

However, the Monetary Policy Committee (MPC) during its press conference indicated that, it observed that execution of the budget for the first quarter was broadly in line with targets although there was a minor deviation in the deficit target, stemming largely from low revenue receipts.

It is the expectation of the Committee that fiscal consolidation will take hold gradually and the mid-year budget review will provide further fiscal fine-tuning to ensure that the fiscal consolidation efforts stay on track.

On the general economic overview, the central bank at a press briefing, last week, said: “In sum, the Committee observed that the global growth recovery is showing signs of a slowdown, on account of heightened risks emanating from lingering supply chain bottlenecks, China’s zero-Covid policy, and the Russia-Ukraine war. Concurrent with the growth slowdown is the sharp rise in inflation across several advanced and emerging market economies, which has posed some challenges to central banks globally. Global price pressures have broadened beyond the volatile items of energy and food.

“This has prompted some coordinated monetary policy tightening in Advanced Economies and most Emerging Market and Developing Economies and triggered tightened global financing conditions. The spillover effects of these policy responses have impacted economies through the trade and finance channels, with vulnerable developing countries faced with capital flow reversals and currency pressures. Ghana’s economy is already facing some of these headwinds from these spillover effects”.

It said growth prospects in the domestic economy remain positive and the Bank’s high-frequency indicators point to continued and increased momentum in economic activities with private sector credit showing some improvement in real terms, despite the increased price pressures.

“All these are resulting in a closure of the negative output gap. The banking sector remains robust, with sustained growth in total assets, investments and deposits. However, business and consumer confidence have dipped, reflecting the sharp depreciation of the currency and the general high inflationary environment, which has resulted in higher input costs for businesses. A quick turnaround, with more confidence-building measures to counter these conditions, would provide further boost to the real economy”, it added.

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