Mid-year Budget Review: Economy shows signs of recovery - Finance Minister

The Minister of Finance, Ken Ofori Atta, has said the implementation of fiscal adjustments and sustained investments have contributed to the stabilisation of the economy.

He said since the 2023 Budget was presented to Parliament in November last year to date, the exchange rate had stabilised, inflation had softened and interest rates had declined, while plans for private investments had been announced due to increased investor confidence in the economy.

Presenting a mid-year review of the 2023 budget to Parliament yesterday in fulfilment of section 28 of the Public Financial Management Act (PFMA), 2016 (Act 921), the minister said the government would continue to pursue adjustment and work hard to build and sustain a favourable macroeconomic environment.

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After an anxious wait for the Mid-year Budget Review, which was rescheduled twice, Parliament gave the minister the opportunity to address the House in fulfillment of section 28 of the Public Financial Management Act (PFMA).

Mr Ofori-Atta, appearing in the house yesterday in his signature all-white ‘kaftan’ apparel, delivered a 36-page speech on a motion which sought to inspire hope and rally Ghanaians to support the government.

The presentation was characterised by the usual boos and cheers from the Minority and the Majority sides of the house, a feature which had become associated with the budget presentations in Parliament.

Fiscal performance 

Touching on the country’s fiscal performance within the last six months after the 2023 budget was read, the minister noted that the economy was back on track to a positive primary balance.
Notably, he said, there had been a slower pace in expenditure execution relative to revenue shortfall, resulting in an overall budget deficit on commitment basis of GH¢6.3 billion (0.8 per cent of GDP), compared to the 2023 first half budget deficit target of GH¢28.3 billion (3.5 per cent of GDP).

There had also been a corresponding primary balance (on commitment basis) of a surplus of GH¢8.8 billion (1.1 per cent of GDP), compared to the target of a surplus of GH¢310 million.

The country had also experienced an overall cash deficit of GH¢10.3 billion (1.3 per cent of GDP), against the 2023 first half budget target of GH¢35.49 billion (4.4 per cent of GDP) and a corresponding primary balance (on cash basis) of a surplus of GH¢4.8 billion (0.6 per cent of GDP), against the 2023 half year deficit target of GH¢6.91 billion (0.9 per cent of GDP). 

Optimism

Mr Ofori-Atta expressed the confidence that prices of goods and services would reflect the trend of economic recovery to ease the burden on families and enterprises.
“Mr Speaker, these positive trends should ease the burden on our pockets,” he said. 

While the government did not seek a supplementary budget or introduce new tax measures, the review outlined the strategy for the re-alignment of the government’s programme to sustain the progress to stability.

“We have not asked for additional funding. We have not asked for new tax measures. We have committed to staying within appropriation and be even more efficient in mobilising resources and managing expenditure,” Mr Ofori-Atta said.

Structural reforms 

He said the government would focus on structural reforms to address systemic weaknesses and strengthen resilience in key areas, including revenue mobilisation, expenditure management, commitment control and arrears clearance, debt management, financial stability as well as energy and cocoa sector state owned enterprises (SOEs) reformation. 

The minister said there would also be a focus on rejuvenating the growth agenda with a prioritised growth strategy, which emphasised private sector-led investments in areas such as agriculture, local manufacturing, tourism, and digital transformation.

The second phase of the Planting for Food and Jobs (PFJ); aquaculture; YouStart; economic enclave project; one-district, one-factory (1D1F), and tech hubs would be integral to that growth strategy, the minister said. 

Mr Ofori-Atta indicated that the government would strengthen the ecosystem of financial services to enhance the catalytic role of the Development Bank Ghana, Consolidated Bank Ghana, Ghana Commodity Exchange, Ghana Incentive-Based Risk-Sharing System for Agricultural Lending Project, Ghana EXIM, the Ghana Infrastructure Investment Fund and the Venture Capital Trust Fund.

To enhance the ease of doing business and crowd-in significant private sector investment, the government will launch the Mutual Prosperity Dialogue framework, first from existing companies and also a global search for new entrants.

Major interventions the government intends to focus on are safeguarding social protection for the vulnerable by increasing funding to the Livelihood Empowerment against Poverty (LEAP), the Ghana School Feeding Programme and the Capitation Grant, among others.

“Mr Speaker, intermediate results from our collective efforts and our resources, especially our people, indicate that we will succeed,” Mr Ofori-Atta said.

Minister’s optimism 

He expressed optimism that beyond the current challenges facing the economy, economic prospects remained bright. 

However, Mr Ofori-Atta said, there was the need to adapt quickly and address unexpected challenges ahead in order to rebuild resilience.

“I would like to bring our attention to several critical imperatives that require our immediate and collective action,” he said.

The minister said the most critical among actions needed was addressing the challenges of the energy sector, especially from the independent power producers payments for power generation.

Mr Ofori-Atta called for support for the Electricity Company of Ghana to significantly improve its collection to reduce the burden the sector imposed on public finances. 

“I am pleased, Mr Speaker, to announce that we have an updated Energy Sector Recovery Plan, and we must all support its implementation to bring the sector towards a sustainable path,” he said.

Expenditure control, the minister said, had become more important to ensure that revenue shocks were efficiently managed. 

Also critical was improving non-oil domestic revenue collection and the completion of the domestic debt exchange programme.

“In this vein, it is important to support the Ghana Revenue Authority  to enhance collection and operationalise measures to strengthen revenue administration effort,” the minister said.

Mr Ofori-Atta said the mid-year review offered an even better opportunity to jointly work towards entrenching stability for the economy. 

“We must seize it. We must claim now a successful first review with the fund in September. We must all work together, regulators, market federations and unions and individual citizens so we all play our part to ensure consumers are treated fairly to complete the turnaround,” he added.