The government of Ghana’s fiscal deficit is projected to reach 9.5% of GDP by the end of this year.
That is according to a revised forecast by the International Monetary Fund.
Excluding energy and financial costs, the budget deficit of GDP will, however, be 6.4% of GDP.
This is higher than the targeted 4.9% of GDP projected by the government this year.
According to the Fiscal Stability Act, the benchmark for fiscal deficit to GDP ratio is 5%.
However, the expected higher budget deficit is due to the coronavirus pandemic which obviously will affect certain sectors of the economy and thus depriving the nation some revenue.
Compared to the 2019 Article IV baseline, the IMF said revenues are expected to be lower by 2.2% of GDP, because of lower oil revenue and weaker tax collections from the growth slowdown, including because of expected lower tax compliance.
Further, the Fund said COVID-19 spending is expected to amount to 0.4% of GDP, composed of higher health and social expenditures (0.2% of GDP), and the CAP fiscal stimulus package (0.2% of GDP).
Additionally, depositor compensation (1.3% of GDP) in the context of financial sector restructuring (unrelated to COVID) is mostly financed through a 5-year zero-coupon bullet bond, only increasing net financing needs by 0.3 percentage points of GDP.
It also said gross government financing needs are expected to be higher by 6.1 percentage points of GDP relative to the 2019 Article IV baseline.
Source: classfmonline.com
