Adnan Adams Mohammed
Ghana’s fiscal deficit-to-Gross Domestic Product (GDP) ratio is estimated to record 4.6 percent as against 11.2 percent in 2022, International Monetary Fund has predicted.
This 2023 estimated ratio is an improvement of about 6.6% of the 2022 figure.
A further reduction in the ratio is expected in the next five year. This follows a significant cut in government expenditure and expected improvement in revenue as announced in the 2023 budget review. The fiscal deficit-to-GDP recorded in 2020 and 2021, were pegged at 17.4% and 12.0% respectively.
“It is expected to fall to 4.1% of GDP in 2024 and subsequently to 3.5% of GDP in 2025 and 3.0% of GDP in 2026. It will again decline to 2.6% of GDP in 2027and 2.8% of GDP in 2028”, the October 2023 Fiscal Monitor noted.
“These figures indicate that the government has adopted a tight budget spending in 2023 as captured by the IMF Programme which stresses more on revenue mobilisation.
“This is also a reflection of the country’s second quarter growth rate where some sub-sectors such as Construction (-11.7%) that rely heavily on government spending contracted.”
Similarly, the primary balance will fall to 0.5% of GDP, from a deficit of 3.7% in 2022.
However, in the next five years, the primary balance will record a surplus.
This is a result of an anticipated strong revenue growth and reduced expenditure in 2023.
Meanwhile, the Fund has revealed that, the 1.2% Gross Domestic Product (GDP) growth forecast for Ghana in 2023 captured in the World Economic Outlook (WEO) was based on old data.
According to the Resident Representative to Ghana, Dr. Leandro Medina, the Fund would revise the growth rate projection when it receives new data.
The Resident Representative said the Fund did not take into account the recent data released by the Ghana Statistical Service.
“In particular, it did not take into account the recent data that showed a higher growth rate than expected at the beginning of the programme (averaging 3.2% for the first two quarters).”
Dr. Madina argued that “ At the current juncture, and based on the findings of the first ECF [Economic Credit Facility] review, the IMF Staff assessment indicated that the growth projection for 2023 will be revised up from the previous 1.5%”.
The IMF lowered Ghana’s growth rate to 1.2%, from the July 2023 forecast of 1.6%.
It was the second time the Fund has revised Ghana’s GDP growth for this year.
In April 2023, the Fund predicted a 2.8% growth rate for Ghana in its World Economic Outlook (WEO) Report.
The World Bank had also slightly lowered the country’s growth rate forecast for this year to 1.5%, according to its October 2023 Africa Pulse Report.
