Before I share my thoughts on this budget, I’d like to share some information from the budget highlights from the Ministry of Finance.
MACROECONOMIC PERFORMANCE FOR 2017
Overall real GDP (as of June) – 7.8%
Non-Oil real GDP (as of June) – 4.0%
End-period inflation (as of October) – 11.6%
Overall budget deficit on cash basis as percentage of GDP (Sept) – 4.5%
Primary balance (Sept) – 0.3%
Current account balance (August) – (0.2%)
Gross International Reserves (import cover) – Sept 3.9%
End year expected deficit – 6.3%
2017 SECTOR GROWTH
Agriculture – 4.3%
Industry – 17.7%
Services – 4.7%
In this post I will stick largely to the 2017 outturn and keep my thoughts on 2018 projections for another post. What I was looking forward to was information about revenue performance. When 2017’s budget was read in March this year, I shared some thoughts. The way revenue would respond to the proposed tax cuts was one of them.
The Ministry had planned to beat 2016’s revenue by 33.5% and as at September this year, they had raised GHȻ28.4bn, which is 16.2% higher than the GHȻ24.4bn raised over the same period last year. GHȻ22.1bn has been realised in total tax revenue compared to the GHȻ18.4bn raised over the same period last year. This performance is impressive given that the government had removed some taxes like VAT on financial services and domestic airlines. The earnings were boosted by oil revenue, which almost tripled to GHȻ1.45bn compared to GHȻ0.52bn in 2016.
Expenditure of GHȻ37.7bn was 8% lower than projected for the period and 7% larger than over the same period in 2016.
The debt-to-GDP ratio of 68.6% is lower than the 73% recorded at the end of December 2016. The debt stock did rise from GHȻ122bn to GHȻ138bn but improved growth (which I think is the best way to handle public debt) helped to reduce the debt-to-GDP ratio. What is on everyone’s mind though is the GHS4.8bn bond which a government-sponsored SPV, named ESLA plc, raised to restructure the debts of the country’s energy companies. The debt is not on the government’s books. Although the IMF is against this classification, the former minister of finance has voiced support for the debt to remain on the books of the energy companies. Never mind that the bond is being serviced by a levy charged to the good people of Ghana, but more on that in another post.
Overall, I think the government has fairly managed expectations. It has fulfilled some campaign promises while not making fundamental changes that will create uncertainty. It remains to be seen what the impact of the implementation of the government’s flagship social interventions will be, but for citizens and investors listening to the minister today, I do not think they would be too worried.