French Chamber, KPMG discuss 2018 budget

The Chamber of Commerce and Industry France Ghana (CCIFG), in conjunction with KPMG, has organised a business breakfast meeting to discuss the 2018 government’s budget, its implications and opportunities for businesses across all sectors.

Attended by 70 business executives comprising both members and associates of the CCI France Ghana, the event was facilitated by KPMG’s Financial Services Strategy and Operations Lead in Ghana, Mr Robert Dzato.

Mr Dzato said growth in the world economy would be led by emerging markets growth.

He said global economic growth had been influenced by a number of geo-political events; including but not limited to the rise of nationalisms and trade wars, terrorism, Brexit, among others.

Giving a macroeconomic overview of Ghana and comparing 2016 to 2017, he highlighted that the country was coming from a difficult recent past towards a period of stability, however, the macro fundamentals needed to be sustainable.

He said based on the 2018 budget statement, 2017 saw a positive GDP growth of 7.9 per cent with 6.8 per cent projected for 2018 against 3.7 per cent in 2016.

Nevertheless, the government’s growth projection could be more ambitious, not less than seven per cent for 2018. The fiscal deficit dropped from 8.7 per cent in 2016 to 4.6 per cent in 2017 with 4.5 per cent projected for 2018.

On price stability, he indicated that the 2016 exit inflation rate of 15.4 per cent dropped to 12.4 per cent in 2017 with 9.8 per cent being projected for 2018.

On monetary policy rate, he indicated that the rate had reduced by 450 basis points to 20 per cent as at the end of 2017, while the lending rates of banks remained high and there was no “pass-through” in lending rates to the real economy due to high non-performing loans in the banking industry.

According to Mr Dzato, the size of the economy was estimated at GHC202 billion, led by the services sector which accounted for 53.4 per cent while industry and agriculture had 23.6 and 23 per cent respectively.

On the 2018 fiscal outlook, he mentioned that the government was targeting revenue of GH¢51 billion with tax revenue contributing 79.4 per cent, non-tax revenue 15.9 per cent with other sources accounting for the rest. On outflows, Ghana is projecting GH¢62 billion with projected fiscal deficit of 4.5 per cent for 2018.

He noted that compensation and interests would account for circa 55 per cent of government’s expenditure in 2018, leaving only circa 11 per cent on capital expenditure on critical infrastructure.

Survey

Based on a pre-budget survey conducted by KPMG comparing concerns of the business community in 2017 to 2018, there were a number of issues affecting businesses.

In the survey which gathered views of business leaders (CEOs and CFOs), utility costs; cost and access to credit; taxes, levies and the volatility of the cedi were the major concerns of businesses.

He stressed that while there had been a number of tax reforms and initiatives in the 2017 and 2018 budgets, challenges remained across sectors of the economy.

Touching on recapitalisation of banks, he indicated the need for local banks to be strong to support the transformative projects in the economy.

He pointed out critical imperatives that should drive accelerated growth. These include digitalisation of the economy to achieve efficiency; encourage lending to the real economy (SMEs) at lower interest rates; investing critical infrastructure; driving public sector efficiencies; diversifying the economic (ensuring non-oil growth); depoliticising flagship national initiatives and building core institutional capacity as enablers.