The government has pegged the 2022 deficit at 7.4 per cent of gross domestic product (GDP) in a surprise move meant to signal strong commitment to fiscal consolidation.
The plan to narrow the gap between revenues and expenditures from the proposed 12.1 per cent of GDP in 2021 to 7.4 per cent next year is the steepest in recent times.
It also plans to register a positive 0.1 per cent primary surplus next year from the negative 4.7 per cent primary surplus target for this year.
The Finance Minister, Mr Ken Ofori-Atta, told Parliament Wednesday that the measures were clear signals by the country to “work our way out of our debt situation.”
“Mr. Speaker, not only are we significantly bringing the fiscal deficit down, we are posting a primary surplus of 0.1 per cent of GDP in 2022 from a negative primary balance of 4.7 per cent in 2021. These measures will, no doubt, slow down debt accumulation and will put the debt to GDP ratio on a declining path,” Mr Ofori-Atta said during the presentation of the 2022 Budget.
“We expect this new paradigm shift to create the needed fiscal space to continue to support broad-based inclusive growth,” he said.
It comes after jitters from investors over the country’s debt levels and the government’s ability to service them, a sluggish fiscal consolidation effort and the heightened sell-off of Ghana’s bonds in October.
Mr Ofori-Atta added that the government was ready to address those concerns, starting with next year’s budget.
“Mr Speaker, based on the estimates for total revenue & grants and total expenditure, the 2022 fiscal operations will result in an overall fiscal deficit of GH¢37 billion, equivalent to 7.4 per cent of GDP. This includes the financial sector and energy sector independent power producers (IPPs) payments,” the minister said.
“This represents a nominal year-on-year reduction of about 30.7 per cent over the projected outturn of 12.1 per cent of GDP in 2021. The corresponding Primary surplus of GH¢435 million, equivalent to 0.1 per cent of GDP, is also projected for the year.”
“The signaling is clear. We are going to judiciously work our way out of our debt situation,” the investment banker said.