Government of Ghana demonstrated a deepened focus on fiscal consolidation with the revision here on Monday of key macro-economic targets for the 2017 fiscal year.
Addressing parliament in his maiden Mid-Year Budget Review, Minister for Finance Ken Ofori-Attah explained that spending was being revised downwards to conform to lower than projected revenue in order not to compromise fiscal consolidation.
"Total Revenue and Grants has been revised downwards by 0.9 percent of GDP (Gross Domestic Product) from 44.5 billion Ghana cedis(10.11 billion U.S Dollars) to 43.1 billion cedis. Total expenditure has also been revised downwards by 1.1 percent of GDP from 58.1 billion cedis to 55.9 billion cedis," the finance minister announced.
Following these adjustments, he said the overall fiscal balance was expected to improve from a deficit of 13.2 billion cedis (6.5 percent of GDP) to 12.8 billion cedis (6.3 percent of GDP).
Although projected real GDP growth of 6.3 percent for 2017 has not been revised, Ofori-Attah announced a downwards revision in the nominal GDP from 203.41 billion cedis to 202.01 billion cedis.
"Speaker, based on the above considerations, the revised macroeconomic targets are summarized below: Overall GDP growth rate is maintained at 6.3 percent with nominal GDP revised slightly to 202.01 billion cedis from the original projection of 203.41 billion cedis; non-oil GDP growth rate maintained at 4.6 percent; end-year inflation rate is maintained at 11.2 percent.
In his comment, an economist at the Institute for Fiscal Studies (IFS) with expertise in Public Finance, Leslie Dwight Mensah, noted that the anticipated cut-backs in spending could affect economic growth negatively.
From the statement, Mensah said it was obvious that government sought to prioritize fiscal consolidation and debt sustainability, demonstrated in the downward revision in the budget deficit target for 2017, in spite of the fact that the nominal GDP which constituted the base of the economy was projected to be slightly lower than earlier envisaged.
"This is generally welcome in the fact that given our recent history of building up debts to unsustainable levels, they want to be careful about deficit and debt accumulation. However, this is going to be done at the expense of spending," he pointed out.
Mensah however cautioned: "And this is also driven by the under-performance of revenue during the first half of the year and indeed they have now revised downwards fiscal revenue target for the full year. Having to cut back spending could potentially affect the economy unless your private sector spending and investments pick up." Enditem
(Xinhua News Agency August 1, 2017)