Wednesday, 27 October 2021

Energy, revenue & wage settlements threaten govt fiscal consolidation process

 By Elorm Desewu

The government’s fiscal consolidation efforts is being threatened with low revenue mobilization, energy sector payments and wage settlements.

The total revenue and grants for the first seven months of 2021 amounted to GH¢34.3 billion representing 7.8 percent of Gross Domestic Product, (GDP), which is below the projected target of GH¢38.8 billion representing 8.8 percent of GDP.

The government is very optimistic that fiscal policy implementation in the remaining months of the year is expected to be shaped by revenue collection efforts and strict alignment of expenditures with revenue inflows to ensure attainment of the fiscal deficit target for the year.

Total expenditures and arrears clearance amounted to GH¢61.1 billion representing 13.9 percent of GDP, which was below the programmed target of GH¢63.8 billion (14.5 percent of GDP). 

The debt sustainability concerns remain, which warrants additional fiscal consolidation efforts, carefully balanced with sustainable growth strategies and efficient debt management strategies. 

Provisional data on the budget execution for the period January to July 2021 indicated an overall broad cash fiscal deficit of 6.1 percent of GDP, against the target of 5.7 percent of GDP. This was due to higher revenue shortfalls. The corresponding primary balance was a deficit of 1.9 percent of GDP compared to the target deficit of 1.3 percent of GDP

These developments impacted the stock of public debt which increased to 76.4 percent of GDP (GH¢335.9 billion) at the end of July 2021, compared with 76.0 percent of GDP (GH¢291.6 billion) at the end of December 2020. Of the total debt stock, domestic debt was GH¢173.4 billion (39.5 percent of GDP) while the external debt was GH¢162.5 billion (37.0 percent of GDP).

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