Government coming next year will face a limited fiscal space to continue with its provision of freebies to Ghanaians.
This is according to the Governor of the Central Bank, Dr Ernest Addison.
Making the assertion with reference to the country’s current debt status at the 97th Monetary Policy Committee (MPC) press briefing on Monday, November 23, Dr Addison noted Government was approaching its limit in providing interventions to businesses and Ghanaians to mitigate the adverse impacts of Covid-19.
Speaking on how the debt stock has shot up from 59.8 per cent of GDP at end-December 2019 to 71 per cent in October this year, Dr Addison stated, freebies provided to Ghanaians in the form of subsidies in utility bills, stimulus packages to businesses as well as financial resolution bonds to investors of the 53 collapsed Fund Management Companies coupled with payments of depositors of the collapsed banks, microfinance companies and savings and loans companies have all led to the huge increment of the nation’s debt stock.
Government in the wake of the pandemic has given in excess of Ghs 600 million in soft loans to businesses, heavily subsidised utility bills for Ghanaians since April this year and for the remaining months of the year coupled with tax exemptions, Ghs 350,000 insurance packages and 50 per cent increment in emoluments of frontline health workers.
In addition, Government has paid over Ghs 21 billion to depositors of collapsed banks in the financial sector clean-up, made available Ghs 563 million bailout package for investors of the 20 liquidated FMCs and also recently announced a partial bailout package for the remaining FMCs.
Also speaking on the country’s fiscal deficit which currently stands at 9 per cent, the Governor noted a return to a 5 per cent fiscal deficit or lower as mandated by the Fiscal Responsibility Act, is likely to happen in 2023.
According to him, fiscal deficit is expected to decline to 8 per cent in 2021, then a further decline in 2022 and a complete return to 5 per cent fiscal deficit in 2023.
Revenues mobilised by Government at end-October according to the BoG is 9.4 per cent of GDP with Government expenditure reaching 18.4 per cent of GDP, resulting in a fiscal deficit of 9 per cent as against a revised fiscal target of 11.8 per cent for end-2020.
The MPC of the Central Bank Monday, announced its decision to maintain the policy rate at 14.5 per cent for the fifth consecutive time.
According to the MPC, the decision to maintain the policy rate is on the back of reduced inflationary pressures and generally improved macroeconomic conditions.