Mid-year budget review meant to align with commitments to IMF, implement new strategies – Eva Mends
Chief Director at the Ministry of Finance, Eva Mends, has elucidated the strategic objectives underpinning the 2023 mid-year budget review.
Speaking virtually at an event held by the Institute of Chartered Accountants Ghana (ICAG) with discussions focusing on the 2023 mid-year budget on August 9, 2023, Ms Mends noted that the mid-year budget review sought to align all commitments made to the IMF and as well as the developments that have occurred in the economy since November 2022, including the domestic debt exchange programme (DDEP).
According to her, the mid-year budget review seeks to implement certain strategies aimed at reducing Government arrears and turning around the cocoa and energy sectors to aid the country’s economic recovery.
She underscored the departure of this year’s mid-year review from the previous budget reviews given the reduction in appropriation from GHS 227bn to GHS 206bn.
“So essentially, this mid-year review is quite different from the mid-year reviews that we have had in the past because it takes account of commitments that we have made and the outlook is quite aligned with those commitments,” she stated.
“It’s also very interesting because for the first time we had a reduced expenditure appropriation. That does not happen very much, most often we increase appropriation because there are new revenues and all of that, but this in particular, we reduced appropriation significantly and all of these makes this mid-year review a different and important for the country’s recovery,” she added.
Key revisions made in the mid-year budget review to the macro-fiscal targets for the year 2023 encompass alterations to the overall Real GDP Growth rate, Non-Oil Real GDP Growth rate, End-period headline inflation, Primary Balance on Commitment basis, and Gross International Reserves.
According to the Finance Minister, the key revisions to the macro-fiscal targets for 2023 year include:
i. Overall Real GDP Growth rate of 1.5 percent down from 2.8 percent;
ii. Non-Oil Real GDP Growth rate of 1.5 percent down from 3.0 percent;
iii. End-period headline inflation of 31.3 percent, from 18.9 percent;
iv. Primary Balance on Commitment basis of a deficit of 0.5 percent of GDP compared to a surplus of 0.7 percent of GDP, aligning with IMF-supported PC-PEG target Primary balance;
v. Gross International Reserves (programme definition) sufficient to cover at least 0.8 months of imports of goods and services by 2023.
Mr Ofori-Atta articulated that the factors that drove these revisions encompass fiscal developments for the first half of 2023, changes in base pay on the Single Spine Salary Structure, partial restoration of capped transfers to the NHIS and GETFund, the impact of the completed Domestic Debt Exchange Program (DDEP), and IMF ECF Programme disbursements.
The drivers of the revisions to the 2023 Fiscal Framework the Minister noted include:
i. Fiscal developments for Jan-June 2023 reflecting shortfalls in revenues and lower spending;
ii. Increase in base pay on Single Spine Salary Structure of 30 percent compared to the assumed 20 percent for the 2023 Budget;
iii. Partial restoration of capped transfers to the NHIS and GETFund;
iv. The impact of the completed Domestic Debt Exchange Program (DDEP) on debt service cost as well as on revenue mobilisation;
v. IMF ECF Programme disbursements for 2023 of US$1.2 billion and reflection of other catalytic financing including the World Bank US$530 million (DPO – US$300 million and Emergency Projects – US$230 million) and expected disbursements of US$103mn from the AFDB;
vi. Revision in exchange rates, interest rates, crude oil prices, crude oil volumes, and GDP projections; and vii. The need to align 2023 Mid-Year Review to the approved IMF-supported PC-PEG.
