Fitch Solutions has disclosed that Ghana’s 2023 budget is more expansionary than it had anticipated, keeping public spending elevated.

In its latest February 2023 Africa Monitor Report, it said despite the government aiming to implement some expenditure reforms, the Finance Minister, Ken Ofori-Atta, did not announce large-scale spending cuts.

“While the government aims to implement some expenditure reforms – including a hiring freeze for public servants and placing a cap on salary adjustments at state-owned enterprises – the Finance Minister did not announce large-scale spending cuts”.

“Indeed, the government aims to keep capital expenditure and grants to government units elevated – areas that we had expected the authorities would cut back on. As such, the government aims to spend a total of ¢205.4 billion, a 51.5% increase on the 2022 target, making the 2023 budget one of the most expansionary budgets in Ghana to date”, it stated.

Budget deficit to remain high in 2023

Fitch Solutions also projected a budget deficit of 7.5% of Gross Domestic Product (GDP) in 2023.

This is higher than its earlier forecast of 6.7%.

It said stronger tax collection will improve outlook in 2023, but spending will remain high.

On November 23 2022 Finance Minister, Ken Ofori-Atta, presented the 2023 budget, highlighting multiple tax reforms that will boost revenue collection.

However, Fitch Solutions said “the 2023 budget detailed spending targets that were more expansionary than we had anticipated, suggesting the budget deficit will remain wider for longer”.

The government aims to raise ¢144.0bn in 2023, a 43.2% increase on the 2022 target.]

It noted that the 2023 revenue target is unrealistic, adding, while higher taxes will boost fiscal intakes, weakening economic activity on the back of still-elevated inflation and tighter monetary policy will cap revenue growth.