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The Finance Minister, Ken Ofori-Atta, has presented the highly anticipated 2024 Budget Statement and Economic Policy to Parliament, outlining a strategic roadmap to advance the government’s fiscal consolidation, macro stability, and growth objectives.
In a move seen as pivotal for the nation’s economic trajectory, the budget sets forth a comprehensive medium-term policy framework, providing insights into the government’s approach to recovery and stability with a focus on sustained growth.
The macroeconomic performance for the first three quarters of 2023, measured against the targets set in the 2023 Mid-Year Fiscal Policy Review, encompasses various indicators. These include an Overall Real GDP growth of 1.5 percent, a Non-Oil Real GDP Growth rate of 1.5 percent, End-period inflation of 31.3 percent, Overall Balance (commitment) of -5.7 percent of GDP, Primary Balance (commitment basis) of -0.5 percent of GDP, and Gross International Reserves (Excluding oil funds, encumbered assets, and pledged assets) sufficient to cover at least 0.8 months of imports of goods and services by end-2023.
Notably, the 2024 budget introduces a new debt sustainability path, addressing the aftermath of recent Domestic Debt Operations and their consequential impact on the financial sector.
In presenting the 2024 Budget statement on the floor of Parliament on Wednesday, Mr Ofori-Atta highlighted key policy priorities embedded in the government’s 5-year growth strategy, emphasising selected initiatives slated for implementation over the next 14 months, which is also the election year.
The budget presentation comes from the successful First Review of Ghana’s 3-year US$3 billion International Monetary Fund Extended Credit Facility (IMF-ECF) Programme. The review resulted in a Staff Level Agreement, attesting to Ghana’s commendable performance in meeting six Quantitative Performance Criteria, two of three Indicative Targets, and six of seven Structural Benchmarks within the stipulated timeframe, concluding in Sept 2023.
The budget underscores Ghana’s commitment to navigating economic challenges and bolstering investor confidence through transparent policy frameworks.
New GDP target!
Mr Ofori-Atta said, “The 2024 Budget is even more significant because we will cross the GH¢1 trillion Gross Domestic Product (GDP) mark for the first time in our economic history. Under President Akufo-Addo’s final year in office, Ghana’s economy is projected to be valued at over GH¢1 trillion in 2024 from GH¢219.5 billion in 2016.”
When realised, the GH¢1 trillion will be a 24.86 percent increase over the GH¢801billion projected for 2023 and almost four times higher than the GH¢219.5billion nominal value in 2016.
This comes as the minister outlined macroeconomic targets for the upcoming fiscal year, including an overall GDP growth of at least 2.8 percent and a Non-Oil Real GDP growth of at least 2.1 percent.
The finance minister said the 2024 and medium-term fiscal framework ‘has been prepared in line with the objectives and policy priorities of our 3-year IMF-supported PCPEG.’
“Over the medium term, we plan to improve the primary balance (commitment) from a deficit of 4.3 percent of GDP in 2022 to 0.5 percent in 2023. The primary balance is expected to improve further to a surplus at 0.5 percent of GDP in 2024 and 1.5 percent of GDP from 2025 onward.”
Other strategic anchors around the 2024 Budget are to ensure the accelerated implementation of the PC-PEG and safeguard the recent macroeconomic gains. It is also to expand investments in the real sector to implement the new Growth Strategy and chart a new course. Other reasons are to consolidate and complete ongoing infrastructure projects to improve productivity and welfare and mobilise climate finance to enable us to build resilience and promote climate-sensitive growth.
Total Revenue and Grants are projected at GH¢176.4 billion (16.8 percent of GDP) and are underpinned by permanent revenue measures, largely Tax revenue measures amounting to 0.9 percent of GDP.
The policy initiatives outlined in the budget will also ensure Ghana remains attractive to domestic and foreign investors. The feedback from our extensive engagements with key stakeholders has informed our policy choices.
Tax initiatives
The minister highlighted the government’s tax policy shift in 2020 due to increased expenditure pressures, emphasising the need for improved short-term tax ratios to maintain long-term competitiveness. The target is an 18-20 percent tax-to-GDP ratio.
