New Era Africa (NERA) as part of its core objectives to champion real development in Ghana and Africa by actively partaking in socio-economic discourse has initiated an initiative where policy decisions of active development players will be scrutinized, criticized, applauded if necessary and alternatives proffered.  

In pursuing this objective and in line with the President’s clarion call for us (individuals and organizations) to be active citizens not spectators, NERA has decided to interrogate the 2019 budget, and paint the economic picture for the 2019 fiscal year to the citizens in a reader friendly (touching on hardcore economic issues in a non-economic manner).

This document analyzed critical parts of the budget with focus on revenue mobilization measures, expenditure policies and the public debt stock.

In terms of revenue, we found the target to be too ambitious and the new measures to be inadequate to achieve the set target.

Therefore, we recommend that government should be circumspect with its expenditure execution in order to stay within the budget deficit target. A more rapid expenditure execution could result in more than the expected deficits as recorded in the first half of the year.

Finally, we have identified some reconciliatory issues in the reported public debt figures. Hence government needs to clarify if the debt stock was GH¢203.8bn at the end of June 2019 or GH¢206.3bn.  


The 2019 Mid-year Budget Review was delivered with an attitude of optimism, resulting from comparably improved performance of the country’s external sector and macroeconomic indicators for the first half of 2019. This notwithstanding, government is faced with developments that poses risk to the fiscal framework. These include; (1) relatively weak performance of the Ghana Cedi against the US dollar. (2) lower-than-programmed total revenue and grants. (3) faster rate of expenditure execution of 92.9 percent relative to a revenue mobilization performance rate of 84.5 percent. (4) crystallisation of energy sector-related contingent liabilities which were not programmed into the 2019 Budget and expenditures on regional security-related concerns; and (5) lower than projected crude oil and gas volumes.

Consequently, government proposed to alter its revenue and expenditure targets for the 2019 fiscal year. However, the adjustment to revenue, that is a reduction of 0.01 percentage point is insignificant as the revenue target remain GH¢58.9bn. Total revenue and grants for the first half of the year was disappointing with the figure amounting to GH¢22.8bn as against the first-half target of GH¢27.0bn equivalent to a shortfall of 15.5 percent (this we predicted during our recent publication on the 2019 budget).

Meanwhile, the total revenue and grants saw a nominal growth of 7.8 percent between June 2018 and June 2019. This means that government has actually collected more revenue in nominal terms. As we cautioned in our analysis of the 2019 budget, we restate that the revenue targets are too ambitious. For instance, tax revenue, non – tax revenue, grants and other revenue components of the budgeted revenue in the 2019 budget were to grow by 13 percent, 30 percent, 51 percent and 61 percent respectively compared to the projections in 2018. We argued that the projected growth rate of non – tax rate, other revenues and grants may negatively affect the achievement of the overall revenue target for the period since the revenue measures are inadequate to achieve this ambitious target.

In the face of this rather unattainable revenue target (at least for this year), a good revenue performance, given the current state of affairs of the economy could be seen as failure. Nevertheless, since government is determined to achieving the target, new tax measures were introduced to increase revenue mobilization. All taxes that were increased (Road Fund Levy, the Energy Debt Recovery Levy; and the Price Stabilization and Recovery Levy, the communication service tax) have the tax incident on the consumer.

The upward adjustment of the Communication Service Tax (CST) from 6 percent to 9 percent means that the consumers of telecom voice and data services will pay a high cost for these services. Although we agree that this will help shore up government revenues because of the seeming inelastic demand for these services, the upward adjustment could threaten the fight for digital inclusion. In addition, the changes in the ESLA and other energy sector levies will increase the cost of power and fuel, which may have a negative cascading effect on other sectors of the economy.

Already, commercial drivers are not happy about their inability to increase fares following past increases in fuel prices. It may be therefore difficult to convince them to keep fares constant if the change to the levies are implemented. Businesses will also have to pay higher cost for power and this will probably be transferred to the consumer in terms of higher prices.  In the most likely event that transport fares go up and producers transfer the cost to consumers, it will have implication for prices of goods and services (inflation) and if not properly controlled, it may make it difficult for the Bank of Ghana to remain on track to realize its medium term inflation target. 

Aside from the fact the incidence of these taxes is on the consumer, their introduction may seem unfair since it became necessary in order to achieve an unrealistic revenue target. Meanwhile, customers of car-rental service will be happy because the luxury Vehicle Tax was abolished. As we intimated when it was introduced, the government’s classification or definition of “luxury” was wrong. Hence, the negative backlash from the public. In reality, the tax generally failed to deliver the targeted revenues amidst disagreement among stakeholders on its implementation. In principle, the idea of taxing the rich (users of luxury vehicles) to subsidies the poor is laudable.

