IMF-fiscal measures to help cut inflation, restore debt sustainability – Dr Addison
The Monetary Policy Committee (MPC) of the Bank of Ghana believes that fiscal measures outlined in the International Monetary Fund (IMF) Staff Level Agreement (SLA) will be instrumental in restoring fiscal and debt sustainability, bringing down inflation, and stabilizing the currency.
The Governor of the Bank of Ghana, Dr. Ernest Addison, stated that the revenue enhancement measures, including the 2.5% increase in VAT, the complete removal of benchmark values on imports, and the review of the Electronic Transaction Levy, should improve the revenue outlook.
On the expenditure side, the Chairman of the MPC highlighted the lower capping on transfers to earmarked funds from 25% to 17.5% and the reduction of budgetary allocation to goods and services, as well as the rationalization of executive compensation, as key measures to contain expenditures in 2023. The MPC stated that it is necessary to remain vigilant and moderate liquidity in the system to drive inflation downwards.
Provisional data on budget execution for the period January to November 2022 showed an overall broad fiscal deficit (cash) of 9.8% of Gross Domestic Product, compared to the programmed target of 6.7% of GDP. The primary balance for the period was a deficit of ¢18.8 billion (3.1% of GDP), against a deficit target of ¢3.1 billion (0.5% of GDP).
Total revenue and grants was ¢81.8 billion (13.3% of GDP), lower than the projected target of GH¢84.0 billion (13.6% of GDP), while total expenditure of ¢142.2 billion (23.1% of GDP) was above the programmed target of ¢125.4 billion (20.4% of GDP). The deficit of ¢60.4 billion was mainly financed from the domestic sector.
The MPC stressed the need for the conclusion of the Domestic Debt Exchange Programme and external debt restructuring, which are contingent on the SLA and will allow the presentation of the SLA to the IMF Board.
