Finance Minister Ken Ofori Atta presenting the government’s mid-year budget review last week Monday, July 31, 2017, disclosed that the country’s fiscal deficit target for 2017 has been reviewed from 6.5 percent to 6.3 percent of GDP.

However, economists in the country want the Finance Minister, to give detailed plans of increasing revenue even as he presented in the mid-year budget review to Parliament last week.

Although, the minister revised downward some macro-economic indicators including the revenue target, fiscal deficit and Gross Domestic Product growth and has decided not to seek a supplementary budget.

The Institute of Economic Affairs (IEA) has predicted that, government will not meet its revenue targets for the financial year 2017, despite the downward review of the target.

Already, figures from the Ghana Revenue Authority (GRA) indicates that, revenue collection the mid-year fall short of over GHC1.3 billion.

But, according to him, the revision of some of the targets aim at preventing lapses in government’s fiscal consolidation objectives, targets and expenditure.

“The downward revision in revenues and expenditures as well as reclassification of inflows from the sale of shares have resulted in the revision of the fiscal deficit target from 6.5 percent of GDP to 6.3 percent. These revisions are consistent with our fiscal and debt sustainability objectives.

“Being mindful of the high debt burden which has arisen largely because of high fiscal deficits in the past, the revision of the fiscal deficit further demonstrates our commitment to fiscal discipline,” he told parliament.

He added, “Going forward, we will strengthen the implementation of revenue measures to ensure that we meet our revised revenue targets. To ensure that the fiscal objectives and targets are not compromised, we will make the necessary downward adjustment to discretionary expenditures in the event that we are not able to meet our revenue targets.”

Apparently, Dr. Eric Osei-Assibey, senior research fellow at the IEA in his analysis of the presentation by the Finance Minister, argued that the country is likely to end the year 2017 with a debt to GDP ratio of 71 percent, about a two-percentage point reduction of what was recorded last year.

“Despite the debt management effort by government, we think that the debt stock is still very high and unsustainable,” he said.

Citing the International Monetary Fund (IMF), he said Ghana remains at the high risk of debt distress which has implications for its credit worthiness and borrowing cost.

“Although government has revised downwards its revenue projections for the second half of the year, we believe that government may still not realise the projected revenue as the above challenges remain,” he predicted.

He thus urged government to “pursue a more aggressive domestic tax revenue mobilisation by ensuring that the compliance rate is increased substantially and the loopholes within the tax collection systems are plugged.”

Also, he advised that “much more innovations should be introduced in the tax collection system particularly within the informal economy.”

Also, economist, Dr. Said Boakye has stressed that, the government’s inability to meet the revenue targets for the first half of the year will require revenue support to fund some critical expenditure.

He explained that, the decision to severely cut spending on critical sectors makes a supplementary revenue inevitable.

“I think that they have to consider a supplementary budget except that the review can be detailed enough because they have not been able to meet their revenue targets and so they’re plan is off budget as at now in the sense that they have to cut spending to meet it,” Dr. Boakye asserted.

Unlike instances where Finance Ministers seek additional budgetary support in their midyear budget reviews, Mr. Ken Ofori Atta has ruled out any request for additional funding support.

Already some targets from revenue have been missed in the first half of the year.

This is also against the backdrop of declining commodity prices on the global market.

Similarly, the Institute for Fiscal Studies (IFS) for instance has warned of government’s inability to meet set targets for the 2017 budget if it does not pay particular attention to reducing excess spending.

The economic think tank has suggested the effective implementation of the Public Financial Management Act (PFMA) as well as the Public Procurement Act (PPA).

Meanwhile, Dr. Said Boakye believes the absence of any concrete plan to increase revenue will impact adversely on the implementation of the budget for the next five months.

“What is also taking place is that spending is being cut more than necessary and because of that arrears is building up. So if they are able to give more details to pay off arrears and others, then no problem but anything short of this, I don’t think is appropriate.”

But the government insists it has put in place strategic measures to achieve the set targets.

The deputy Finance Minister, Kweku Kwarteng has said, “the target that we brought in the mid-year review are achievable and I dare say we do have some hope that we could exceed them but we do not anybody to get any impression that this a government that will over spend its means.”

There were a number of positives in the mid-year budget review, especially the macroeconomic indicators, which were quite impressive; inflation, Treasury bill rates, gross international reserves, exchange rate were all looking northward.

Within the first six months of the year, the government’s real Gross Domestic Product (GDP) growth for the first quarter was 6.6 per cent against 4.4 per cent for the same period in 2016.

Agriculture, which has been recognised by the government as a key driver in ensuring food security and creating jobs, grew by 7.8 per cent against five per cent for the same period in 2016. The industry was 11.5 per cent against 1.8 per cent for the same period in 2016.

Unfortunately, however, services grew by just 3.7 per cent against 6.6 per cent for the same period in 2016, while non-oil GDP growth rate was 3.9 per cent against 6.3 per cent for the same period last year.

Inflation, which is the sustained increase in the general price level of goods and services in an economy over a period of time, dropped to 12.1 per cent at the end of June, down from 15.4 per cent at end of December 2016, while the 91-day Treasury bill (T-bill) rates performed positively as it dropped from 12.08 per cent at end of June, down from 16.4 per cent at the end of 2016, an indication of the government’s reduction in its appetite for domestic funds, a move which often stifles the ability of local business to borrow for expansion.

The country’s gross international reserves reached US$5.9 billion (3.4 months of import cover) in June, up from US$4.9 billion (2.8 months of import cover) at end December 2016.

At the beginning of the year, the government demonstrated its commitment towards reviving the ailing private sector by reducing and cutting a number of taxes which it described as ‘nuisance taxes’. It argued that there was the need for the government to free funds for the sector to play its role in expanding the economy and creating jobs for the people.

For instance, the government abolished the one per cent Special Import Levy which was imposed mainly on imported raw materials and machinery; removed the 17.5 per cent VAT/NHIL on financial services; abolished the 17.5 per cent VAT/NHIL imposed on airline tickets; and also removed the excise duty on petroleum to reduce the excess burden on final consumers.

It further went ahead to reduce the special petroleum tax rate from 17.5 per cent to 15 per cent to mitigate the excess burden on final consumers; abolished the five per cent VAT flat rate on the sale of real estate; abolished import duty on spare parts; exempted from tax, the gains from realisation of securities listed on the Ghana Stock Exchange; reviewed the ESLA to reduce the cost of power and reduced the National Electrification Scheme Levy from five per cent to three per cent; and the Public Lighting Levy from five per cent to two per cent; replaced the 17.5 per cent standard rate with the three per cent flat VAT/NHIL rate

-Adnan Adams Mohammed