The same principle was used for the introduction of the fifth band of the Pay As You Earn (PAYE) schedule. However, the main problem with the luxury vehicle tax was the definition for luxury vehicles.  Given the need to raise more revenue, we think government should have properly or redefine luxury vehicle to include a certain year of manufacturing, a certain engine capacity and usage (public or private transport or rental). This would have definitely added some revenue to the government kitty and we propose its reintroduction in the future in a well-defined form should be considered. Aside looking at taxing luxurious lifestyles, the government should also explore the option of eco-tax to help ensure sustainable physical environment.

We believe that the additional revenue measures contained in the mid-year budget will bring in more revenue to government. However, after a careful analysis of the new measures, we assert that the measures are inadequate to meet the revenue target and government needs to be more creative in its tax mobilization drive. Its decision to opt for the easiest option i.e taxing commodities (services) with inelastic demand is unattractive, as it will compound the hardship of the ordinary Ghanaian. Also, we argue government to be consistent with it measures in the quest to increase tax revenues. On assumption of office and in fulfillment of its manifesto pledge (perhaps with less attention to comprehensive fiscal impact analysis), the government lowered taxes in the energy sector. It is therefore curious for government to do a detour and slapback tax hikes on the same sector. This action may not allow businesses to develop a reliable long-term plan to guide their development/expansion. Also, we think government ought to do better than using the “take or pay” contract in the energy sector as justification for the tax hikes. We hold the view that, if these were indeed the problems confronting the energy sector, it should not have taken government 31months to detect them.

Furthermore, the government’s desire to seriously embark on digitization drive has not seen much urgency and same has not reflected in the revenue accumulation. We do believe critical urgency should be placed on this initiative in order for government to rake in some revenue particularly from rent tax and property tax. Furthermore, it is obvious the government has inundated itself with several policies that make funding, tracking and execution problematic. With the little revenue stream, it will be better to cut the fifteen priority programs to say 10 to ensure proper execution without overburdening the taxpayer and the future generation with debts and interests.

Lastly, despite government’s effort, we maintain our earlier assertion that projections in terms of revenue targets are unlikely to be met for the 2019 fiscal year. This is because the measures are inadequate to achieve the set target.


The government has requested for an amount of GH¢6.37bn as supplementary estimate. This will increase the original appropriation from GH¢78.8bn to GH¢85.1bn.  Out of the additional estimate, GH¢5.12bn, that is about 81% will be used to settle debts in the energy sector that were unplanned for in the 2019 budget. This leaves GH¢1.2bn which increases estimated government expenditure of GH¢73.4bn to GH¢74.6bn. As a result, the budget deficit is expected to increase from 4.2% of GDP to 4.5% of GDP.

An analysis of the allocations showed that, 81% of the GH¢1.2bn will go into interest payments. This is a reflection of excessive debt accumulation and the weak performance of the Cedi. The following expenditure classifications are also expected to increase; goods and services, wages and salaries, grants to government other agencies, social benefits and other expenditures to about GH¢1.4bn. In order to accommodate all these increments, government reduced the capital expenditure estimate by GH¢953million. This decreased capital expenditure’s share of the total government expenditure from about 12% to 10%.

This is worrying as it is not the first time the capital expenditure has been reduced in order to accommodate other expenditures. Ghana’s infrastructure is considered to be below the level required for sustainable economic growth and development. Also, there are no substitutes for infrastructure development in the equation of faster economic growth and development. In addition, the poor state of infrastructure and its financing gap seems to be the biggest challenge to the attainment of ‘‘Ghana beyond aid’’. Hence, more importance should be place on capital expenditure in the budget and should not be seen as surplus to requirement.  The President stated in May 2017, when opening the 2017 World Bank Development Finance Forum that,  infrastructure finance gap for Ghana is projected to be between US$3.9billion and US$5.5 billion per year for the next 10 years.

Therefore, we strongly advise that, governments should endeavor to increase allocations to the capital expenditure instead of reductions to finance recurrent expenditures. The current allocation is in itself inadequate and a reduction only makes the financing challenges worse. In addition, the problem associated with the wage bill is far from over. The current trend of expenditure overruns in respect of wages and salaries must be dealt with. We believe that Ghana’s developmental needs are enormous and therefore, raising more revenues to pay the few working in the public sector is not ideal. We, therefore, recommend a comprehensive audit of government payroll using the Ghana card since it captures everyone’s unique biometric data. Therefore, public sector workers must be impressed upon to register for the card as early as possible to enable this process. 

