Adnan Adams Mohammed
The government of Ghana has revised the end-period inflation from 8 per cent to 28.5 per cent, Finance Minister Ken Ofori-Atta has announced in his mid-year review budget presented to parliament, last week.
He said the revision of the end-period inflation for 2022, as part of the re-jigging of the entire macroeconomic framework, has been necessitated by a significantly-changed macroeconomic environment.
He said based on the developments for the first six months of 2022 and outlook for the rest of the year, the government has, accordingly, revised the macro-fiscal targets for 2022 as follows:
· Overall GDP Growth rate of 3.7 percent down from 5.8 percent
· Non-Oil GDP Growth rate of to 4.3 per cent down from 5.9 per cent
· End period inflation of 28.5 per cent up from 8 per cent;
· The overall fiscal deficit of 6.6% of GDP down from 7.4%
· Primary surplus of 0.4% of GDP up from a surplus of 0.1% of GDP; and
· The Gross International Reserves of not less than 3 months import cover.
Mr Ofori-Atta told the legislature that “price pressures have continued to build in several advanced and emerging market economies, primarily due to escalating energy and other commodity prices, and widespread supply chain disruptions”.
“In response, inflation in advanced economies is expected to increase from 3.1 per cent in 2021 to 5.7 per cent in 2022, but moderate to 2.5 per cent in 2023. Similarly, inflation in emerging markets and developing economies is expected to increase from 5.9 per cent in 2021 to 8.7 per cent in 2022 before moderating to 2.5 per cent in 2023”.
He also noted that the 2022 fiscal framework has been revised due to the fiscal performance for the first half of the year.
He put the revision down to shortfalls in the expected yields from the new 2022 revenue measures and the implementation of the 30% discretionary expenditure cuts and other expenditure measures announced by the government earlier in the year.
The other expenditure measures are:
o the moratorium on foreign travels except pre-approved critical and/or statutory travels;
o 50% cut in fuel coupon allocations for all political appointees and Heads of government institutions, including SOEs, effective 1st April 2022;
o the moratorium on foreign travels except pre-approved critical and/or statutory travels; and
o 50% cut in fuel coupon allocations for all political appointees and Heads of government institutions, including SOEs, effective 1st April 2022.
The other factors include:
· Government’s support for 15% Cost of Living Allowance (COLA) to public servants; · upward revision to the average weighted domestic interest rates;
· upward revision in exchange rate on account of higher depreciation; and
o revision of the Benchmark Crude oil price from US$61.2/bbl to US$94.8 and the Benchmark Crude oil volume from 59.5mn barrels to 58.0mn.
Accordingly, Mr Ofori-Atta said: o Total Revenue and Grants have now been revised to GH¢96,842 million (16.4% of GDP) in 2022, down from the 2022 Budget target of GH¢100,517 million (20.0% of GDP) representing 3.7 per cent reduction.
o Total Expenditure (including payments for the clearance of arrears) has been revised downward to GH¢135,742 million (22.9% of GDP) from the original budget projection of GH¢137,529 million (27.4% of GDP).
o Interest Payments have been revised upwards from GH¢37,447 million (7.5% of GDP) to GH¢41,362 million (7.0% of revised GDP), mainly on account of inflationary pressures and exchange rate depreciation resulting in higher cost of financing.
He said the revisions in government’s fiscal operations result in a fiscal deficit (on cash basis) of GH¢38,900 million (6.6% of revised GDP) up from the 2022 Budget deficit target of GH¢37,012 million (7.4% of GDP). The corresponding primary balance is a surplus of GH¢2,461 million (0.4% of revised GDP), up from the 2022 Budget estimate of a surplus of GH¢435 million (0.1% of GDP).
He noted that although the deficit is expected to be financed from both foreign and domestic sources, domestic financing will be the key driver while the government works to regain external market access.
Mr Ofori-Atta announced that the following revenue measures will be pursued in the remaining half of the year:
· eVAT – The digitalisation of our revenue mobilisation processes remains a key focus; therefore, the GRA is finalising all relevant processes to facilitate the effective collection of VAT revenue. This includes a proposed amendment of the Value Added Tax Act 870 to enable its electronic collection, effective 1st October 2022. · Property Rate – It is fundamentally important that, together with the Ministry of Local Government, we continue to assist and support the Assemblies, not only to expand their revenue base, but to do so with optimal efficiency and effectiveness. Therefore, the collective efforts of the local government, the Assemblies, and the GRA in launching and end-to-end digitalised process will be realised by August.
· Extension of Waiver of Interest & Penalty to Dec 2022; and
· Introduction of upfront payment of VAT on importers not registered for VAT with implementation start date of 1st October 2022.
