What’s gov’t’s 2019 Medium-term Macroeconomic Targets?

With the November 15 budget reading by Finance Minister, Ken Ofori-Atta, what are the 2019 Medium-term Macroeconomic Targets government is working with?

Below, the soft spoken minister shares with us the plan.

Mr. Speaker, I turn now to the medium-term macroeconomic targets. Following our significant achievements in stabilising the economy, Government will continue to pursue prudent macroeconomic policies to provide a stable environment for expanding economic opportunities, and for promoting inclusive and job-creating growth and development.

Consistent with the Public Financial Management Act, 2016 (Act 921), growth objectives will be pursued without compromising fiscal consolidation. We will reduce the fiscal deficit to make the overall debt burden sustainable. We will pursue prudent monetary and external sector policies to keep inflation under control and achieve favourable current account balance to underpin exchange rate stability.

The following medium term (2019-2022) macroeconomic targets have been set:

  • 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 3-5percent 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.

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.

Mr. Speaker, we now provide details of the medium-term outlook for the real, fiscal, monetary, and external sectors of the economy

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 %), and the Services Sector (6.1 %).

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 GH¢58.9 billion, 17.1 percent of the rebased GDP, up from a projected outturn of GH¢46.8 billion, 15.7 percent of rebased GDP in 2018.

Domestic revenue is estimated at GH¢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 GH¢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 GH¢6.5 billion (1.9 percent of GDP) in 2019, equivalent to 11.3 percent of Total Domestic Revenue. Of this amount, GH¢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 GH¢282.2 million is expected to be paid into the Consolidated Fund.

Receipts from upstream petroleum activities are projected at GH¢5.4 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 GH¢1.1 billion, up from the projected outturn of GH¢773.2 million in 2018.

Resource Allocation for 2019

Mr. Speaker, Total Expenditure (including clearance of Arrears) is estimated at GH¢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 GH¢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 GH¢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 GH¢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 GH¢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 GH¢13.8 billion, equivalent to 4.0 percent of GDP, compared to 3.5 percent in 2018.

Capital Expenditure is projected at GH¢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 GH¢3.2 billion or 0.9 percent of GDP. An amount of GH¢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

Mr. Speaker, based on the estimates for Total Revenue & Grants and Total Expenditure, the 2019 fiscal operations will result in an overall budget deficit of GH¢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 GH¢9.7 billion, including a planned sovereign bond issuance of GH¢9.6 billion. Total Domestic Financing is estimated at GH¢4.8 billion. This will result in a Primary Surplus of 1.2 percent of GDP.