Let’s carefully balance fiscal consolidation and growth initiatives – BoG

The Bank of Ghana is calling for a carefully balance fiscal consolidation with growth initiatives by government in order to achieve the desired macro-economic benefits.

This will require the effective coordination of both fiscal and monetary policies.

Government’s recent proposal of up to 20% cut in discretionary spending could support consolidation but the Central Bank says it must be tactfully executed in order not to affect growth-oriented programmes.

“It is envisaged that the implementation of the measures and the commitment to expenditure controls will signal Ghana’s commitment to keep the fiscal deficit under control and curb external pressures that may emanate as a result of concerns about the fiscal position”, the regulator of the Bank of Ghana disclosed in its latest report.

Government budgetary operations resulted in an overall budget deficit of GH¢42.523 billion, about 9.7% of Gross Domestic Product at the end of 2021. This was higher than the expected target of GH¢41.272 billion (9.4% of GDP).

In addition, the primary balance for the period under review recorded a deficit of 2.0% of GDP, achieving its target for the year in review.

The overall fiscal deficit of GH¢42.523 million was financed mainly from domestic and external sources. Domestic financing (net) was GH¢23.892 billion (5.4% of GDP), substantially lower than the target of GH¢26.506 billion (6.0% of GDP).

Foreign financing, on the other hand, was a net inflow of GH¢12.481 billion (2.8% of GDP), lower than the target of GH¢15.874 billion (3.6 % of GDP).