Finance Ministry clears misconception over projected fiscal deficit for 2021
The Ministry of Finance has reacted to reports the seem to suggest that the projected fiscal deficit for the year 2021 was increased from the earlier projected 9.4% of Gross Domestic Product (GDP) to 12.1% of GDP in the 2022 budget.
The Ministry setting the records straight in a press release stated the projected fiscal deficit for the year 2021 which is exclusive of financial sector (finsec) clean-up costs and energy sector payments to Independent Power Producers (IPPs) remains 9.4%.
However, the projected 12.1% fiscal deficit for the year 2021 as stated in the budget is inclusive of financial sector clean-up costs and energy sector payments to IPPs.
According to the Ministry, since 2017, the fiscal operations of Ghana have been presented with financial clean-up costs as a memo item and energy sector IPP payments
as part of amortisation as these items were regarded as one-off obligations.
Thus, the overall fiscal balance reported from 2017 to 2021 excluded the finsec clean-up costs and the energy sector IPP payments. Given that the finsec payments are almost complete and the energy IPP payments are still being honoured, the Ministry of Finance decided to report both payments “above the line” from the 2022 financial years.
The 2022 Budget, therefore, shows the overall fiscal balance including finsec and IPP payments as well as the overall fiscal balance excluding finsec and payments to foster comparison.
According to the Ministry, overall fiscal deficit excluding finsec and IPPs payments on a cash basis for the period between January and September was 7.7% against a target of -7.4% of GDP.
Including finsec and IPPs, the overall fiscal deficit on a cash basis was -9.3% of GDP against a target of -9.9% of GDP.
Press release by Fuaad Dodoo on Scribd
Speaking on the floor of Parliament during the presentation of the 2022 budget, Mr Ofoei-Atta noted that, preliminary data for the first nine months of the year indicate that, both revenue and expenditure were below their respective targets for the period.
However, the shortfall in revenue was higher than that of expenditure, resulting in a fiscal deficit of 7.7 percent of GDP against the target of 7.4 percent of GDP.
Total Revenue and Grants for the first three quarters of 2021 amounted to GH¢47,235 million (10.8% of GDP), against the revised target of GH¢51,314 million (11.7% of GDP) for the period. The end-September outturn, nonetheless, compares favourably with the GH¢37,445 million recorded in the same period in 2020.
Total Expenditures (including arrears clearance and discrepancy) for the period amounted to GH¢81,093 million (18.5% of GDP) against the target of GH¢83,890 million (19.1% of GDP). The end-September provisional outturn was 15.3 percent above the GH¢70,316 million recorded for the same period 2020.
Expenditure on Compensation of Employees amounted to GH¢23,394 million, 0.3 percent above the revised target of GH¢23,323 million and 14.4 percent above the outturn in the corresponding period 2020.
Interest Payment, was marginally above the target for the period by 0.9 percent, totalling GH¢25,394 million against a revised target of GH¢25,158 million. Of this amount, domestic interest payment amounted to GH¢20,576 million, 4.9 percent higher than the revised target, while external interest payment of GH¢4,818 million was below the programme for the period by 13.2 percent.
