Ghana’s fiscal risk is moderating on the back of expenditure control.

According to research firm, IC Securities, fiscal execution in the first 5-months of 2023 revealed ongoing adjustments in line with the International Monetary Fund programme target and indicates a steady moderation in the fiscal risk, albeit still elevated.

The Bank of Ghana’s Summary of Economic and Financial Data showed a primary deficit equivalent to 0.7% of Gross Domestic Product, below the target deficit of 0.8%.

“Our review of the fiscal numbers showed that the better-than expected non-interest deficit was aided by a suppression in primary expenditure within the context of enforcing structural reforms to rationalise spending”, IC Securities said.

Total revenue for the first five months undershot the target by 17.8% at ¢44.9 billion (5.6% of Gross Domestic Product). This represents a 47.2% year-on-year growth, partly due to the elevated inflation for the period.

“While the target undershooting was expected, we anticipate a slight improvement in the months ahead as the latest revenue measures took effect from May 2023 and are outside the reported revenue data” it stated.

Amidst the revenue shortfalls and ongoing debt restructuring, the government reported a total expenditure of ¢59.5bn (7.4% of GDP), a 28.1% compression below the budget limit.

While this largely reflects the short-term benefits of suspended debt service, the year-on-year fiscal adjustment of 0.5% of GDP emphasizes the steady progress in restoring fiscal sustainability with successful debt restructuring as a crucial anchor, in our view.

On external debt restructuring, the Governor of the Bank of Ghana, Dr. Ernest Addison, confirmed that formal discussions are yet to commence between the Ghanaian government and the bilateral creditors.

However, he indicated that a crucial target of Ghana’s external debt restructuring is to reduce the sensitivity of the debt portfolio to FX adjustments.