Government has issued the budget guidelines for the 2021-2024 fiscal period, which will facilitate the preparation of the 2021 budget by Ministries, Departments and Agencies (MDAs) as well as Metropolitan, Municipal and District Assemblies (MMDAs). Importantly, the guidelines reveal the key fiscal targets for 2021 as well.
However, with general elections scheduled for the end of this year, retention of these budget plan will depend on whether or not the incumbent government wins a second term in office. If it does not, the current political opposition would form a new government in January next year, and draw up an entirely new budget subsequently, within two months of taking office.
2021 Fiscal Framework
Total Revenue and Grants are projected at GHc 56,956 million, or 13 percent of GDP, for 2021 based on the 2021 fiscal framework, and this represents a nominal growth of 9.7 percent over the revised target for 2020.
Of the Total Revenue and Grants, non-oil Tax Revenue is estimated at GHc 43,621 million, or 9.9 percent of GDP, in 2021, representing a per annum growth of 12.7 percent relative to the 2020 revised target. Non-oil Tax Revenue is expected to constitute about 76.6 percent of Total Revenue and Grants in 2021.
Total Expenditure, which includes payments for the clearance of arrears, is projected at GHc 98,462 million, or 28.2 percent of GDP, in 2021. Additionally, Compensation of Employees is projected to increase from GHc 26,656 million, or 6.9 percent of revised GDP, in 2020 to GHc 28,563 million, or 6.5 percent of GDP, in 2021. Goods and Services expenditure is projected at GHc 7,085 million, representing 1.6 percent of GDP, in 2021.
Government projects that interest payments will amount to GHc 24,738 million, representing 5.6 percent of GDP, in 2021.
Effectively, the projected government operations will result in a fiscal deficit (on cash basis) at GHc 41,506 million, representing 9.4 percent of GDP, during the budget year. The deficit is expected to be financed from both foreign and domestic sources.
Foreign Financing of the deficit will amount to GHc 11,757 million, or 2.7 percent of GDP, while total Domestic Financing is expected to amount to GHc 29,029 million, representing 5.8 percent of GDP.
The associated primary balance is projected at a deficit of GHc 16,768 million, or 3.8 percent of GDP, in 2021.
According to the Ministry of Finance, the Guidelines have been developed to provide instructions on the processes and procedures for preparing the 2021-2024 budget, pursuant to Article 179 (1) of the 1992 Constitution and Section 20 of the Public Financial Management Act, 2016 (Act 921) and section 122 of the Local Governance Act, 2016 (Act 936).
In view of the coronavirus pandemic, government’s main thrust of macroeconomic policy in 2021 is to ensure stabilization and return of the economy to the pre-pandemic fiscal stance.
Further to this, government plans to revitalize the economy to speed up the Ghana Beyond Aid agenda through turbo-charging the productive sectors and facilitating competitive import substitution, export promotion and diversification.
Given that 2020 is an election year, in accordance with Article 180 of the 1992 Constitution and Section 23 of the Public Financial Management Act, 2016 (Act 921), a draft Budget Statement and Economic Policy will be prepared whilst a three month’s “Expenditure in Advance of Appropriation” is laid before Parliament by November 15, 2020.
The ministry noted that the full budget statement and estimates for the year 2021 will be presented by the first quarter of 2021.