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Fiscal deficit estimated to expand to 11.4% of GDP by the close of the year - BoG

Tue, 28 Jul 2020 Source: Laud Business

The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has noted that the COVID-19 pandemic has pushed public finances out of the path of fiscal consolidation.

The Committee at its sitting on Monday, July 27 said the fiscal deficit is estimated to expand to 11.4 per cent of GDP by the close of the year.

The huge financing gap brought about by the expanded deficit could exert pressure on public debt, with long term implications for the economy.

While government stimulus package for various sectors of the economy, including micro, small and medium-sized enterprises is in the right direction to boost economic activity, the Committee’s view was that going forward, the 2021 budget should be focused on instituting measures to return to the fiscal consolidation path with the view to building resilience and strengthening the pillars of the economy for a return to macroeconomic stability.

The Bank of Ghana’s latest forecast shows that inflation is currently above its upper limit, driven mostly by food prices.

Adjusting for the unusual noise in the food inflation, the indications are that underlying inflationary pressures are stable.

The Bank projects a return of inflation to the medium-term target band by the second quarter of 2021, conditional on corrective fiscal measures being introduced in the near-term.

Meaning the Committee has kept the policy rate at 14.5%.

Source: Laud Business

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