2020 mid-year budget statement and economic policy review in retrospect

Pursuant to the Public Financial Management Act of 2016, Act 921, Section 28; Standing Order 143 of Parliament; and Section 8 of Article

179 of the Republican Constitution, the Minister of Finance, Mr Ken Ofori-Atta, availed himself of the good people of Ghana through

Parliament to present the mid-year fiscal policy review of the 2020 budget statement and economic policy; and supplementary estimate, as well as adequate measures put in place by the economic management team to get the national economy back on track.

Highlights

The mid-year fiscal policy review focused on key sectors of the Ghanaian economy including health, agriculture, and education with strong emphasis on COVID-19 and its devastating effects on the activities of young entrepreneurs, faith-based organisations, transportation, creative arts and media, agriculture, trade and industry, financial services, health, education and the manufacturing industry.

Hon. Ken Ofori-Atta noted the disruptive effect of COVID-19 on the global economy and affirmed the government’s resolve to marshal the requisite financial and material resources to protect lives and preserve livelihoods in the midst of the pandemic.

The presentation highlighted essential government projects and initiatives, including but not limited to Planting for Food and Jobs, One,district- One,factory, fish landing sites, Inner City and Zongo Development, sanitation and water resources, Infrastructure for Poverty Eradication Programme (IPEP), Livelihood Empowerment Against Poverty (LEAP) programme, Free Senior High School and School Feeding programmes, railway sector development, construction of roads and other infrastructural facilities, development of the automobile industry; and the design, construction, equipping, and staffing of new district and regional hospitals in the respective districts and regions with none, under President Nana Akufo-Addo’s “Agenda 111” initiative.

Macro-economic indicators

The Finance Minister outlined the macro-economic indicators of the Ghanaian economy as of  June 30, 2020. For instance, the nation’s gross domestic product (GDP) growth rate for the first quarter of 2020 was 4.9 per cent.

This was 1.8 per cent less than the GDP growth rate recorded over the same period in 2019. Ghana’s inflation target in the medium term is 8±2 per cent; and the inflation rate as at June 30 , 2020 was 11.2 per cent.

This was 0.6 per cent shy of the 10.6 per cent recorded earlier in April 2020; and a slight improvement over the 11.3 per cent recorded in May 2020.

The monetary policy rate witnessed 150 basis points reduction from 16 to 14.5 per cent while the cash reserve requirement of deposit money banks (DMBs) was reduced by two per cent to boost economic activities; and to ease liquidity challenges in the banking sub-sector. Interest payments on 91-, 182-, and 364-day Treasury bills witnessed significant decrease during the period.

Ghana’s fixed income bond market recorded a significant amount of GH¢45.6 billion at the end of June 2020.

This represented about 161 per cent increase over the GH¢17.48 billion recorded during the same period in 2019.

The gross international reserves of about US$9.2 billion were equivalent to 4.3 months import cover, which was an improvement over the 4.0 months import cover recorded earlier in December 2019. Fiscal deficit as a percentage of GDP was 6.3 per cent.

This was about 2.03 times the targeted fiscal deficit of 3.1 per cent during the period. Ghana’s primary account showed a deficit of 3.3 per cent. This was about 266.67 per cent more than the 0.9 per cent deficit targeted at the end of the second quarter of 2020.

The higher fiscal deficit was a reflection of significant shortfalls in taxes- and non-tax revenues relative to escalated COVID-19 induced expenditures.

Total revenues and grants targeted during the period were GH¢29.759 billion. However, the ravages of COVID-19 enabled the economy to meet about 74 per cent of the target.

Total expenditures, including arrears clearance was GH¢46.352 billion. This was 11.5 per cent more than the total targeted expenditure of GH¢41.554 billion during the period.

Total expenditures on financial sector interventions during the period amounted to GH¢18.6 billion, equivalent to 4.8 per cent of GDP. Global economic uncertainties, coupled with national economic challenges, have compelled downward review of Ghana’s growth target for 2020 from 6.8 to 0.9 per cent.

However, this compares favourably with the -2.1 and -5.1 per cent projected by the World Bank for the African economy; and the 42 per cent contraction rate predicted for the Chinese economy in 2020. Indeed, the devastating effects of COVID-19 on the global, African and Ghanaian economies have been dire.

That notwithstanding, current managers of the Ghanaian economy have resolved to be tactful, diligent and strategic in their adaption and implementation of measures that could stimulate and assure overall economic success during and after COVID-19.

These are strong attributes that could define the resounding accomplishments of the Ghanaian economy in the immediate, medium term; and beyond.

The writer is a Chartered Economist/Business Consultant