Government is projecting a total Expenditure, including the clearance of Arrears, of GH¢137.5 billion, equivalent to 27.
4 per cent of Gross Domestic Product (GDP) for the 2022 fiscal year.
The estimate for 2022 represents a growth of 23.2 per cent over the projected outturn of GH¢111.6 billion, equivalent to 25.3 per cent of GDP for 2021.
Also, the government pegs projected revenues at GH¢100.5 billion in 2022.
Mr Ken Ofori-Atta, Minister of Finance, made this known when he presented the Budget Statement and Economic policy of Government for the 2022 fiscal year to Parliament on Wednesday.
The theme for the 2022 financial plan is: “Building a Sustainable Entrepreneurial Nation: Fiscal Consolidation and Job Creation.”
The key drivers of expenditure growth include Capital Expenditure, funding of key Government flagship programmes, wages and interest payments.
The Minister said based on the estimates for total revenue and grants and total expenditure, the 2022 fiscal operations would result in an overall fiscal deficit of GH¢37.0 billion, equivalent to 7.4 per cent of GDP.
These include the financial sector and energy sector IPPs payments and represented a nominal year-on-year reduction of about 30.7 per cent over the projected outturn of 12.1 per cent of GDP in 2021.
Mr Ofori-Atta, who described the financial plan as the “Agyenkwa” budget, said the corresponding primary surplus of GH¢435 million, equivalent to 0.1 per cent of GDP, was also projected for the year.
“The signalling is clear. We are going to judiciously work our way out of our debt situation,” he added.
He said the total foreign financing of the deficit as well as exceptional financing, namely the IMF’s Special Drawing Rights (SDRs) would amount to GH¢9.1 billion, equivalent to 1.8 per cent of GDP and will include a planned international financing programme, which would not exceed USD One billion, to raise up to US$750 million for liability management and budget support, particularly, capital expenditure.
However, financing of the deficit from domestic sources, including net issuances from debt, the minister stated, would amount to GH¢27.9 billion, equivalent to 5.6 per cent of GDP.
The additional exceptional financing from the utilization of the newly allocated SDRs by the IMF will augment and reduce domestic borrowing needs.
The Finance Minister said as a country “we still rely heavily on debt financing to meet a significant portion of our expenditures compared to our peers.”
He noted that, on the expenditure side, for instance, interest payments and compensation payments alone amounted to GH¢48.7 billion, which was 103.3 per cent of total revenue and grants for January to September 2021.
“In fact, these two expenditure items absorb all the revenue collected for the period and this trend must be reversed.”
Mr Ofori-Atta said a key focus of the budget was to enhance debt and fiscal sustainability as the government implemented its post-Covid 19 economic revitalisation and transformation programme “to save more lives from the pandemic and better the lives of Ghanaians.”
“It is for this reason that Government is proposing for the consideration and approval of Parliament the revenue-enhancing and expenditure rationalization measures in this budget,” he added.
The approval and implementation of those measures, the Minister noted, would lead to significant fiscal adjustment from a projected fiscal deficit of 12.1 per cent of GDP in 2021 to 7.4 per cent in 2022.
He said not only was the government significantly bringing the fiscal deficit down but was posting a primary surplus of 0.1 per cent of GDP in 2022 from a negative primary balance of 4.7 per cent in 2021.
“These measures will no doubt slow down debt accumulation and will put the debt to GDP ratio on a declining path… We expect this new paradigm shift to create the needed fiscal space to continue to support broad-based inclusive growth,” he said.