A recalibration of the 2020 budget in the wake of the outbreak of Covid 19 virus indicates that the country’s fiscal deficit will widen from the projected GH18.2 billion to GH 30.2 billion, Minister of Finance, Mr Ken Ofori Atta, has announced.
This new figure represents 7.8 per cent of GDP which is way above the 5 per cent cap imposed by the Fiscal Responsibility Act.
The deficit has come as a result of the estimated fiscal impact from the shortfall in petroleum receipts, shortfall in import duties, shortfall in other tax revenues, the cost of the preparedness plan for Covid 19, and the cost of Coronavirus Alleviation Programme, which are all expected to cost the country GHȼ9.5 billion.
Addressing members of Parliament, Mr Ofori Atta, said the government programmed a crude oil price of US$62.60 per barrel for the 2020 Budget, consistent with the PRMA (Act 815).
However, global crude oil price has declined significantly since the outbreak of the coronavirus, and as at March, 30, crude oil prices (Brent) were down to US$22.9 per barrel from the December 2019 price of US$65.9 per barrel.
He said preliminary analysis showed that at an average crude oil price of US$30 per barrel for year 2020, the government would register a shortfall in crude oil receipts amounting to GHȼ5.67 billion.
Decline in imports
He said the anticipated decline in import volumes and values, as well as the slowdown in economic activities, would also lead to shortfalls in both import duties and other tax revenues.
“Based on the performance of import duties to date, as well as assumptions on projected decline in import volumes and values, preliminary analysis shows that import duties will fall short of target by GHȼ808 million for the 2020 fiscal year.
“Similarly, the projected slowdown in non-oil GDP as result of the coronavirus pandemic is expected to result in shortfalls in tax revenues (excluding oil tax revenues and import duties) amounting to GHȼ1.44 billion, bringing the total estimated shortfall in non-oil tax revenues to GHȼ2.25 billion,” he noted.
Increased health expenditures
The Finance Minister also indicated that the Ministry of Finance has been working with the Ministry of Health to cost the National Preparedness and Response Plan prepared by the Ministry of Health and the World Bank.
He said the initial cost of programmes and activities under the COVID-19 Preparedness and Response Plan was about GHȼ572 million.