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Interest payment outstrips compensation as the largest budget expenditure item – PFM Tax Africa

4 years ago
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Interest payments for the first quarter of 2021 outpaced compensation expenditure of government.

According to Public Financial Management Consultancy firm, PFM Tax Africa Network, interest payments for 2021 exceeded compensation payments by 0.2 percentage points.

“At 1.9 percent and 1.7 percent, interest payments now exceed compensation or wages, as the largest single budget expenditure item,” stated PFM Tax Africa.

“This is consistent with the 2021 Budget projection of 8.3 percent and 7 percent, respectively,” it added.

The Network is of the view that, the outpacing of compensation payment by interest payment is likely to put significant fiscal pressure on expenditure as well as the possible rise in domestic and external debt financing.

Adding that, the two recurrent expenditure crowds out capital expenditure, which is only 0.7 or 0.8 percent of GDP for projected and actual figures for Q1 2021.

“The annual 2021 target of 2.7 percent for capital is less than the 3.8 percent for Q1-2021 and provisional actual of 3.6 percent for interest plus compensation,” added the Network.

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Meanwhile, on the country’s revenue performance for Q1 2021, the Network asserts that government failed to meet its target revenue of 3.7 percent and 2.8 percent total and tax revenues respectively.

According to PFM Tax Africa, actual provisions of total and tax revenues for Q1 2021, is 3 percent and 2.4 percent respectively.

On the back of the unrealized revenue targets for Q1 2021, the Network asserts that there is the need for a higher performance in the remaining quarters to achieve the annual target of 16.7 percent of GDP revenue target.

In monetary terms, revenue attained by government for Q1 2021 was Ghs 12.8 billion as against a target of Ghs 15.8 billion, falling short of some Ghs 3 billion.

Peruse below details of PFM Tax Africa’s report on the country’s fiscal performance for Q1 2021

2021 Fiscal Performance, Part 2 by Fuaad Dodoo on Scribd

Source: norvanreports
Tags: Interest payment outstrips compensation paymentPFM Tax Africa
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