Government’s fiscal consolidation agenda on track – Standard Bank

Economic and research analysts at Standard Bank, parent company of Stanbic Bank Ghana, have stated that despite the recent downturn of the Ghana Cedi, government’s fiscal consolidation programme is still on track. This statement comes on the back of balance of payment surplus achieved in 2017.

According to the September 2018 edition of the African Markets Revealed (AMR) report, prepared by the Standard Bank, the Government of Ghana appears determined to reduce its debt level in the medium term. “The government is determined to reduce the debt level in the medium term. Having started to achieve a primary surplus in 2017, be it a small one at 0.6% of GDP, the government is budgeting for a more substantial 1.7% of GDP primary surplus”, the report said.

The report further indicates that, as it happened last year, government seems to be on course to achieve its fiscal deficit target this year. The report said:

“Even after realising that revenues were falling behind target, the government reasserted its intention to achieve an overall fiscal deficit of 4.5% of GDP. Our GDP estimate is somewhat lower, hence the higher deficit we show. In sticking with the originally budgeted fiscal deficit despite revenue shortfalls, the government would have to find savings somewhere. As happened last year, the government seems set to achieve its fiscal deficit target.”

The September 2018 AMR goes on to say that:

“Progress in financing the deficit from the domestic market indicates that the government was well ahead of target in the first 5 months of the year. Even after taking account of the revised domestic borrowing requirement of GHS5.2bn, the government raised about GHS3.0bn in the first 5 months of the year. Clearly it is well on its way to satisfying domestic financing needs.”

Government’s fiscal deficit target looks very achievable this year also because government’s budgeted arrears clearance is now much lower according to the AMR. The report noted that:

“Last year the government budgeted to clear nearly 2% of GDP in arrears. However, it ended up paying only half of that. In part, this was because some claims against the government could not be verified upon closer scrutiny. Perhaps that is why budgeted arrears clearance is now much lower in the current fiscal year.”

The Standard Bank AMR report indicates that government, may however, face challenges in its bid to achieve fiscal consolidation regarding external financing and project loans. “It is with respect to external financing, project loans to be precise, that the government may be facing a challenge. Admittedly, these flows tend to be lumpy.

But for what it’s worth, about just about GHS675.7m of the GHS2.97bn in project loans were disbursed in the first 5-m of the year. To be sure, the government has already issued the Eurobonds it was looking to issue. So, there will probably be no new issuance over the remainder of the year”, the report said.

The African Markets Reveal is a monthly report issued by the Standard Bank Group, parent company of Stanbic Bank Ghana and focuses on the economic and financial outlook of African countries.

The report also reviews current economic situations and makes short to medium-term predictions about the economies of African countries.