Highlight of the 2019 National Budget and Government’s Economic Policy

2019 Medium-Term Macroeconomic Targets

Government intends to continue to pursue prudent macroeconomic policies, to provide a stable environment for expanding economic opportunities, as well as promoting inclusive and job-creating growth and development.

To this end, government have set the following medium term (2019- 2022) macroeconomic targets consistent with its objectives:

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Overall Real GDP to grow at an average of 7.0 percent;
Non-Oil Real GDP to grow at an average of 6.6 percent;
Inflation to be within the target band of 8.2 percent;
Overall fiscal deficit to remain within the fiscal rule of 3-5 percent of GDP;
The primary balance to be in a surplus of at least 1 percent of GDP; and
Gross International Reserves to cover at least 4 months of imports of goods and services.

2019 Targets

Based on the overall macroeconomic objective of sustaining and restoring macroeconomic stability and pursuing inclusive growth, and job-creating programmes, the following targets have been set for the 2019 fiscal year:

Overall Real GDP growth of 7.6 percent;
Non-Oil Real GDP growth of 6.2 percent;
End-period inflation of 8.0 percent;
Fiscal deficit of 4.2 percent of GDP;
Primary surplus of 1.2 percent of GDP; and
Gross International Reserves to cover not less than 3.5 months of imports.

Real Sector

Overall GDP is projected to grow by 7.6 percent in 2019 while non-oil GDP is projected to grow at 6.2 percent. In terms of sectoral growth, the Agriculture Sector is expected to grow by 7.3 percent, the Industry Sector (9.7 percent), and the Services Sector (6.1 percent).

Fiscal Sector

To bolster our resolve to maintain fiscal discipline, government will soon submit a bill to this august House with the main objective of ensuring that the fiscal deficit is capped at 5 percent of GDP. Additionally, government will institute a Fiscal Council to further strengthen fiscal management.

Resource Mobilisation for 2019

Total revenue and grants for 2019 is estimated at GHS 58.9 billion, 17.1 percent of the rebased GDP, up from a projected outturn of GHS 46.8 billion, 15.7 percent of rebased GDP in 2018.

Domestic revenue is estimated at GHS 57.8 billion, representing an annual growth of 25.5 percent over the projected outturn for 2018. Of this amount, non-oil Tax Revenue will constitute about 74.2 percent of domestic revenue and amount to GHS 42.9 billion. This estimate reflects the impact of expected improvements in tax compliance and reforms in revenue administration.

Non-Tax Revenue, excluding oil, will amount to GHS 6.5 billion (1.9 percent of GDP) in 2019, equivalent to 11.3 percent of Total Domestic Revenue. Of this amount, GHS 4.4 billion is expected to be retained by institutions as internally generated funds (IGF). In addition, as a result of the IGF capping, an amount of GHS 282.2 million is expected to be paid into the Consolidated Fund.

Receipts from upstream petroleum activities are projected at GHS5.4 billion in 2019, equivalent to 1.6 percent of GDP, and representing 30.3 percent growth over the projected outturn for 2018.

Grants disbursements from Development Partners are estimated at GHS 1.1 billion, up from the projected outturn of GHS 773.2 million in 2018.

Resource Allocation for 2019

Total Expenditure (including clearance of Arrears) is estimated at GHS 73.4 billion, equivalent to 21.3 percent of GDP, representing a growth of 27.0 percent above the projected outturn for 2018.

Expenditure on Wages and Salaries is forecasted at GHS 19.4 billion representing about 26.5 percent of Total Expenditure. The wage bill is anticipated to reduce to 5.6 percent of GDP from the 5.9 percent projected outturn for 2018.

Expenditure on Goods and Services is projected at GHS 6.3 billion, representing 1.8 percent of GDP. The annual growth of 38.8 percent reflects a full provision made to cater for the Government’s priority programmes, including the flagship Free SHS policy.

A total amount of GHS 18.6 billion has been estimated for Interest Payments of public debt. Of this amount, domestic interest payments will constitute about 77.8 percent and amount to GHS 14.5 billion.

Government in 2019 will continue to implement the Earmarked Funds Capping and Realignment Act, 2017 (Act 947) to reduce budget rigidities and create fiscal space to fund growth enhancing expenditures. In this regard, transfers to Statutory Funds as well as all other earmarked funds, are estimated at GHS 13.8 billion, equivalent to 4.0 percent of GDP, compared to 3.5 percent in 2018.

Capital Expenditure is projected at GHS 8.5 billion, equivalent to 2.5 percent of GDP and a growth of 55.7 percent over the 2018 projected outturn. Of this amount, domestically financed Capital Expenditure is estimated at GHS 3.2 billion or 0.9 percent of GDP.

An amount of GHS 5.3 billion has been budgeted for Foreign Financed Capital Expenditure and this will be funded by a combination of Project Grants and Loans.

Budget Balances and Financing Operations for 2019

Based on the estimates for Total Revenue & Grants and Total Expenditure, the 2019 fiscal operations will result in an overall budget deficit of GHS 14.5 billion, equivalent to 4.2 percent of GDP.

Financing of the fiscal deficit will be from both domestic and foreign sources. Net Foreign Financing will amount to GHS 9.7 billion, including a planned sovereign bond issuance of GHS 9.6 billion. Total Domestic Financing is estimated at GHS4.8 billion.

This will result in a Primary Surplus of 1.2 percent of GDP.

Petroleum Revenue for 2019

The Benchmark crude oil price for 2019 has been projected at US$66.76 per barrel in line with the Petroleum Revenue Management Act (Amendment), 2015 (PRMA, Act 893). The gas price for 2019 is also projected at US$3.99 per

MMBtu. The 2019 Benchmark Revenue crude oil output is 63.4 million barrels (173,764 barrels of oil per day).

Government intends to exclude gas revenues to the tune of US$181.80 million from the projected petroleum revenues for 2019, as we devise ways of getting VRA to pay for the gas supplied it by Ghana Gas. Furthermore, as a measure to minimise the amount of gas produced in the SGN Field for power production, Government has decided to postpone the extraction of its share of the gas resource (Royalties, and Carried and Participating Interest (CAPI), until such a time that we line up off takers to consume the gas in-year.

From this arrangement, the projected petroleum revenue for 2019 will amount to US$1.1 billion.

This is made up of Royalties (US$227.10 million), Carried and Participating Interest (US$602.80 million), Corporate Income Tax (US$249.60 million) and Surface Rentals (US$1.10 million).

Of this amount, US$404.90 million will be ceded to the NOC for its Equity Financing Cost (US$320.10 million) and share of the Net Carried and Participating Interest (US$84.80 million), US$473.0 million allocated to the Annual Budget Funding Amount (ABFA), while the GPFs receive US$202.70 million. The GPFs’ receipts will be distributed between the Ghana Stabilisation Fund (US$141.90 million) and the Ghana Heritage Fund (US$60.80 million).

Strategic Pillars of the 2019 Budget

The strategic pillars of the 2019 budget are: