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The Pros and Cons Of 2020 Mid-Year Budget Review

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2020 MID YEAR BUDGET

Section 28 of Public Finance Management Act (PFMA) 2016, Act 921 mandates the Finance Minister to prepare and submit to Parliament a mid-year fiscal policy review, not later than 31st JULY of each financial year and in line with PFMA 2016, this ritual was performed on Thursday 23rd July 2020 by the Minister, Ken Ofori Atta.

Prior to reading the 2020 budget Ghana had made some significant gains on the economy which had been resilient and robust.  For instance, growth rebounded from three-point four percent in 2016 to an average of seven percent. Inflation ebbed from 15-point four percent in December 2016 to seven-point six percent in September last year. Fiscal deficit declined from six-point five percent to four-point five percent at the end of the third quarter.

On successes chalked up, one point two million students enrolled under the free SHS; while more than 97 graduates were employed under the NABCO programme and 307 ambulances procured for distribution across the country, Planting for Food and Jobs had benefited the masses.  It was in the light of these successes that managers of the economy sought to consolidate the gains for growth, jobs and prosperity for all in 2020, hence the setting of the target of achieving overall real GDP growth of  six point eight percent, end of year inflation of eight percent, fiscal deficit of four point seven percent, primary surplus of zero point eight percent of GDP and Gross International Reserves of not less than three and half months of import of goods and services. From all indications, everything seemed to be in order, hopes were heightened as managers of the economy were ready because in an election year, they ought to excite the electorate however, hopes were shattered as the novel corona virus came to ravage most of the gains on the economy.

The economy of Ghana expanded four-point nine percent year-on-year in the first Quarter of this year compared to six-point seven percent growth during the same period last year. Four-point nine percent expansion in the first quarter though lower than anticipated, however it is higher than the GDP growth rate of negative one-point six percent and negative one-point four percent for sub Saharan Africa and ECOWAS.

The disease pandemic has had significant impact on industry as policies put in place made the other sectors resistant to the Covid 19. For instance, the Agricultural sector grew by two-point eight percent this year compared to two-point two percent last year. The service sector was resilient and grew by nine-point five percent this year as compared to seven-point two last year. The sector that was ravaged significantly was industry which declined from eight-point eight percent last year to one point five this year. Industry was also dented because the much talked about African Continental Free Trade Area (AfCFTA) which has a market of one point two billion with three point two Trillion economy has been postponed to January 2021.

Indeed, some schools of thought estimates that Ghana’s economic losses from covid 19 will be around 15 billion, equivalent to four-point two seven percent of projected GDP of more than 351 billion for this year. The Minister revised the GDP from six-point eight percent to zero-point nine percent, lowest in more than three decades. Mr. Ofori Atta indicated that revenue mobilization for the first half of the year fell short by 26 percent for the first half of the year. Total revenue and grant were a little over 222 million Ghana Cedis. That means from January to June this year, Ghana generated a total revenue and grant of 122 Million Ghana Cedis daily. Interestingly the total expenditure for the same period was more than 46 Million Ghana Cedis or 12 percent of GDP implying that during the period under review Ghana spent 258 Million Ghana Cedis daily. Indeed, expenditure went up mainly due to mitigation measures against Covid 19.

The Minister announced the development of the automobile industry which is starting with assembling of Volkswagen, Toyota, Nissan, Sinotruck and Kantanka cars in Ghana. These initiatives are laudable however the questions researchers are outraged by is the magnanimity of government since NEOPLAN has not been revived at the time government wants to make Ghana the hub of the automobile industry in the sub region. Reviving Neoplan could facilitate production of buses locally for the Metro Mass transport scheme which has been embraced by the masses.

BY YAW OHEMENG KYEI – PRESIDENT, COMMODITY BROKERS ASSOCIATION OF GHANA, (CBAG)

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