First step towards 2021 fiscal consolidation commences

The first step towards bringing the fiscal deficit down from a targeted 11.8 percent of Gross Domestic Product for 2020 to 9,4 percent for 2021 will be taken on Wednesday, October 28 as the Finance Minister, Ken Ofori-Atta presents an appropriation bill to Parliament

This is the traditional practice in Ghana preceding general elections every four years; because the incumbent government cannot be sure of being in power during the next year it cannot present5 a full-year budget like in other years and so can only present a first-quarter budget. Whoever wins the elections, therefore, ha to get a full year budget approved by Parliament before the end of the first quarter by which time the temporary appropriation would have expired.

His presentation will present government’s revenue and projections and expenditure plans for the first quarter of 2021 – January to March next year. While no details of the Finance Minister’s plans have been made public they are expected to conform to the incumbent government’s full year plans to reduce the extraordinary, COVID 19 instigated fiscal deficit to 9.4 percent as the first stage of a three-year programme to rein the deficit in to under five percent as required by the Fiscal Responsibility Act

However, the task will likely be harder than originally envisaged as the government looks likely to significantly overshoot its unusual 11.8 percent fiscal deficit for 2020. As at the start of August it was 7.2 percent, which was higher than the 7.2 percent target set for that time of the year; and since then government has engaged in several significant extra-budgetary expenditures including (near) cash payments to depositors of liquidated deposit-taking financial institutions to the tune of GHc3.5 billion

The impending general elections scheduled for December 7 are putting concerted expenditure pressures on government – both administrative and politically instigated – even as COVID 19 instigated social interventions to continue to add to government’s expenditures. As expected the political opposition is accusing the incumbent government of doing both interchangeably in order to woo voters ahead of the polls.

The general expectation is that the Finance Minister will present an appropriation bill that calls for a sharp slowdown in public spending since by the time its tenets are implemented the elections will have been behind it. If the opposition wins, however, there would be major revisions to step up spending requisite for changing the political administration.

This means, there will not be a conventional budget presentation in November as is associated with election years.

In July this year, Parliament approved an extra ¢11.8bn to support government expenditure after the Mid-Year Budget review and supplementary estimates presented by the Finance Minister.

This was after another approval in November last year, where the House approved ¢98,36,692,358.00 for government’s expenditure for the 2020 financial year.