Future borrowing to cover up for expenditure dangerous for economy – Economist
Dr. Adu Owusu Sarkodie - Economist
An Economist, Dr. Adu Owusu Sarkodie has said the Finance Minister, Ken Ofori-Atta, should outline the government's progress so far with the allocation of support under the Coronavirus Alleviation Programme (CAP) when presenting the 2020 Mid-year budget review to Parliament later this month.
Dr. Sarkodie is of the view that limiting budgetary allocation is critical of which an increase could impact the country’s budget deficit; that is the difference between revenue and expenditure.
Ken Ofori-Atta is expected to appear before parliament with revised estimates on the economy’s performance which was presented in November 2019.
Although the budget review is a routine act by the Finance Minister, the pressure of the coronavirus pandemic on the economy is likely to cause unFor instance, before the start of 2020, Mr. Ofori-Atta projected that government would rake in an amount of 67.1 billion cedis as revenue, with an amount of about 86 billion expected to be spent on various governmental projects. By this, it was going to cause an initial budget deficit of 19 billion cedis.certainty in figures for the remaining six months of the year and as well, government expenditure more critical.
In Dr. Adu Sarkodie’s view, the presentation should see a review of all key economic indicators such as growth rate, primary balance, budget deficit, revenue and expenditure targets, among others.
“In all these, I think the Finance Minister should be able to tell us how far we have come with this program. What is needed to be done and how we are going to revive our economy and make sure that, we come back on track. So, there must be a review of everything,” he said.
Also, Mr. Ofori-Atta has drawn the margin of reduction expected in some projected revenue from taxes in both oil and non-oil sectors.
Additionally, the COVID-19 outbreak has compelled him to make some projections on how the drop will impact the budget deficit for the year 2020.
A type of this, for instance, has been made evident as import duties are expected to drop by 808 million cedis, with total revenue, excluding oil, is also expected to drop by 2.25 billion cedis.
The budget deficit, which is the difference between the revenue and expenditure, is also projected to increase by 11.3 billion cedis representing 2.9% of revised GDP for 2020.
However, Dr. Adu Sarkodie maintained that Mr. Ofori-Atta is likely to fall on the 9.5 billion cedis Coronavirus Alleviation Programme and the Bank of Ghana’s 10 billion cedis support to cover these differences.
Meanwhile, he says the steady pickup in economic activities especially in the informal sector of Ghana’s economy, which witnessed some losses earlier, could see improvement by the time the Finance Minister appears before Parliament.
“The first quarter figures indicate that we grew by 4.9% as against 6% last year, first quarter. So, it is very likely that we will do better than the 1.5% projected. Our reasons been that the Ghanaian economy is largely informal and because the lockdown has been lifted many people have gone back to work and therefore it is very likely that we will do better than the 1.5,” he added.