Finance Minister Ken Ofori-Atta (L) and Vice-President Dr Mahamudu Bawumia
Finance Minister Ken Ofori-Atta has said the government is relooking at all the fundamental assumptions it made for the 2020 budget and come out with a new one in July this year in view of the economic havoc being caused by the COVID-19 outbreak.
He told Accra-based Citi TV in an interview that: “It is a time of sacrifice and understanding. Sometimes, I wonder if people have divorced themselves from the reality that this could lead to some serious debt. We will be uncomfortable running a system with a lot of inefficiencies but ours is to find ways of mitigating that. A lot of things come to play depending on the severity we are going to experience. But one has to keep the eye on the ball to make sure we do not derail all that we are doing.”
He revealed that “a number of meetings we have had with the Finance Ministers in Africa are aimed at trying to reposition this whole global architecture to see if this is the most fit-for-purpose architecture. We are pushing for reliefs; we are pushing for postponement and that will allow us to make fiscal pace for us in order not to wipe out of the season”.
“Fortunately,”, he noted, “We are beginning to build a consensus globally, as to how to manage this. We are just going to have to relook all the fundamental assumptions for the budget and signal to Parliament that come July, we should come with some more information and analysis so that we address the base”.
A few days ago, Mr Ofori-Atta told Parliament that the total estimated fiscal impact, as a result of the coronavirus pandemic, is GHS9.5 billion (2.5% of revised GDP).
This is from the shortfall in petroleum receipts, shortfall in import duties, shortfall in other tax revenues, the cost of the preparedness plan, and the cost of Coronavirus Alleviation Programme.
A recalibration of the 2020 Fiscal Framework underpinning the approved 2020 Budget to reflect the fiscal impact of the coronavirus, without incorporating measures, shows that the overall fiscal deficit will increase from the programmed GHS18.9 billion (4.7% of GDP) to GHS30.2 billion (7.8% of revised GDP).
Also, the primary balance will correspondingly worsen from a surplus of GH?2.811 billion (0.7% of GDP) to a deficit of GHS5.6 billion (1.4% of GDP).
According to Finance Minister, measures are, therefore, required to close the fiscal gap of GHS11.4 billion (2.9% of revised GDP).
“Since we are faced with extraordinary circumstances which require extraordinary measures, we would like to propose the following measures for the consideration and support of the House”, Mr. Ofori-Atta revealed.
The measures include to lower the cap on the Ghana Stabilisation Fund (GSF) from the current US$300 million to US$100 million in accordance with Section 23 (3) of the Petroleum Revenue Management Act (PRMA).
This measure, he believes, will enable the excess amount in the GSF account over the US$100 million cap to be transferred into the Contingency Fund, consistent with Section 23 (4) of the PRMA.
The amount transferred into the Contingency Fund will be used to fund the Coronavirus Alleviation Programme (CAP). Through this process, an estimated GHS1.250 billion will be transferred into the Contingency Fund to Fund the CAP.
Others are an arrangement with the Bank of Ghana to defer interest payments on non-marketable instruments estimated at GHS1.22 billion to 2022 and beyond, as well as adjust expenditures on Goods & Services and Capex downwards by GHS1.248 billion, secure the World Bank DPO of GHS1.71 million and obtain the IMF Rapid Credit Facility of GHS3.145 billion.