The country’s total revenue will end 2022 at ¢89.0 billion, far below the target of ¢100.5 billion, the July 2022 Africa Monitor Report by Fitch Solutions has revealed.

This will keep the fiscal deficit high [8.5% of Gross Domestic Product, excluding bailout costs] as revenue was below 13.6% of its target in the first quarter of this year.

Revenue growth, the report said, will remain above trend, but will miss the official target.

“We at Fitch Solutions expect Ghana's fiscal deficit to narrow to 8.5% of GDP in 2022, from 9.3% in 2021, facilitated by a widening tax base and higher oil receipts. We have revised our 2021 deficit from 11.3% previously on the back of full-year data published by the Ministry of Finance, which shows higher-than-expected revenues of ¢70.1bn, while total public expenditure rose to ¢109.3 billion”.

However, public revenue will expand by 27.0%, above the 10-year pre-pandemic average of 23.4%.

E-levy to fall short of target

Fitch Solutions pointed out that the recent implementation of the Electronic Transaction Levy (e-levy) will further support revenue growth over the year. However, it will fall short of the 5 billion cedis revised projected targeted, for two reasons.

This is based on two reasons.

“First, the government had initially proposed a 1.75% tax on electronic financial transactions, but lowered it to 1.5% following pushback from the opposition. Second, authorities had planned for the tax to come into force on January 1 2022. However, the e-levy only took effect on May 1, five months after the start of Ghana's fiscal year”.

Public expenditure to remain elevated

The report added that despite some fiscal consolidation efforts, public expenditure will remain elevated, preventing a more substantial narrowing of the deficit.

In the 2022 budget, the government stated it will commit to 'expenditure rationalisation and reforms' in order to improve its fiscal position and maintain debt sustainability.

However, Fitch Solutions projects that due to the rigid nature of Ghana's expenditures, there will be limited room to significantly restructure spending over the short term.

“We believe that due to the rigid nature of Ghana's expenditures, there will be limited room to significantly restructure spending over the short term. Indeed, Ghana's public wage bill and debt servicing costs accounted for 67.4% of total spending over quarter 1, 2022."