Fiscal deficit targeted at 9.5 percent for 2021

The government as part of its macroeconomic targets is set to achieve a fiscal deficit of 9.5 percent of Gross Domestic Product (GDP) based on the estimates for total revenue and grants and total expenditure.

According to the Caretaker Finance Minister, Osei Kyei-Mensah Bonsu, said the 2021 fiscal operations will result in an overall fiscal deficit of GH¢41,298 million.

He indicated that the financing of the fiscal deficit will come from both domestic and foreign sources.

Net domestic financing will amount to GH¢25,424 million, 5.9 percent of GDP, while net foreign financing will amount to GH¢15,870 million, 3.7 percent of GDP.

The financing will also include a planned international capital market programme to raise up to US$5 billion, of which US$1.5 billion is intended to be used to support the implementation of the 2021 budget and the rest for liability management.

In 2020, government’s revenue and expenditure performance resulted in an overall fiscal deficit of 11.7 percent of GDP, excluding the financial sector clean-up cost, compared to the programmed deficit target of 11.4 percent of GDP.

During the year, the fiscal deficit was financed from both domestic and external sources. Given the tightness of the external financial conditions, government had to resort more to domestic financing, including drawdown in Government deposits at the Central Bank, domestic market operations, and other sources of domestic financing.

For 2020, net domestic financing amounted to GH¢44.89 billion, equivalent to 11.7 percent of GDP. Net foreign financing amounted to GH¢31 million against a target of GH¢18.46 billion, 4.8 percent of GDP.

The corresponding primary balance for the period was also a deficit of 5.3 percent of GDP, compared with the revised deficit target of 4.6 percent of GDP. The fiscal deficit including the financial sector cost for 2020 stood at 13.7 percent of GDP.