The Minister of Finance, Ken Ofori Atta on Thursday 19th of July, 2018 presented the Mid-Year Budget in accordance with the law in Section 28 of the Public Financial Management Act 921 in parliament. The Mid-Year Budget Review in accordance with the law; Act, 2016(Act 921) is expected before the end of 31st July of the year. The essence of this is to show the projections that were made in the beginning of the year and also what to expect by the end of the year. Although the minority in parliament projected an increase of VAT from 17.5% to 21% ahead of the Mid-Year budget review dubbed “Mid-year Economic Performance and Projections -Minority’s Perspective”, the ruling party was not worry about it’s stance so far as the “Asempa” budget is concerned.
Now, to section three of the statement highlighting on the fiscal performance for January to May 2018. Just at the beginning of this year on 15th of January 2018, the Vice President Dr. Mahamudu Bawumia said “at the same time the government is committed in the 2017 budget to reduce the fiscal deficit from 9.3% to 6.3% of GDP addressing the 69th Annual Year School of continuing and Distance Education Conference under the College of Education, the Finance Minister claims, ‘’on the fiscal policy objectives and target, to achieve our fiscal objectives, the fiscal deficit has been set as the primary anchor and aims to reduce the overall fiscal deficit from 5.9 percent of GDP (recorded at the end of 2017) to 4.5 percent, sustain a primary surplus of about 1.6 percent of GDP, ultimately leading to a decline in the rate of debt accumulation. Continued fiscal consolidation is expected to be achieved through improvement in domestic revenue mobilisation and stricter spending controls and rationalisation”. Meanwhile, Ghana’s Gross Domestic Product (GDP) provisional growth for 2017 hits 8.5 percent, according to figures from the Ghana Statistical Services (GSS). This is a sharp increase in growth compared to the about 3.7 percent recorded in 2016.
On the summary of 2018 fiscal performance from January to May, the Minister said ‘’provisional data for the period indicates that total revenue and grants amounted to GH¢17,384.7 million (7.2% of GDP), against a programmed target of GH¢18,813.5 million (7.8% of GDP)’’. Hence there have been a decline in the provisional data with a total revenue and grants with a difference of 0.6%. The Minister has accepted that despite observed overages in some expenditures, total expenditure (including the clearance of arrears) also fell below its target and amounted to GH¢23,756.5 million (9.8% of GDP), against a target of GH¢24,553.0 billion (10.2% of GDP). This resulted in a fiscal deficit on cash basis of GH¢6,371.8 million (2.6% of GDP), against a target of GH¢5,739.5 billion (2.4% of GDP). That means there have been 0.2% of quite an improvement of the fiscal deficit against the target.
In revenue performance, the total revenue and grants amount of GH¢17,384.7 million (7.2% of GDP) represents 34.1 percent which was more than the annual target per annum growth of 14.8 percent despite being 7.6 percent below the programmed target of GH¢18,813.5 million.
For expenses on the use of goods and services which amounted to GH¢1,627.0 million was about 9.0 percent higher than the programmed target. He said ‘’slippage is mainly attributed to front-loaded expenditures including those for the purchase of fertilizer for the Planting for Food and Jobs programme’’. As ‘’these overruns are not expected to recur in the second half of the year’’.
Despite the layoff and the merge in the banking sector, Mr. Ofori Atta claimed, interest payment remained within the programmed target for the period but is expected to pick up, given the impact of the bond issued by government on behalf of GCB Bank on the purchase and assumption of UT Bank and Capital Bank. He continue by saying grants to other government units, comprising transfers to statutory and earmarked funds such as the National Health Insurance Fund (NHIF), the Ghana Education Trust Fund (GETFund), the District Assemblies Common Fund (DACF), among others, remained lower.
Former Finance Minister, Seth Tekper, has also take his turn to urge businesses in the country not to rejoice over the 2018 mid-year budget review which supposedly tried not to increase VAT across the board. According to Terkper, the budget review with regards to separating NHIL and GETFund levies from the 17.5% flat VAT rate is a VAT increase in disguise.
The Former Finance Minister said “Ghana’s VAT rate is 17.5 percent, and that includes NHIL (2.5%) and GETFund (2.5 %). Removing them from the VAT base and making them specific rates (instead of ad valorem) and increasing that rate to earn more revenue citing Honorable Kwarteng is a ruse,” he stated in a series of tweets after the mid-year review of the budget.
In relation to the public debt, as disclosed from the Bank of Ghana GH¢154 billion, although the Minister has confirm the same gross public debt stock in nominal terms from the GH¢154 billion (US$32.00 billion) as at the end of May 2018, representing 63.8 percent of GDP compared to 66.8 percent in same period in 2017. He said, of the total public debt, external debt at end May 2018 amounted to GH¢81.7 billion (US$18.5 billion), whereas domestic debt amounted to GH¢72.6 billion (US$16.4 billion), representing 53.0 percent and 47.0 percent of the total public debt stock, respectively. As a percentage of GDP, external and domestic debt represented 33.8 percent and 30.0 percent, respectively.
The depreciation of the Cedi to Dollar between January to June 2018 was 2.4%. But the Minister decline and said the Cedi was stable in the first quarter of 2018 with a slight year to date depreciation in April in relation to the US Dollar. However, in May and June we saw pressures on the Cedi from a strengthening US Dollar and oil prices among others, which weakened the performance of the Cedi, he said.
The new tax measure is estimated to raise 1.345million cedis.
Prince Schroeder
