Based on the current fiscal performance, in terms of revenue mobilization, government will be under pressure to most likely to introduce some new revenue measures and possibly expenditure cuts in the upcoming mid-year budget review later this month.
Data from Bank of Ghana’s (BoG), latest Monetary Policy Report for May 2019 shows that, government has not been able to raise enough revenue to meet its budgetary targets, as the revenue mobilization for the first quarter of 2019 fell short of the projected target by 17.6 percent.
Although data for the second quarter is not yet available, it is believed that the budgetary performance trends have been similar to the first quarter, thus necessitating Parliamentary approval for significant changes in the financial plan for 2019.
Government during the first quarter mobilized total revenue and grants amounting to GHc 10,250.36 million, representing 3.0 percent of GDP, compared with a target of GHc 12,432.22 million, 3.6 percent of GDP.
In the same period last year, revenues and grants amounted to GHc 9,362.02 million, this being 3.1 percent of GDP at the time.
The report explains that the revenue underperformance was largely attributed to lower-than-expected Cost-Insurance-Freight (CIF) values, rising zero-rated CIF and lower-than-anticipated personal income taxes.
On the expenditure front, the pace of government spending was slower than it had projected for the period, in response to revenue shortfalls.
Total expenditure, including arrears clearance, for January to March 2019 amounted to GHc 15,607.27 million, or 4.5 percent of GDP, compared with GHc 12,440.35 million, or 4.2 percent of GDP, for the corresponding period in 2018.
Although this outturn represents a year-on-year (y-o-y) growth of 15.0 percent, it constitutes only 82.9 percent of the projected expenditure target for the period.
Most importantly for the managers of the economy, overall, government budgetary operations resulted in a budget deficit of GHc 6,359.62 million, 1.8 percent of GDP, at the end of the first quarter of 2019, this being significantly higher than the target of GHc 4,891.88, or 1.4 percent of GDP.
The primary balance also recorded a deficit of 0.8 percent of GDP against a primary deficit target of 0.3 percent.
Given that government is faced with a higher than planned budget deficit, it is expected that it will strongly embark on some expenditure cuts, while working towards increasing revenue for the rest of the year.
Nevertheless, in the 2019 budget government set out some 16 priority projects and programmes to fulfill in the year. It expected that even in the light of the budget deficit, these projects and programmes are most likely to be the only ones to receive their full budgetary allocations this year, with expenditure cuts having to be implemented elsewhere.
The social intervention programmes that have priority status this year include: Nations Builders Corps (NABCO); Livelihood Empowerment Against Poverty (LEAP); Zongo Development Fund; MASLOC; Free Senior High School (including scholarships. Double track and education infrastructure); water and sanitation; school feeding programme; teachers and nurses trainees’ allowances.
Some of the priority projects and programmes bridge social interventions and economic infrastructure, such as planting for food and jobs, the national identification programme, the Infrastructure for Poverty Eradication Programme and the development of the six new regions.
The others are primarily driven by economic considerations. These are: the fish landing sites projects; railway development programme; road construction projects under the agreement with Sinohydro; and the one district lone factory programme.
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