Ghana Budget Blues

• Published date: 27 July 2022
• Subject Matter: Finance and Banking, Tax, Financial Services, Sales Taxes: VAT, GST
• Law Firm: Songhai Advisory LLP
• Author: Songhai Advisory LLP

Finance Minister Ken Ofori-Atta delivered his mid-year budget speech yesterday (25 July) in a radically different register than most of his presentations between 2019 and 2022. This time, he said that "this state of affairs is quite a painful one for me to report to you... This is not how we envisioned the economy... Recent challenges have overtaken us...The downside risks about which the IMF had previously warned have now materialised." His speech is preparation for a sought after IMF programme. See: Ghana's J Curve.

SIGNIFICANCE - PREAMBLE

In sum, the government has been humbled by events - in particular, 29.8% consumer price inflation, 38% producer price inflation, 3.3% year-on-year growth in Q1 2022, 22% currency depreciation between January and May 2022, 78.3% of GDP public debt, investment outflows and constrained access to international capital markets, below target revenue performance and above target expenditure partly due to interest payments. Today, the assumptions that underpinned 2019-2021 fiscal expansionism have been dramatically stripped away. See: Ghana's credit rating moment.

Ghana's strategy going forward - the Enhanced Domestic Programme - will be tied to IMF support and is still in development. However, Ken Ofori-Atta has outlined some of the priorities. For example:

1. Maintaining totemic programmes like free SHS (secondary education) and the school feeding programme.
2. Continuing with signature infrastructure projects like the Accra-Tema Motorway, the Tema-Mpakadan Railway line and hospitals/clinics in Western region, Upper East and the Eastern Region.

For detail, we will have to wait on the Enhanced Domestic Programme and the IMF agreement, assuming one is forthcoming. Fiscal consolidation will be its...