[ 2016-11-08 ]

Fiscal deficit to hit 6.2 percent in 2016 – Economist
Some economists have predicted that Ghana will end
this year (2016), with a budget deficit of 6
percent to GDP.

They contend that the increased expenditure by
government without an equal increase in revenue
will cause a distortion to government’s budget
deficit target for the year.

“Per the projections, we are supposed to end the
year with a fiscal deficit of 5.3 percent of GDP;
but in my estimation, we will not be able to
achieve that by the end of the year. The fiscal
deficit target to GDP will be hovering around 6
– 6.3 percent of GDP,” Chief Economist for the
Institute of Certified Economists Ghana, Daniel
Anim told Citi Business News.

Government is projecting to end the year with a
budget deficit of 5.3 percent.

But provisional figures released by the Finance
Ministry indicates that the country recorded a
budget deficit of 1.7 billion cedis more than
anticipated for January to July this year.

Between the period, total revenue and grants were
11 percent lower than the projected.

Government had estimated to accrue about 21
billion cedis but ended up accruing about 18.6
billion cedis.

Also, domestic revenue accrued during the period
amounted to an estimated 17.5 billion cedis
against a projection of 19.9 billion cedis.

In addition, tax revenue amounted to about 15
billion cedis against a target of about 16 billion
cedis.

It is however worth to note that government’s
expenditure for the period which amounted to 23.28
billion cedis, fell within the target of 23.88
billion cedis.

This also comes despite the fact that
government’s capital expenditure increased due
to increased infrastructure, that is, 4.11 billion
cedis on capital expenditure against a target of
3.43 billion cedis.

However Mr. Daniel Anim explains to Citi Business
News the development is less likely to affect
investments into the country.

“As much as we will record a deficit around
6-6.2 percent at the end of the fiscal year, that
will not deter investors from coming into the
country to invest because that is not the only
determining variable to induce investments into
the country. There are other equally important
factors such as good governance, rule of law,
strategic position of the country in terms of
market accessibility and interest rates.”

The lower revenue mobilization is also an
indication of lower crude oil prices as well as
weak economic activity where businesses are unable
to grow.

This is also expected to affect the economic
growth within the first quarter of 2017 when a new
government takes over.

Meanwhile Mr. Anim believes the ease in the cost
of doing business will propel growth among the
industrial sector to be able to expand, pay taxes
and culminate in shoring up government’s
revenue.

“For emerging economies, it is the industrial
sector that becomes the anchor for the growth and
development so we are running a system where the
cost of doing business is high once they make less
profit, they pay less tax and we should find
innovative ways to ensure that the cost of
operation in the industry is lessened,”

Source - citibsinessnews.com

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