The expected revenue from taxes and grants dropped by 26 per cent to GH¢22.01 billion for the first half of the year, the Minister of Finance, Mr Ken Ofori-Atta, has said.
The drop, the minister said, was against a target of GH¢29.76 billion, thus showing a shortfall of GH¢7.75 billion.
Presenting the 2020 mid-year supplementary estimates for the year in Accra Thursday, Mr Ofori-Atta attributed the shortfall to the impact of the coronavirus disease (COVID-19) pandemic and a global economic recession.
"Revenue and grants for January to June 2020 amounted to GH¢22.01 billion, compared with the programme target of GH¢29.76 billion, resulting in a shortfall of 26 per cent or a performance rate of 74 per cent."
The provisional outturn, he said, constituted 32.8 per cent of the annual target compared to the programmed expectation of 44.4 per cent of the annual projection.
Non-oil tax revenue, comprising taxes on income and property, goods and services, and international trade amounted to GH¢16.723 billion, representing 4.3 per cent of Gross Domestic Product (GDP).
The recorded outturn was 16.2 per cent below the programmed target of GH¢19.95 billion (5.2 per cent of GDP).
The lower than programmed performance in non-oil tax revenue resulted from underperformance of non-oil taxes such as domestic Value Added Tax (VAT), petroleum excise taxes, the National Health Insurance Levy, and the Ghana Education Trust Fund (GETFund) Levy.
However, personal income tax and communication services tax both out-performed their respective targets for the period.
Revenue from upstream
Mr Ofori-Atta stated that revenue from upstream oil and gas activities amounted to GH¢1.99 billion, 55.4 per cent lower than the programmed target of GH¢4.47 billion.
He said that was mainly on account of lower than programmed performance of company taxes from the oil and gas sector, as well as the global decline in crude oil prices due to impact of COVID-19.
"Non-tax revenue (non-oil) yielded GH¢1.774 billion, 39.4 per cent below target. The fall in non-tax revenue for the period was due to lower than programmed ministries, departments and agencies (MDAs’) retention and lodgement for the period”.
"Mr Speaker, grants disbursements were below target during the period mainly due to both lower project and programmed grants. The expectation is that disbursements will recover in the second half of the year, following the anticipated gradual easing of the COVID-19 restrictions in donor countries," he said.
The impact of the health pandemic, coupled with a global economic recession, the finance minister said, had resulted in revenue shortfall of GH¢13.6 billion and unanticipated but necessary expenditures of approximately GH¢11.7 billion.
"Ghana has been hit with a double shock: a health pandemic and a global economic recession. These have resulted in revenue shortfall of GH¢13.6 billion and unanticipated but necessary expenditures of approximately GH¢11.7 billion,” Mr Ofori-Atta said.
That, he said, would result in a projected fiscal deficit of 11.4 per cent of GDP and above the five per cent limit as stated in the Fiscal Responsibility Act, 2018 (Act 982).
"Mr Speaker, Ghana is not unique in this regard. The pandemic has caused other countries, including the 26 countries in the European Union (EU), Brazil, Jamaica, Costa Rica, etc to suspend their fiscal rules in 2020 in light of their sharply increased fiscal deficits."
He said given Ghana's history of fiscal rectitude, it was with great difficulty that the government would suspend the fiscal rule.
"Mr Speaker, given our history of fiscal rectitude, it is with great difficulty that we are having to suspend our fiscal rule due to exogenous factors. We intend to return to compliance in the shortest possible time," the finance minister stated.