Sources at the Ministry of Finance say revision work ahead of the mid-year review has already begun in preparation for the Ministers presentation to Parliament during the second half of July.

However, the debate is still on as to some major decisions that will have to be made as to the direction of this year’s mid-year review.

Last year, the situation was relatively simple; with revenues well short of target by the middle of the year, government ruthlessly slashed planned expenditures for the year to stay within the full year fiscal deficit target of 6.3% of Gross Domestic Product.

However, this year, the circumstances have changed in fundamental ways. Once again, revenues are falling short of target – during the first quarter of the year, total revenues and grants amounted to GHc9.4 billion, or 3.9% of GDP.

This is lower than the 4.4% of GDP collected during the corresponding period of 2017, but only on account of a higher GDP being used in the computations – in absolute terms revenues have increased over last year’s levels.

But revenues are once again well below target, this time by 13.3%. Just as with last year, government has responding by cutting back on planned expenditure during the first quarter of 2018, but only by 5.5% of the target, with GHc12.9 billion having been spent during the first quarter of the year.

Also, just like last year, capital expenditure has suffered the most, with spending on development projects amounting to just 0.5% of GDP, the same as in the first quarter of 2017.

However, government is now armed with $750 million out of the recently issued $2 billion worth of Eurobonds, available for budgetary financing, along with another $200 million in International Monetary Fund support, originally meant as balance of payments support but now available for use as 2018 budgetary support.

While the professional politicians in the upper echelons of the President Nana Akufo-Addo administration believe government should increase its capital expenditure and work towards enabling tax revenues to catch up later, the economic technocrats, including the finance Minister, Ken Ofori Atta himself prefer a more cautious approach matching expenditure with revenues as they come.

Instructively, while the overall fiscal deficit for the first quarter of 2018, at 1.3% of GDP was the same as this year’s target for that period and also the same as last year’s out turn for the corresponding period – which however was smaller than the target at that time – the primary balance for the first quarter of this year was a 0.1% of GDP deficit, in complete reversal of the 0.2% surplus recorded last year.

This means the public debt rose during the first quarter of the year, even before the record high Eurobond issuance in May.

Under these circumstances, there is unanimous agreement that domestic tax revenues must be increased urgently and thus the proposed tax reforms planned for the second half of this year, particularly those relating to improved personal tax compliance, will certainly be implemented.

However over the next one month, government will have to make crucial decisions as to whether to loosen the fiscal deficit target a little, since financing is already available, or whether to stick to the plan, at least until the end of the IMF programme on March 31 next year.