Some economists have predicted that Ghana will end this year (2016), with a budget deficit of 6 percent to GDP.
They contend that the increased expenditure by government without an equal increase in revenue will cause a distortion to government’s budget deficit target for the year.
“Per the projections, we are supposed to end the year with a fiscal deficit of 5.3 percent of GDP; but in my estimation, we will not be able to achieve that by the end of the year. The fiscal deficit target to GDP will be hovering around 6 – 6.3 percent of GDP,” Chief Economist for the Institute of Certified Economists Ghana, Daniel Anim told Citi Business News.
Government is projecting to end the year with a budget deficit of 5.3 percent.
But provisional figures released by the Finance Ministry indicates that the country recorded a budget deficit of 1.7 billion cedis more than anticipated for January to July this year.
Between the period, total revenue and grants were 11 percent lower than the projected.
Government had estimated to accrue about 21 billion cedis but ended up accruing about 18.6 billion cedis.
Also, domestic revenue accrued during the period amounted to an estimated 17.5 billion cedis against a projection of 19.9 billion cedis.
In addition, tax revenue amounted to about 15 billion cedis against a target of about 16 billion cedis.
It is however worth to note that government’s expenditure for the period which amounted to 23.28 billion cedis, fell within the target of 23.88 billion cedis.
This also comes despite the fact that government’s capital expenditure increased due to increased infrastructure, that is, 4.11 billion cedis on capital expenditure against a target of 3.43 billion cedis.
However Mr. Daniel Anim explains to Citi Business News the development is less likely to affect investments into the country.
“As much as we will record a deficit around 6-6.2 percent at the end of the fiscal year, that will not deter investors from coming into the country to invest because that is not the only determining variable to induce investments into the country. There are other equally important factors such as good governance, rule of law, strategic position of the country in terms of market accessibility and interest rates.”
The lower revenue mobilization is also an indication of lower crude oil prices as well as weak economic activity where businesses are unable to grow.
This is also expected to affect the economic growth within the first quarter of 2017 when a new government takes over.
Meanwhile Mr. Anim believes the ease in the cost of doing business will propel growth among the industrial sector to be able to expand, pay taxes and culminate in shoring up government’s revenue.
“For emerging economies, it is the industrial sector that becomes the anchor for the growth and development so we are running a system where the cost of doing business is high once they make less profit, they pay less tax and we should find innovative ways to ensure that the cost of operation in the industry is lessened,”
By: Pius Amihere Eduku/citibusinessnews.com/Ghana