The Finance Minister Ken Ofori-Atta on Monday, July 29, 2019, appeared in Parliament to present government’s mid-year budget and supplementary estimates in line with the Public Financial Management Act, 2016 (PFMA) Act-921.
Citi Business News unpacks the budget presented into 10 salient points.
- GDP growth has been revised to 7.1 percent from 7.6 percent
The Finance Minister said the economic growth has been slowed down by poor revenue mobilisation and also due to an increase in government’s spending. The depreciation of the cedi against the dollar is also to be blamed. Another reason ascribed for slow growth is the energy sector debt (almost US$1 billion) which the Minister confessed was not factored into the original 2019 budget.
- Government revenue fell by GH¢4.2 billion in the first six months of 2019
In the 2019 budget, the government was hoping to get GH¢27 billion in revenues and grants in the first half of the year. But the government was only able to collect GH¢22.8 billion, a 15.5 percent shortfall. The Ghana Revenue Authority (GRA) has been blamed for being unable to collect more taxes domestically.
- Ken Ofori-Atta requested for additional GH¢6.37 billion in 2019
Given that government was unable to meet its revenue targets, it needs more money to execute its programme as originally outlined in the 2019 budget as well as other emergencies that have arisen since the last budget was read. According to Mr. Ofori-Atta, the additional amount the Parliament must approve is GH¢6.37 billion.
- Cancellation of all take or pay agreement to save gov’t US$500m per annum
The Finance Minister said the previous Mahama- administration left a number of power purchasing agreements which cost about US$500 million per annum.
The Minister stated that the government has to pay this amount whether the power produced was consumed or not. According to Mr. Ofori-Atta, from August 1, 2019, the government will no longer tolerate such arrangements.
- Vehicle Luxury Tax Abolished
This tax was not only controversial but threatened to make government unpopular. Added to that, government was not able to meet its revenue target from that policy. The government decided to get rid of it entirely.
- ESLA levies increased to 21 percent; Talk tax increased to 9 percent
ESLA is made up of a number of taxes. The Finance Minister announced that some of the tax components like the Road Fund Levy, the Energy Debt Recovery Levy; and the Price Stabilisation and Recovery Levy have all been increased to raise more money. The effect of these increases will be felt on fuel prices as well as on the cost of electricity.
The Communication Service Tax alias Talk Tax was increased from 6 to 9 percent. This tax is paid by consumers of telecommunication services when they purchase or pay for airtime for either voice or data services.
- Energy sector arrears of US$2.7 billion (GH¢14.04 billion) as of January 2019
These arrears have largely being necessitated by the expensive power purchasing deals which the Finance Minister blames the previous administration from. These debts would be paid using proceeds from the ESLA Levies which is already charged on fuel and power.
- GH¢2.75 billion savings in 3years by Procurement Authority
The Finance Minister said since he took over, a number of government contracts which have been penciled for either sole-sourcing or restrictive tendering were reviewed. The review was able to reduce the original contract sums by a cumulative GH¢2.75 billion.
- Public debt stood at GH¢204 billion (US$38.7 billion) as at end-June 2019,
The public debt which includes all government borrowing from both domestic and external sources stood at GH¢204 billion, representing 59.2 percent of GDP. The debt includes the almost GH¢12 billion the government used to clean up the financial sector.
- Total expenditure now GH¢85.1 billion in 2019 Fiscal year
When the GH¢6.37 billion additional money the Finance Minister requested is approved by Parliament, it will mean that government will now spend GH¢85.1 billion in the 2019 Fiscal year (in addition to the GH¢78.7 billion planned in the 2019 budget).
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