The government is projected to spend ¢55.93 billion in 2024 on interest payments, constituting about 5.3% of Gross Domestic Product (GDP), according to the Institute of Fiscal Studies (IFS).
This is an increase from GH¢34.77 billion in 2023, accounting for about 4.1% of GDP. In contrast, non-interest expenditure is anticipated to grow in nominal terms to GH¢182.36 billion in 2024 from GH¢144.20 billion in 2023, with a corresponding increase in the ratio of GDP from 17.0% in 2023 to 17.4% in 2024.
The IFS recommends expediting foreign debt restructuring and pursuing debt cancellation as part of the agreement with creditors.
“Interest payment is budgeted to increase significantly in 2024. This partly reflects large accrued foreign debt service obligations that have to be budgeted for since the foreign debt restructuring process has not been completed. We therefore urge the government to expedite the restructuring to secure the much-needed debt service relief to aid its fiscal recovery. In addition, for the relief to be significant and impactful, it should include the cancellation of some of the debts”.
The IFS also believes that additional efforts to control non-interest expenditures should be pursued, including a review of flagship programs.
“While the budgeted decreases in compensation expenditure and goods and services as ratios of total revenue and grants are commendable, the government must take further steps to reduce these expenditures, especially in the face of the still-large debt service obligations despite the debt relief already secured. To this end, we urge the government to act on its commitment under the IMF [International Monetary Fund] programme to review its flagship programs to help cut down budgetary spending and improve efficiency”, it mentioned.
Again, it wants the government to review the extractive sector component of its Medium-Term Revenue Strategy (MTRS) in line with IFS’ recommendations.
“The MTRS fails woefully to tackle Ghana’s weak revenue generation from the extractive sector. The government should therefore reconsider the extractive sector component of the strategy and revise it to incorporate recommendations long advocated by IFS, most importantly our call for active state participation in the sector and/or the use of production-sharing agreements to substantially improve revenue generation”.
The government anticipates that its overall fiscal balance in 2023 will be better than targeted, with a projected budget deficit (on a cash basis) of ¢49.09 billion (5.3% of GDP), compared to the mid-year budget target of ¢54.95 billion (6.4% of GDP).
However, revenue is expected to fall below target, with a projected outcome of ¢133.88 billion (15.7% of GDP), compared to the mid-year budget estimate of ¢134.91 billion (15.8% of GDP).
The Institute of Fiscal Studies (IFS) noted that the lower deficit projection is primarily attributed to lower expenditure, with total expenditure and arrears clearance forecasted at ¢178.97 billion (21.0% of GDP), down from the mid-year budget figure of ¢189.86 billion (22.2% of GDP). This reduction is mainly due to lower interest payments.