Ghana records 11.3% fiscal deficit to GDP in Q1 2022, fiscal economy remains fragile – World Bank

Ghana records 11.3% fiscal deficit to GDP in Q1 2022, fiscal economy remains fragile – World Bank

Ghana recorded 11.3% fiscal deficit to Gross Domestic Product (GDP) in the first quarter of 2022.

According to the World Bank’s 6th Ghana Economic Update, total expenditure (provisional) including arrears and bailout cost stood at 26.7% whereas total revenue and grants (provisional) stood at 15.4%.

This is coming despite expenditure cuts.

For expenditure, wages and salaries (6.7% of GDP) and domestic interest payment (5.9%) of GDP were the biggest items.

The World Bank said Ghana has recently had more fiscal and debt challenges than her peers.

Again, Ghana’s revenue efforts have been lower than her peers for several decades, as inflation has surged at rates higher than peers.

“Low levels of domestic revenue mobilization constrain fiscal consolidation”, the report added.

The report further noted that Ghana faces elevated public debt and financing needs, but limited access to international capital markets.

“The fiscal remains fragile given persistently low levels of domestic revenue mobilization and shortfalls from energy sector SOEs, which the government has committed to (partly) fill”, it said.

Outlook

The report said the macroeconomic outlook is subject to significant downside risks

“The war in Ukraine will severely set back the global recovery, slowing growth and fueling inflation. A new significant outbreak of the COVID-19 pandemic could have serious consequences on Ghana’s economy as the country has used up its fiscal buffers with the support packages it provided in 2020”.

“The growth outlook is subject to considerable risks if Ghana fails to address debt and fiscal sustainability. Growing reliance on domestic capital markets for financing could drive up interest rates, limit access to credit by the private sector, and put a strain on the financial sector o Fiscal slippages would significantly threaten debt sustainability”, it added.

Way forward

It called for rigorous implementation of reforms to strengthen the macroeconomic framework and rebuild buffers.

They include macroeconomic and fiscal framework, debt sustainability, expenditure rationalization and contingent liabilities, domestic revenue mobilization and monetary policy.