Government had big plans for the 2020 fiscal year when it delivered this year’s budget in November 2019.
The fiscal year was tagged the ‘Year of roads’, an indication of how heavy it was going to be on infrastructure, particularly roads.
But the emergence of the COVID-19 pandemic from December 2019 through to now has diminished government’s revenue and disrupted expenditure.
On Thursday, July 23, the Finance Minister returns to Parliament to present a Mid-year budget review.
Although this is normal practice in accordance with Section 28 of the Public Financial Management Act, 2016 (Act 921), a lot more is expected due to the impact of COVID-19 on the economy.
Per the 2020 budget presented by the Finance Minister, Ken Ofori-Atta, he mentioned that the country’s economic growth rate had doubled under President Akufo-Addo, rebounding strongly from 3.4 percent in 2016 (the lowest GDP growth rate since 1994); averaging 7%.
However, with the emergence of Covid-19, the GDP growth forecast for 2020 was cut by 530 basis points to 1.5%, the lowest in 37 years.
The decision was also due to the huge fall in oil prices which was triggered by the pandemic. With the banking sector, the Finance Minister had mentioned that it was on the rise again after it underwent a cleanup exercise.
In 2019, the sector recorded a year-on-year after tax profit of GHȼ1.67 billion, or 36 percent. The 91-day Treasury bill rate also stood at 14.7.
He had Projected revenues could shrink by GHS9.5 Billion (US$230 Million), bringing a budget deficit up to 7.8% from 2.3%
As the year of roads, there was also the Planting for food and Jobs initiative as well as the building of warehouses, one district, one factory, one village, one dam initiative, and the National Entrepreneurship Innovation Programme (NEIP) among others.
There was also the digitalization of the economy, where government sought to formalize economy by leveraging on technology and digitization to improve administrative systems and increase transparency.
Per the Finance Minister’s presentation to Parliament, the specific macroeconomic targets for the 2020 fiscal year were Overall Real GDP growth of 6.8 percent, Non-Oil Real GDP growth of 6.7 percent, End-period inflation of 8.0 percent, Fiscal deficit of 4.7 percent of GDP, Primary surplus of 0.7 percent of GDP and Gross International Reserves to cover not less than 3.5 months of imports of goods and services.
Touching on some Tax Policy Reforms, government said as part of its policy interventions for 2020, it will address the challenges of domestic revenue mobilization, conduct a holistic review of the existing system and the entire taxation infrastructure.
It said it will leverage the resultant review to develop a medium term revenue policy and strategy. The ensuing reforms will place premium on partnerships with the private sector in providing solutions to the country’s revenue mobilization efforts.
With the current health and socio-economic crisis, it is uncertain if government will scrap or reduce some taxes, still work on the deplorable roads it promised among other pledges it made to Ghanaians.
Speaking to Citi Business News ahead of the presentation, Economist Dr. Lord Mensah, said he hopes expenditure will be reduced to match up with budget deficit due to the impact of the pandemic.
“What I am expecting is a realization of what was requested somewhere in April when we were at the peak of COVID-19. At that time the Minister made a request to spend a particular amount, I want the Minister to come out clearly. The monies that were requested, how it has been used, whether it is making impact or not is very important in this review”, he pointed out.