“It is difficult to implement all the structural reforms and tax reliefs immediately,” he said.
The government, in collaboration with Ghana Revenue Authority (GRA) and the Mutual Prosperity Dialogue committee, he noted, prioritises reliefs, including VAT extensions, import duty waivers, and a VAT flat rate of 5 percent on commercial properties.
Also, to address plastic waste, there will be a review of the Environmental Excise Duty. The Stamp Duty Act of 2005 will be reviewed in 2024 for realignment with current economic realities.
He said a simplified tax return promotes voluntary compliance, especially for the informal sector. The Tripartite Committee concluded negotiations on the National Daily Minimum Wage, prompting adjustments to the tax-free portion of Individual Income Tax rates.
“The government will engage the Ghana Medical Association on waivers for vehicle imports, easing transportation burdens for medical personnel with the passage of the Exemptions Act,” he added.
Dam spillage disaster
Following the devastating impact of the Akosombo Dam spillage, which led to the flooding of downstream communities in parts of the Volta, Eastern, and Greater Accra regions, the finance minister announced that the government had allocated GH¢220 million to support the relief phase. This financial assistance is intended for the communities affected by the Akosombo spillage and floods upstream in the Oti, Savannah, and Bono-East Regions.
In the minister’s words, “For the restoration phase, the government through the Ministry of Agriculture will allocate additional resources to support the restoration of livelihoods. We have requested funding from the World Bank under the IDA Crisis Response Window (CRW) to support the resettlement of the victims, restoration of livelihoods, compensation, and reconstruction of infrastructure in the affected communities.”
Furthermore, he emphasised that the government recognises the importance of climate policy and financing in addressing the long-term effects of climate change on victims of drought, flooding, and other adverse weather events.
To address this, the Ministry has applied to the Global Shield Against Climate Risk Fund, an initiative President Nana Akufo-Addo and Chancellor Olaf Scholz launched during COP 27 in Sham El-Sheikh. The goal is to access financial resources to support communities upstream and downstream of the Akosombo Dam, he added.
Budget reactions
However, in a quick reaction following the budget presentation, Economist and Political Risk Analyst, Dr Theo Acheampong said a GH¢1 trillion economy means nothing when inflation is still more than 30 percent. It is just US$83bn at current exchange rate of USD 1 to GHS12, he remarked.
He said, “The finance minister should rather talk about Gross National Income (total GNI or per capita or growth rate) as one of the better macro indicators of our economic prosperity. I get worried when we ‘abuse’ such indicators in the name of grandstanding.”
Similarly, the Dean of the University of Cape Coast Business School, Professor John Gatsi, has voiced concerns regarding the economic growth as reflected in the gross domestic product (GDP).
He questioned the validity of the GDP expansion, particularly highlighting the performance of the industrial sector.
Prof. Gatsi underscored that the primary focus should not solely be on expanding the economy; instead, attention should be directed toward assessing whether this growth translates into job creation, revenue mobilisation, and developing a robust industrial sector.
He articulated his concern by stating, “What should be of concern is not the economy’s expansion. Is our growth able to provide the needed jobs and contribute to revenue mobilisation, and is the industrial sector’s performance reflecting this expansion?”
“Recall, we have the One District, One Factory (1D1F) initiative – yet the performance of industries is abysmal,” Professor Gatsi pointed out, highlighting a substantial gap between expectations and reality.
Currently, medium-term projections do not indicate a significant shift in the economy’s structure, with the industrial sector expected to conclude 2024 contributing 32.3 percent. This contribution is projected to decline over the next three years to 31.9 percent, 31.7 percent, and 31.2 percent.
“If we exclude oil and gas, it is almost as though we do not have a real economy,” Professor Gatsi emphasised, underscoring the nation’s heavy reliance on the extractive industry.
Meanwhile, the Minority Leader in Parliament, Ato Forson, has described the 2024 Budget as insensitive and out of touch. He called the budget empty. “They are living behind an economy that has seen massive and uncontrolled corruption,” he stated.
