'Junk junk' downgrade: Capital market knows Ofori-Atta 'playing games' with 'unclear' debt exchange comment in 2023 budget – Adongo

continued from last edition

The shortfall in revenue stemmed from the less robust performance recorded in all the revenue handles for the period.

41. Mr. Speaker, Domestic Revenue for the period amounted to GH¢64,601million (10.9 percent of GDP), falling below the target of GH¢66,503 million (11.2 percent of GDP) by 2.9 percent.

The outturn, however, represents a year-onyear growth of 34.0 percent and constituted 98.8 percent of Total Revenue and Grants.

Expenditure Performance

42. Mr. Speaker, Total Expenditure (including arrears clearance and discrepancy) for the period amounted to GH¢109,421 million (18.5 percent of GDP), above the target 2023 BUDGET STATEMENT

14 of GH¢103,992 million (17.6 percent of GDP) by 5.2 percent. Compensation of Employees amounted to GH¢27,146 million (4.6 percent of GDP), 2.9 percent below the budgetary provision of GH¢27,947 million (4.7 percent of GDP).

The Wage bill constituted 91.3 percent of the total Compensation and amounted to GH¢24,734 million.

43. Interest Payments for the period amounted to GH¢32,101 million (5.4 percent of GDP), against the target of GH¢30,890 million (5.2 percent of GDP) reflecting the higher cost of borrowing and the adverse impact of the currency depreciation on external interest.

Domestic Interest Payments constituted 78 percent of total Interest Payments for the period. Financing Operations

44. Mr. Speaker, the fiscal operations for the period resulted in an overall budget deficit of GH¢44,022 million (7.4% of GDP), against a target of GH¢36,684 million (6.2% of GDP).

The corresponding primary balance for the period was a deficit of GH¢11,921 million (2.0% of GDP), against a deficit target of GH¢5,794 (1.0% of GDP).

45. The fiscal deficit for the period was financed mainly from domestic sources amounting to GH¢37,491 million (6.3% of GDP), accounting for 85.2 percent of the total financing.

Foreign financing for the period amounted to GH¢6,531 million (1.1% of GDP) and ac- counted for the remaining 14.8 percent of the fi- nancing.

Public Debt Developments for January - Sep- tember 2022

46. Mr. Speaker, provisional debt data as at end September 2022 shows a significant increase in Ghana’s public debt largely due to exogeneous factors.

47. The end-September 2022 provisional figures indicate that total gross public debt stood at GH¢467,371.31 million (US$48,871.34 million), representing approximately 75.9 percent of GDP.

48. The domestic debt component is GH¢195,657.60 million, which is 31.79 percent of GDP, whilst external debt is GH¢271,713.71 million, representing 44.15 percent of GDP.

The increase in the domestic debt is largely on account of rising interest costs. Domestic debt as a share of total public debt reduced from 51.6 percent in 2021 to 41.9 percent as at end September 2022.

49. Mr. Speaker, the external debt as a percentage of the total debt stock is 58.1 percent as at end September 2022.

The sharp growth in the external debt stock is largely driven by the depreciation of the local currency. The depreciation of the Ghana cedi added GH¢93,855.15 million to the external debt stock.

50. Overall, debt accumulation increased from 20.7 percent in 2021 to 32.7 percent as at end September 2022, reflecting the impact of the depreciation of the Ghana cedi on the external debt side.

Outlook for External Sector in 2023 and the Medium Term

51. Mr. Speaker, the external sector performance in the outlook will depend largely on the quick resolution of the Russia-Ukraine war and the outcome of recession fears in advanced economies.

The thrust of the external sector will focus on rebuilding external buffers enough to cover at least three and half months of imports of goods and services to cushion the economy against adverse external shocks.

This will be underpinned by, among others, bilateral support, and strong remittance inflows. Measures by BOG to address the Exchange Rate depreciation

52. Mr. Speaker, the Bank of Ghana will continue to monitor inflation developments and respond appropriately to contain price pressures. Monetary Policy will focus on using the monetary policy rate to, among others, contain inflationary pressures.

53. Since August 2022, the Bank of Ghana has successfully been working with the mining firms, international oil companies, and their bankers to purchase all foreign exchange arising from the voluntary repatriation.

UPDATE ON THE GHANA’S ENGAGEMENT WITH THE IMF FOR A FUNDSUPPORTED PROGRAMME

54. Mr. Speaker, since Government announced its engagement with the International Monetary Fund (IMF or the Fund) for a supported Programme on 1st July, 2022, we have made substantial progress.

The Fund assured Government of its strong commitment and support in these difficult times.

55. Mr. Speaker, Government and the IMF have agreed on programme objectives, a preliminary fiscal adjustment path, debt strategy and financing required for the programme to be in line with the Government’s Post-COVID-19 Programme for Economic Growth (PC-PEG).

The PC-PEG is Government’s blueprint to restore macroeconomic stability, promote debt sustainability, sustain economic recovery and support structural reforms.

2023 and Medium-Term Overall Macroeconomic Targets

56. Mr. Speaker, guided by the medium-term policy objectives, the following macroeconomic targets are set for the medium-term (20232026):

i. Overall Real GDP to grow at an average rate of 4.3 percent;

ii. Non-Oil Real GDP to grow at an average rate of 4.0 percent;

iii. Inflation to be within the target band of 8±2 percent;