Ghana

Mid-year budget must review projections - Economist

Business News of Thursday, 16 July 2020

Source: B&FT Online

Finance Minister, Ken Ofori-Atta Finance Minister, Ken Ofori-Atta


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Dr. Theo Acheampong, an economist and Political Risk Analyst with IMANI Africa, believes the current adverse economic challenges being faced due to the impact of COVID-19 should inform government to suspend some of its programmes to make room for fiscal space to run the economy better.

Speaking during a webinar on how Ghana’s Mid-Year Budget can benefit from sound Public Financial Management (PFM) systems, Dr. Acheampong said the current challenges call for an impact assessment of all government programmes to ascertain whether they need to be suspended or continued, depending on the quantum of investment required to keep them operational.

The Nation Builders Corps (NABCO), Planting for Food and Jobs, Free SHS, and Planting for Export and Rural Development (PERD) are among the many interventions government has introduced to better the fortunes of Ghanaians – but the outbreak of COVID-19 has led to a strain on government’s budget.

He warned that if care is not taken, government’s budget deficit after the election may go way beyond projections. Already, the Fiscal Development Report (May 2020) released by the Bank of Ghana shows that government’s operations in the first quarter of this year sent the budget deficit to GH¢13billion against a target of GH¢7.2billion.

This means the budget deficit widened to 3.4 percent of GDP against a pre-pandemic target of 1.9 percent of GDP. Revenue generation has also been hit strongly by the pandemic, especially with regard to oil proceeds due to falling prices.

The IMF and World Bank have also expressed concern about the country’s rising debt situation, due to which they caution the economy is at risk of debt distress.

Coming down to the specifics, Dr. Acheampong expressed firm conviction that programmes like NABCO can and should be reviewed. If done diligently, and with the attitude to ensure prudent spending of revenue, it will provide government with an opportunity to identify how to scale back on funding in order to ensure the sustenance of its programmes.

Government will soon present its mid-year review budget, and there is anxiety about the negative economic impact on its projections and programmes – hence, IMANI’s advice is designed to help government explore options open to it.

Obviously, the pandemic has caused slower economic growth – which is to be expected because contracted economic activity while containing the virus has come with its own cost implications. Ghanaians are eager to see what the revised projections will look like.

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