Dr. Ernest Addison
Provisional data on budget execution for the first seven months showed an overall government budget deficit of 7.4 per cent of GDP against the revised target of 7.2 per cent of GDP as the Covid-19 pandemic continues to impact fiscal operations.
The primary balance also recorded a deficit of 3.7 per cent of GDP above the planned target of 3.4 per cent of GDP.
Over the review period, total revenue and grants amounted to GH¢27.7 billion compared with the target of GH¢26.8 billion. Total expenditures and arrears clearance amounted to GH¢56.2 billion, above the target of GH¢53.3 billion.
Effect On Public Debt
These developments impacted the stock of public debt which rose to 68.3 per cent of GDP (GH¢263 billion) at the end of July 2020, compared with 62.4 per cent of GDP (GH¢218.2 billion) at the end of December 2019. Of the total debt stock, domestic debt was GH¢125.1 billion (32.5 per cent of GDP) while external debt was GH¢138 billion (35.8 per cent of GDP), representing 52.4 per cent of the total public debt.
Hope For Rest Of Year
On the real economy, despite the contraction in the second quarter, the indication is for improved growth outturn in the third and fourth quarters. Leading indicators of economic activity point to a recovery. A sustained level in consumer and business confidence, broad-based growth in the indicators of the CIEA are all supportive of positive growth conditions in the outlook. Following from the above, it is estimated that growth in 2020 will be between 2.0 and 2.5 per cent.
The Chairman of the Bank of Ghana’s Monetary Policy Committee, who made these known to journalists Monday in Accra, said, “Fiscal policy has been a source of considerable stimulus, driven by exceptional expenditures directed towards goods & services, capital expenditures, Covid-related spending, and in the energy sector. As at July 2020, the budget deficit was higher than programmed. Indications from banking data point to a faster budgetary execution in August relative to the annual target of 11.4 per cent of GDP, supported by exceptional domestic and foreign financing sources.”
Domestic Developments
On the domestic front, he said the policy and regulatory relief measures introduced by the Bank of Ghana in recent times have enhanced liquidity in the banking system, preserved capital buffers, and provided relief to customers severely impacted by the pandemic.
“These measures have also helped banks and specialised deposit-taking institutions provide support to critical sectors of the economy to mitigate the adverse impact of the pandemic. The Bank of Ghana will continue to monitor the impact of these relief measures,” he added.
BY Samuel Boadi