by Jerome Kuseh
In an interview on Uniiq FM on Wednesday President Mahama expressed confidence that Ghana will meet its fiscal target for 2015. The target had originally been 6.5% of GDP but it was revised to 7.3%, a revision which Bloomberg reports halted the appreciation of the cedi which had begun after a favourable review of the government’s economic management by the IMF.
In 2014 the budget deficit target was 8.5% of GDP, revised to 8.8% in the mid year review, projected to be 9.5% in the budget reading in November and ended up being 10.2% as revealed in the 2015 mid-year budget review. With this in mind and the recent labour agitation and continuing fall in crude oil prices, one has to be a bit skeptical about the target.
In my last post I gave details of the way in which oil receipts fell 45% even though export volumes went up by 6.7%. By the time of writing that post, brent crude price was at US$53.47 per barrel. It is US$49.22 as I write. The fact that oil receipts were 13.4% higher than expected for the first five months helped the cash deficit stand at 1.9% against a target of 3.4%. Now the price has fallen far below the budget target of US$57 per barrel.
Government has however been able to keep expenditure below targets while improving domestic revenue collection. In the first 5 months of the year expenditure was 10.8% of GDP, lower than the 11.9% target. Tax revenue of GH¢9,362.3 million was 10.6% higher than the target. Government has shown its intention to increase domestic tax revenue by setting up a task force to go after defaulting taxpayers. Also gold prices are rebounding, going from US$1,077 at the time of my last post, July 28 to US$1,114 as I write.
As I have stated in many posts the fact that 2016 is an election year makes many people skeptical about any targets that will be announced for that year. It is therefore crucial that we meet our targets this year.