In a concerning fiscal outlook, the Institute of Fiscal Studies (IFS) reveals that the government is set to grapple with a surge in interest payments, reaching ¢55.93 billion in 2024, constituting 5.3% of the Gross Domestic Product (GDP).
This marks a stark increase from ¢34.77 billion in 2023, representing 4.1% of GDP. The IFS underscores the imperative for swift foreign debt restructuring, urging the government to expedite the process to secure vital debt service relief. Notably, the call extends to seeking debt cancellation as a pivotal component of negotiations with creditors.
In tandem with the escalating interest payments, non-interest expenditure is slated to rise nominally to ¢182.36 billion in 2024, up from ¢144.20 billion in 2023. As a percentage of GDP, non-interest expenditure is anticipated to climb from 17.0% in 2023 to 17.4% in 2024.
The IFS advocates for a rigorous approach to rein in these expenditures, advocating for a meticulous review of flagship programs to optimize budgetary spending and enhance overall efficiency.
The Medium-Term Revenue Strategy (MTRS) also comes under scrutiny, with the IFS contending that it inadequately addresses Ghana’s weak revenue generation from the extractive sector. The institute calls for a comprehensive review of the extractive sector component within the MTRS framework, emphasizing the incorporation of recommended measures, including active state participation and the utilization of production-sharing agreements to substantially bolster revenue generation.
Despite fiscal challenges, the government anticipates a more favorable overall fiscal balance in 2023 than initially targeted. The budget deficit, projected at ¢49.09 billion (5.3% of GDP), outperforms the mid-year budget target of ¢54.95 billion (6.4% of GDP).
Noteworthy, however, is the anticipated shortfall in revenue, projected at ¢133.88 billion (15.7% of GDP), compared to the mid-year estimate of ¢134.91 billion (15.8% of GDP). The IFS underscores that the lower deficit is primarily attributed to prudent expenditure management, with a notable reduction in interest payments accounting for over 90% of the decrease.
As the government navigates this intricate fiscal landscape, the urgency for proactive measures in debt restructuring, expenditure control, and strategic revenue initiatives takes center stage.
