Ghana’s fiscal deficit of GDP in 2020 was 16.0%, not 11.7% – IMF

The International Monetary Fund has contradicted government’s fiscal deficit of Gross Domestic Product (GDP) claim of 11.7% achieved in 2020, as its data shows that government financing gap was actually 16% of GDP in 2020.

This made it one of the highest among low-income developing countries. Zambia followed closely with a budget deficit to GDP ratio of 13.9%.

The government in the 2021 Budget and Economic Policy said its fiscal deficit (gap between revenue and expenditure) to GDP was estimated at 11.7% of GDP.

But the Fund’s April 2021 Fiscal Monitor stated otherwise.

It is also projecting a financing gap of 12.6% and 10.4% in 2021 and 2022 respectively.

In 2023, 2024 and 2025, the Bretton Wood institution is forecasting a fiscal deficit of GDP of 9.3%, 9.1% and 8.9% respectively.

All things being equal, the gap between revenue and expenditure will fall to 6.8% in the year 2026.

Overall Budget Balance and Financing

The government said in the 2021 Budget and Economic Policy that its fiscal operations resulted in a cash basis deficit of GH¢44.898 billion, equivalent to 11.7% of GDP, compared to the revised target of GH¢44.074%, equivalent to 11.4% of GDP.

Also, the corresponding Primary Balance recorded a deficit of GH¢20.299 billion, equivalent to 5.3 percent of GDP, 14.0 percentage points higher than the programmed deficit of GH¢17.806 billion, equivalent to 4.6 percent of GDP.

Revenue performance

The government said in the 20201 Budget and Economic Policy that Total Revenue and Grants for the fiscal year 2020 amounted to GH¢55.128 billion, compared with the target of GH¢53.6 billion.

It pointed out that the 2020 outturn exceeded the 2019 performance by 3.3% and the target for the year by 2.7%.

Non-oil tax revenue, comprising taxes on non-oil Income and Property, Domestic Goods and Services, and International Trade, amounted to GH¢42.4 billion (11.1 percent of GDP). The recorded outturn exceeded the revised Budget target of GH¢40.7 billion (10.6% of GDP) by 4.1%.

Expenditure Performance

The government said on the expenditure front, the execution of expenditures for the period exceeded the programme target slightly by 2.3%.

“The higher than programmed target reflects the unanticipated expenses incurred to mitigate the negative impact of COVID-19. Consequently, Total Expenditures (including arrears clearance) for the period amounted to GH¢100.026 billion compared to a programme target of GH¢97.740 billion and represents a year-on-year growth of 42.3%”, it said.