The Finance Minister Ken Ofori-Atta on Monday, July 29, 2019, asked Parliament to approve an amount of GH¢6.37 billion being the supplementary budget for the 2019 fiscal year.
While questions have been raised regarding what these additional funds will be used for, Citi Business News analysis of the mid-year budget shows that more than GHS6.15 billion, representing 96.6 percent of the supplementary budget, will be used to pay debts.
The analysis reveals that government’s provision for amortisation — which is the process of reducing or paying off debt with regular payments — in the 2019 budget, has shot up to GHS10.53 billion from the planned GHS5.33 billion.
Additionally, out of the GHS1.17 billion increase in the government’s total expenditure for 2019, GHS952.7 million will be spent on interest payments on the government’s debt.
This brings the amount to be spent on debt servicing/interest payments in the revised 2019 budget to GHS6.15 billion representing 96.6 percent of the supplementary budget the Finance Minister had requested from Parliament.
According to Mr. Ofori-Atta, the increase in government’s amortisation has been necessitated by the power purchasing agreements that it inherited from the Mahama administration.
“The crystallisation of energy sector contingent liabilities in respect of take-or-pay contract obligations with Independent Power Producers (IPPs) estimated at GH¢5.1 billion for 2019 is being amortised, thus increasing the requirements for external amortisation above the amount originally provisioned for in the 2019 Budget,” the Finance Minister stated.
Whereas the increase in the rate of certain taxes like Communication Service Tax and a number of components in the ESLA Levy is expected to generate more revenue, they will only be enough to plug the GHS4.2 billion revenue shortfall realized in the first six months of the year.