Ghana's real budget deficit to exceed 5% by end of 2019, Institute for Fiscal Studies discloses

The Institute for Fiscal Studies (IFS), an independent non-profit think-tank in Ghana has warned that the government may record a real budget deficit of more than 5 percent of GDP.

Finance Minister, Ken Ofori-Atta

This, according to the institution, is due to the government’s consistent appetite for borrowing.

Even though the government has outlined measures not to overspend its budget, the trend, the IFS says rather shows that the government is borrowing outside its plans in what it describes as extra-budgetary borrowings.

A Research Fellow with the IFS, Leslie Mensah made the revelation while speaking at a press conference ahead of the Mid-Year Budget Review.

He explained that other institutions are borrowing from the same market that the government is also borrowing from. This is, therefore, putting pressure on interest rates.

“Examples are the bonds that were issued to bail out the financial sector and extra-budgetary borrowing through the Ghana Education Trust Fund (GETFund),” he said.

Providing some details on the budget deficit in recent times, Mr Mensah argued that the budget deficit, which is the gap between how much the government spends and how much it collects in revenue fell to 12.2 billion or 4.8 percent of GDP in 2017 from 13.9 billion or 6.5 percent of GDP in 2016.

He observed that even though the budget deficit contracted to 11.7 billion cedis or 3.9 percent of GDP in 2018, the figure, did not show the true situation on the ground.

“These figures do not reflect the true state of the public finances, due to the incurrence of expenditure and liabilities by the government that are outside the framework of the budget approved by parliament,” he stressed.

Mr Mensah, therefore, called for circumspection in increasing the public debt adding that the debt levels are alarming.

Finance Minister, Ken Ofori-Atta is expected to present the policy review of the country on July 29, 2019.

In a press briefing last week, he hinted that the review is to announce new tax measures such as a review of the controversial tax on luxury vehicles announced in 2018.

He said that the government has considered the feedback from the public on the luxury vehicle tax and plans to review it.

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