PricewaterhouseCoopers Ghana (PwC) has commended the government for presenting a promising Budget for 2020 that seeks to consolidate the macroeconomic gains of the last few years. In its 2020 Budget highlights, PwC added “We believe that its successful execution [budget] depends critically on government's further efforts at enhancing domestic revenue mobilisation, for which more specific and targeted initiatives are required, combined with a credible and enduring political commitment to fiscal discipline. “Timely and the full implementation of the programmes outlined in the Budget and the reform agenda will also be important. We look forward to 2020 being a year in which the growth and shared prosperity that we all seek as Ghanaians is reflected in our day to day lives.” Growing concern There is a growing concern about the mounting debt stock despite the government's debt management measures that have slowed the pace of debt growth in recent times. Not only has the debt stock risen, but both external and domestic borrowing costs have rapidly increased, taking about a quarter of total expenditure and about 45% of tax revenue. PwC mentioned that the recent banking sector cleanup also added about GH¢13 billion to the debt stock, moving it from 57.4% of GDP to 60.5% of GDP as at September 2019. While the recent rebasing exercise led to a decline in the debt-to-GDP ratio, interest payment as a percentage of tax revenue, which demonstrates the country's repayment ability, remains unchanged. This suggests that any future debt management measures should focus on limits to the amounts borrowed, in addition to the conventional debt-to-GDP ratio. Further, strictly adhering to a medium-term debt strategy and an annual domestic and external borrowing plan, as well as, improving treasury management and forecast will be needed to curb any frontloaded and unplanned debt rise. “Future borrowing should also be driven by viable projects that can pay for themselves”. The Budget highlights stated that a key risk to debt and fiscal sustainability is the exchange rate volatility. “Given that the external debt component of the public debt is increasing, any rapid depreciation of the currency will not only raise the interest service cost but also trigger currency sell-off by the non-resident domestic bondholders. A steep increase in the exchange rate will also result in considerable currency outflows to service external debt, which will result in a weakening of our local currency as Government will need to purchase foreign currency on a large scale to repay significant US dollar debt obligations. This could result in a further accumulation of new debt as the Budget deficit widens.” GDP The Ghanaian economy continues to perform better than the global economy and this is projected to continue in the medium term. Though ambitious, the projected GDP growth rate of 6.79% for 2020, is expected to be driven mainly by the non-oil sector. The economy is also expected to benefit from the African Continental Free Trade Agreement (“AfCFTA”) and Foreign Direct Investments which are expected to double over the next ten years. Agric sector Key amongst the factors accounting for this conservative growth projection is the adverse impact of the outbreak of the ISKVD on the fisheries subsector in 2019, which constrained growth in the fisheries subsector to 3.30% in 2019 compared to a target of 13.80%. Going forward, government's commitment to following through with its Planting for Export and Rural Development Programme will be key to achieving the projected growth in the crop subsector (5.40% in 2020) and by extension, the Agriculture sector. Private sector investments in cash crop production may benefit from this initiative as it is geared towards promoting the export of tree crops. Industry sector In contrast to the historical trend of industry growth, which had been driven mainly by the oil (i.e. petroleum) subsector, the projected growth for 2020 is expected to be driven mainly by the non-oil subsector as no new oil production is expected to come on stream in 2020. Instead, Government's resolve to invest in infrastructure (mainly roads and hospitals), to boost growth in manufacturing (181 1D1F factories), to lift the ban on small-scale mining and increase in power production are expected to be the key drivers of the projected growth rate of 8.60% in 2020. These initiatives can drive growth in the private sector and reinforce its position as the engine of economic growth and job creation in line with the government's belief. Services sector   The Education subsector, as at half-year 2019, had registered growth of 8.70% which is notably higher than the growth recorded for the subsector in 2018 (3.90%). Indications are that the mid-year growth has been driven mainly by Government's flagship programs in the education subsector (i.e. Free SHS and School Feeding Programmes). “We expect growth in Education in 2020 to be driven mainly by Government's investments in the subsector,” the budget highlights added. Of all the subsectors, the financial intermediation subsector is expected to post the lowest growth in 2020 at 1.10%. This is not surprising as the “clean up” of the subsector embarked on by Bank of Ghana (BoG) has had a toll on the subsector's GDP and this is expected to continue in 2020.