10 Things We Learnt from the Mid-Year Budget Review

By Jerome Kuseh

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Photo: Bloomberg

Finance Minister, Seth Terkper, presented the mid-year budget review to parliament this afternoon seeking approval of a total of GH¢865,789,380.00 supplementary estimates to the 2015 budget. Here are 10 things we learnt from the budget review.

1. Industry Suffered in 2014

It should not come as a surprise that the industry sector was the worst performing in 2014. The crippling power cuts (dumsor) have taken their toll. The sector grew by only 0.8% against a target of 6.8%. The manufacturing sub-sector contracted by 0.8%, water and sewerage also fell by 1.6%. Mining & Quarrying grew by 3.2%, Electricity 0.3% and Construction 0.03%.

2. And is Still Suffering in 2015

Agriculture has grown by 7.4% in the first quarter of 2015 and Services are up by 4.7%, industry grew by only 0.9%. The manufacturing sub-sector declined by 0.4%, electricity and construction contracted by a whopping 7.6% and 6.3% respectively. The effect of dumsor can clearly be seen in this atrocious performance.

3. Growth this Year will be Better than 2014

The 2015 first quarter growth of 4.7% is better than the 3.8% growth of Q1 2014 and the 4% overall that year. Overall 2014 was a disappointing year. And even if tighter monetary policy affects growth, going below the 4% growth of last year would be terrible.

4.  Going to the IMF was Crucial

Looking back at it now, the decision to go to the IMF was the right one. The chucking of the Senchi Consensus appears to be deliberate – no home grown solution could return investor confidence the way the IMF Extended Credit Facility has. The blessings by the IMF for our Eurobond issues and their approval of the country’s compliance with their economic terms have contributed to the recovery of the cedi and has given the necessary incentive to government to seek fiscal consolidation.

5. Donor Support has Resumed

This is related to the 4th point. The resumption of donor support by the EU, World Bank and the African Development Bank has partly been as a result of the country following the terms agreed with the IMF. The World Bank is providing Ghana with a total of US$550 million to stabilise the economy and as a guarantee for external financing. The World Bank is also set to help the country secure US$7.9 billion for the development of the Sankofa Gas Field.

6. Fiscal Targets for 2014 were Missed by a Wide Margin

In November 2014 I wrote about how Ghana was set to miss the fiscal deficit target for 2014. Seth Terkper had projected a 9.5% fiscal deficit against a target of 8.8%. The actual deficit for 2014 was 10.2%, worse than the 2013 deficit of 10.1%. The failure to meet the deficit target was as a result of lower than expected revenue which countered the effects of a below budget expenditure.

7. And that Means Pressure to Meet 2015 Targets

Just like in 2014 revenue shortfalls is what may affect us. The government has shown the ability to meet expenditure targets but it is possible oil may drop below the $57 per barrel prediction and gold prices are also falling. This makes it difficult to see them making the target of 6.5% deficit. However, as at May 2015, the cash fiscal deficit stood at 1.9% against a target of 3.4%. Hopefully, this good early performance will offset shocks later on.

8. Dumsor Must Stop but When?!

The Minister listed several power projects expected to generate 1800MW in the short-term and 3000MW in the medium-term. As to how long short-term and medium-term are, we do not know. This is frustrating. I believe most Ghanaians are mostly interested in knowing a date by which they can expect consistent power supply. Not having a date to look forward to adds to the frustration.

9. Jobs are not the Priority of Government 

The 63-page Budget review document mentioned jobs a total of zero times. Same with the 29-page speech. Fiscal consolidation seems to be the priority of the government and with the wage bill being as high as GH¢4.2 billion in 2014, net freeze on employment in the public sector excluding health and education sectors continues.

10. Preparations are underway for Campaign Season

The Minister mentioned five community senior high schools that will be completed by August 2015. He said all the first batch of 50 schools will be completed by February 2016 and a contract for the next batch of 50 schools has been signed to be completed in 15 months (October 2016). The construction of 200 new senior high schools was a key campaign promise of the NDC in 2012 and it is not by accident that an update on them made it to the speech. In the coming months I am expecting more of such updates as we get closer to the general elections.

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Jerome Kuseh

Financial Analyst | Accountant | Private Investor
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