Interest Payment & Employee Compensation Higher Than Domestic Revenues By 9.3% In Q1 2022

Government’s revenue mobilization efforts continue to face difficulties amid the mounting pressures from the expenditure side, despite its commitment to stick to the fiscal consolidation pledge.

The total domestic revenues mobilized in the first quarter of 2022 (Q1, 2022) was not even enough to cater for Just two expenditure components – Interest Payment and Employee Compensation.

According to data from the Bank of Ghana (BoG), these two expenditure components were 9.3% higher than the total revenues mobilized domestically in the first three months of the year.

During the review period, domestic revenue amounted to GH¢16,624.3 million (3.3% of GDP), below the target of GH¢19,183.6 million (3.8% of GDP), reflecting mixed performances of both tax and non-tax proceeds.

Meanwhile, employee compensation and interest payments together amounted to GH¢18,164.3 million in Q1, 2022.  This means that the domestic revenues raised during the quarter was GH¢1,540 million (9.3%) less than what the government required to meet its interest payment obligations as well as pay its employees.

The pace of revenue mobilization remained below target, as Total Revenue & Grants for the first three months of 2022 amounted to GH¢16,708.9 million (3.3% of GDP), lower than the target of GH¢19,338.8 million (3.9% of GDP).

This outturn represented a shortfall of 13.6 percent of the January to March 2022 target. However, it represented a year-on-year growth of 25.1 percent over the GH¢13,361.35 million recorded in the first quarter of 2021.

Total Expenditure Analyses

Total expenditures & arrears clearance for the first three months of 2022 amounted to GH¢26,953.3 million (5.4% of GDP), below the target of GH¢30,524.2 million (6.1% of GDP). This outturn represented a year-on-year growth of 16.1 percent even though 11.7 percent below the target.

Two expenditure components – Compensation of Employees and Interest Payments – accounted for 67.4% of Total expenditures & arrears clearance for the first three months of 2022.

Compensation of Employees (including wages and salaries, pensions & gratuities, and other wage related expenditure) was GH¢7,555.9 million, 15.7 percent lower than the target of GH¢8,960.3 million.

 In terms of fiscal flexibility, compensation of employees constituted 45.5 percent of domestic revenue mobilized at the end of the first three months of 2022, lower than the 54.2 percent recorded in the corresponding period of 2021, according to the Bank of Ghana.

Meanwhile, Total Interest Payments amounted to GH¢10,608.4 million over the review period, higher than the envisioned target of GH¢10,037.3 million.

“Domestic interest payments accounted for 82.7 percent of the total interest payments, while external interest payments constituted the remaining 17.3 percent. Total interest payments constituted 63.8 percent of domestic revenue, down from 64.6 percent recorded in the corresponding period of 2021”.

Bank of Ghana 

Use of Goods and Services for the period under review amounted to GH¢163.5 million, lower than the expected target of GH¢1,842.4 million.

Grants to Other Government Units, made up of National Health Fund, Education Trust Fund (GET Fund), Road Fund, Energy Fund, District Assemblies Common Fund (DACF), Retention of IGFs, transfer to GNPC and other earmarked funds, amounted to GH¢4,459.6 million, lower than the target of GH¢5,596.1 million. This represented a shortfall of 20.3 percent from the target, but recorded a year-on-year growth of 34.8 percent.

Also, ‘Other Expenditure’, made up of ESLA transfers, COVID-19 related expenditure, and other critical spending, for the first three months of 2022, amounted to GH¢2,225.3 million.

Capital expenditures for the period under review amounted to GH¢1,940.6 million (0.4% of GDP), lower than the programmed target of GH¢2,751.4 million (0.6% of GDP) by 29.5 percent. Notably, the outturn represented a year-on-year decline of 46.2 percent. Foreign-financed capital expenditure accounted for 98 percent of the total, with domestic financed capital expenditure making up the remaining 2 percent.

Source: vault news