Finance Minister presents revised budget today
After seven months in office, the government is ready to review its 2017 economic policies and the Minister of Finance, Mr Ken Ofori-Atta, will go to Parliament Monday to present a revised budget for this year.
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His presentation is expected to see a revision in macroeconomic forecasts, analyses of the total revenue and expenditure for the first half and a revised outlook for the last two quarters of the year.
Also expected are the implications of all revised targets on the Medium-Term Fiscal and Expenditure Framework.
The presentation is in line with the Public Financial Management Act (2015), Act 921, which requires the Finance Minister to, not later than July 31 of each financial year, prepare and submit to Parliament a mid-year fiscal policy review.
Revenue
The government’s expected revenue for the first half of the year fell below expectation. As a result, key on the agenda for today is how it intends to revise its revenue targets.
The government had projected to rake in about GH¢34 billion, but estimates in the first half show a shortfall, proving right the warning sounded by some economic analysts that the revenue target was too ambitious.
The Finance Minister is expected to indicate that tax revenue underperformed by 36.3 per cent, while the prices of cocoa went down by 1.3 per cent.
The prices of crude oil and gold also dropped by 4.7 per cent in the first six months.
In presenting the 2017 budget statement, the government, in its quest to revive the private sector, either cut down or scrapped about 15 different tax types described as ‘nuisance taxes’. That threw back over GH¢1 billion in the hands of the private sector. However, the reverse impact of that action is yet to show in the government’s revenue mobilisation efforts.
Against this background, the fiscal deficit target of 6.5 per cent of gross domestic product (GDP) for the year is also expected to be reviewed upward to between 6.8 per cent and seven per cent, on the back of the disparity between revenue bagged in the last six months and public expenditure.
The Head of the Economics Department of the University of Ghana, Prof. Peter Quartey, told the Daily Graphic in an interview that “the government’s revenue collections fell below expectation and, therefore, we are expected to hear the Finance Minister announce new measures on how to catch up”.
He said it was up to the government to announce new strategies to make up for the gap created so far and that might include some borrowing or donor support or any other innovative means to raise revenue from within.
Last month, the government announced a three per cent flat VAT rate for businesses in the country, a move that generated some uproar. Although some analysts were convinced that the move was part of efforts to plug the revenue gap in the first six months, the government maintained that it was intended to widen the tax net.
Prof. Quartey again noted that the Finance Minister might also revise the growth target from 6.3 per cent to about six per cent, which, he said, should not be a bad idea.
The US-based rating agency, Fitch, in May this year said it expected the deficit to narrow to 7.5 per cent of total economic output, measured by GDP.
It said the government's 2017 deficit forecast of 6.5 per cent of GDP was based on an expected increase in tax revenues and a cut in capital expenditures.
Fitch had predicted that the expected increase in tax revenues would be difficult to realise, as the budget contained significant tax cuts aimed at boosting the business climate, adding that Ghana had historically underperformed its budgeted revenue projections.
Gov’t expenditure
On the expenditure side, he said the government would have to revise its spending and focus on priority areas that were most likely to generate revenue for the state.
“If the Finance Minister does not cut expenditure, then we expect him to tell us where he intends to raise funds to take care of the projected expenditure,” Prof. Quartey said.
An Associate Professor at the Institute of Statistical, Social and Economic Research (ISSER) of the University of Ghana, Prof. Robert Darko Osei, at a forum last week, also urged the government to ensure that public expenditure was efficient and results oriented in order to strengthen the public financial management system.
He said although it was important for the government to cap expenditure, it was even more important to check the efficiency of expenditure.
He, therefore, advised the government to ensure that it got the maximum output from its expenditure to improve efficiency.
“It is better to check efficiency of expenditure than to check corruption,” he stated.