Ken Ofori-Atta — Finance Minister
Ken Ofori-Atta — Finance Minister

2024 Budget to boost growth - Expenditure rationalisation key

Tomorrow’s budget and economic policy will articulate the government’s commitment to fiscal discipline, spell out support for the private sector and implement growth-focused economic policies.

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Also, it will spell out expenditure rationalisation measures, efforts to reduce inflation, further stabilise the cedi and address private sector concerns to boost investment, jobs and growth. 

“These policy measures are signals of the government's dedication to building on and sustaining the current growth momentum,” sources familiar with the budget told the Daily Graphic.

“One of the significant revelations in the budget is expected to be the imminent crossing of the country’s Gross Domestic Product (GDP) over a historic mark that will be specified in the budget,” the sources further hinted. 

They said the milestone would reflect the effectiveness of the strategic initiatives and policies that the government had rolled out since 2017. 

Background

The Minister of Finance, Ken Ofori-Atta, will lay the 2024 Budget Statement and Economic Policy of the government before Parliament tomorrow.

The presentation will be done on behalf of President Nana Addo Dankwa Akufo-Addo in fulfilment of Article 179 of the 1992 Constitution.

“The President shall cause to be prepared and laid before Parliament, at least one month before the end of the financial year, estimates of the revenues and expenditure of the Government of Ghana for the following financial year”, Article 179 (1) states.

The successful implementation of the Post-COVID Programme for Economic Growth (PC-PEG), backed by the International Monetary Fund’s (IMF)’s $3 billion Extended Credit Facility (ECF) support has contributed to the country's economic recovery, complemented by extensive stakeholder collaboration.

The government has also opened a channel to engage the private sector through platforms such as the Ghana Mutual Prosperity Dialogues. 

The maiden edition, held a fortnight ago, examined how the public sector could support the private sector by creating an enabling environment to attract investments from both local and foreign sources in order to create jobs and boost growth. 

Key budget areas

The 2024 budget is expected to focus on key areas that will be pivotal for economic growth, including the agricultural sector. 

“This is significant for food security, reducing inflation and job creation, especially through its flagship programmes such as the Planting for Food and Jobs (PFJ) Phase II,” the sources at the Ministry of Finance hinted.

With the refurbished Kwame Nkrumah Memorial Park raking in increased revenue in multiple fold of its pre-upgrade performance, the 2024 Budget is again expected to emphasise harnessing the potential of the tourism industry to boost revenue and promote the country as a preferred destination in the sub-region.

Other initiatives on the tourism front include Beyond the Return and the implementation of the $40 million Tourism Sector Development Project, funded by the World Bank, to upgrade many tourism sites.

The 2024 Budget is also expected to outline measures to improve business regulation to create an environment conducive for private sector growth and investment.

Efficiency

Investments in infrastructure development, such as roads, would also feature prominently, addressing critical needs which would further propel economic growth, the sources said.

“However, achieving these ambitious targets will necessitate the streamlined implementation of existing revenue measures,” the sources added, expressing the belief that “no new tax measures will be announced”. 

Although the sources did not disclose the line-item details of the budget, they said strong public-private partnership and efficient revenue mobilisation would play a crucial role in supporting the outlined focus areas and sustaining the country's economic momentum.

Context

The economy has been battling with severe challenges in the last two years, with inflation hitting a 22-year high of 54.1 per cent in December 2022 and an unsustainable public debt above 93 per cent of the country’s productivity, measured by GDP.

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In July 2022, the government formally approached the IMF for a fund programme to support structural reforms and help the economic recovery of the country.

The key objectives of the extended credit facility programme are to, among others, restore fiscal sustainability, re-anchor inflation expectations by achieving low and stable inflation, strengthen the exchange rate regime, restore investor confidence and regain market access while unlocking other financing sources.

Five months after implementing the programme, the fruits have started showing with GDP growth rebounding strongly, averaging 3.2 per cent in the first two quarters of the year.

This is contrary to the IMF forecast of 1.5 per cent for the end of the year.

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Inflation has also dropped to 38.1 per cent in September this year, while the cedi’s depreciation has slowed from the beginning of the year to date, after depreciating cumulatively by about 23.5 per cent  compared to a cumulative depreciation of 37.6 per cent over the same period in 2022.

On the fiscal front, the primary balance on commitment basis for the first half of the year was a surplus of about GH¢2 billion compared to a target of a deficit of GH¢4 billion.

Gross International Reserves (GIR), which measures how the country could fund its import bill, also stood at $2.1 billion, equivalent to one-month import cover, compared with $1.5 billion (0.6 month of import cover) recorded at the end of December 2022.

On debt, the government has concluded the domestic debt exchange programme (DDEP), which saw it swap old bonds valued at GH¢82 billion for 12 new ones at reduced coupon rates and longer tenors.

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The exchange of dollar-denominated local bonds of about $742 million also saw a participation ratio of 91.7 per cent; the exchange of cocoa bills worth GH¢7.7 billion also saw a participation ratio of 97.4 per cent, while the exchange of pension funds holdings of treasury bonds of about GH¢29.6 billion also saw a participation ratio of 95.3 per cent.

The government is also negotiating with the bilateral Official Creditor Committee (OCC) to restructure debts of $5.4 billion.

The country is also seeking to reach an agreement with its external commercial creditors by end of the year to restructure debts of $14 billion, out of which $13 billion are in bonds.

Growth to be revised

The IMF Review Mission to the country last month gave thumbs up to the country’s recovery, saying growth this year had proved more resilient than initially anticipated. 

“Although all the challenges are not going to be solved overnight, and there is still a lot of work ahead, what makes us very optimistic is that these actions are already generating positive results,” the IMF Ghana Mission Chief, Stéphane Roudet, said at a press briefing after the IMF successfully conducted its first review of how the country was performing to attain targets under the ECF programme. 

Mr Roudet said Ghana’s economy was beginning to see a turnaround characterised by declining inflation, relative currency stability, improvement of fiscal space and an improvement in gross international reserves.

He said the turnaround signalled that the macroeconomic stability was emerging again, saying, “Growth in 2023 has proven more resilient than we were initially anticipating”.

Responding to questions from the media at the government and IMF joint press conference in Accra, Mr Roudet said growth for the rest of the year was expected to be stronger than what was projected under the fund programme.

“Growth for the first half was above three per cent and this gives you an idea of the difference between what is happening on the ground and what the assumptions of the programme were”.
“So yes, we will revise growth for this year but we will share the exact details later,” he stated.

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