Finally, as we projected earlier, government may not meet the revenue targets for the 2019 fiscal year. Therefore, we advise government to be circumspect with its expenditure execution in order to stay within the budget deficit target. A more rapid expenditure execution could result in more than the expected deficits as recorded in the first half of the year.


The public debt stock stood at about GH¢203.8bn (59.2% of GDP) as at the end of June 2019. This is made up of GH¢107.6bn (52.8%) foreign debt and GH¢96.3bn (47.2%) domestic debt. This means that, the debt stock increased by about GH¢30.8bn from December 2018 to June 2019. We, however, have challenges reconciling the data provided in the 2019 budget review statement. According to the statement, paragraphs 60 and 105; the domestic public debt stood at GH¢86.9bn at the end of 2018 and GH¢96.3bn at the end of June 2019. This indicates an increase of GH¢9.4bn over the period. In addition, the external public debt stock stood at GH¢86.2bn at the end of 2018 and GH¢107.6bn at the end of June 2019. This shows an increase of GH¢21.5bn in the external debt stock within the period.

This is lower than the GH¢23.8bn captured in paragraph 107 of the statement or 86 of the abridged version presented to Parliament. Could it be that the reported GH¢9bn which was due to exchange rate depreciation was actually GH¢6.7bn? Assuming that the reported GH¢23.8bn increase in the external debt is correct and the GH¢ increase in the domestic debt is also correct, then the total increment in the public debt should not be GH¢30.8bn as suggested by the figures presented. It would have been GH¢33.2bn, which bring the total debt stock to GH¢206.3bn instead of the reported GH¢203.8bn. We recommend that government clarify this issue.

The above notwithstanding, Ghana risks going back to the IMF if the current rate of debt accumulation is not checked. Using the reported figure of GH¢203.8bn, Ghana’s public debt increased by 66 percent from GH¢122.6 billion at the end of 2016. This represents about GH¢81.2bn rise and an average of about GH¢2.7 billion accumulation per month (about GH¢90 million a day) over the period. The rebasing of the economy resulted in about 12.4 percentage points reduction in the debt to GDP ratio. A reduction in the debt to GDP ratio because of rebasing does not mean an increase in economic activity and hence high tax revenues for government. Government’s assertion that it is aware of this and the process will not influence debt accumulation does not reflect in the current trend in debt accumulation.

Finally, we are worried by the extent of debt accumulation post rebasing. It is worrying to see the debt stock increase from 51% to GDP in May 2018) to over 59% to GDP in June 2019). The level of depreciation coupled with likely spending pressures particularly as the country approaches election year gives a very worrying signal. Again, it is also worrying that due to the debt overhang, the country spends over GH¢18bn on just interest payment. This trend is not helpful as the country desires to embark on the needed growth path. Hence, we argue government to revise the current trend to reflect its earlier assertion that rebasing will not influence its borrowing decisions.


It is fair to admit that the government in the past two and half years has made positive strides as far as the management of the macroeconomic fundamentals are concerned. It has also shown the desire to be fiscally discipline.

However, in terms of revenue mobilization, we believe that the government has not shown enough commitment in terms of policies outlined and we recommend that government should rapidly extend its digitization drive into revenue mobilization. Again, we expect government to set realistic and achievable priority programs by reducing the program to ensure proper execution without overburdening the current generation (with taxes) and the future generation (with interest on debts).

In terms of expenditure, we recommend that government should be circumspect with its expenditure execution in order to stay within the budget deficit target since it may not meet the revenue targets for the 2019 fiscal year due to inadequate measures. A more rapid expenditure execution could result in more than the expected deficits as recorded in the first half of the year.

The 2019 budget shows that government will embark on aggressive expansionary fiscal policy. The Bank of Ghana (BoG) must therefore critically balance its inflation-targeting objective with the expansionary fiscal policy of government so that the macroeconomic fundamentals are not thrown off balance.

Lastly, despite government’s effort of restructuring the public sector debt, the rate of the accumulation especially after the rebasing of the economy could be a major setback in sustaining the macroeconomic gains. Therefore, we argue government to reduce the rate of debt accumulation. Finally, government should clarify the issues identified in this report about the debt figures reported in the budget review statement.

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