The government has had fears that the COVID-19 pandemic will impact the economy negatively and it seems to be happening as anticipated.
The Bank of Ghana (BoG) recently in its recent Fiscal Developments Report stated that the government recorded GHC10.4bn in revenue and grants as against a target of GHC13.9bn for the period.
The biggest decline came from tax revenue which fell short by more than GHC1.7bn.
The report indicated that tax revenue – comprising taxes on income and property, taxes on domestic goods and services, and international trade taxes – was GHC8.4bn (2.2 percent of GDP). An amount lower than the target of GHC10.2bn (2.6 percent of GDP).
The tax revenue performance for the first quarter of 2020 represents a year-on-year growth of 0.5%, which is lower than the 18.9% growth recorded in the same period of 2019.
The government received GHC300 million from oil revenue as against a projection of over GHC1.9billion. This could be attributed to the collapse of crude oil due to the pandemic.
The report mentioned that the government’s spending went up in the first quarter, mainly due to unbudgeted expenditure to contain the COVID-19 pandemic, compensation to employees, and capital expenditures.
During the first three months of the year, the government spent GH¢20.8bn, representing year-on-year growth of 33%.
On compensation of employees, the government spent GHC6.5bn as against the planned GHC5.9bn.
Meanwhile, expenditure on infrastructure development for the period rose to GHC2.5bn, although the government had planned to spend GHC2.2bn.
The BoG fears that there is imminent risk for the country’s debt since the government incurred a fiscal deficit of 3.4% of GDP as against a target of 1.9%.
“Elevated government spending in response to the pandemic exacerbated the substantial drop in domestic revenue resulting from the pandemic and falling oil prices. Going forward, fiscal policy will largely depend on how these two reinforcing factors evolve. The expanding deficit and the primary deficit would exert pressure on the public debt stock, and alongside lower growth projections for 2020, may pose debt sustainability risks over the medium-term,” the bank said in its report.