Ghana proposes 21% budget increase for 2020

The Ghanaian government has proposed an 85.9 billion cedi appropriation bill for the 2020 fiscal year, marking a significant increase of 21% from the previous year. This budget announcement comes at a crucial time as it is an election year and the first budget to be prepared without an IMF program since 2015. The details of the budget were disclosed by the country's Minister of Finance, Ken Ofori-Atta, in a presentation before the Parliament. To delve deeper into the implications of the budget, John Gatsi, Dean of the School of Business at the University of Cape Coast (UCC), joined CNBC Africa to unpack the key takeaways and address the challenges facing Ghana's fiscal policies. Gatsi highlighted several critical points from the Finance Minister's presentation, shedding light on the country's revenue mobilization, expenditure performance, and fiscal deficit concerns. One noteworthy aspect is the inability to meet the revenue targets, with a deficit of 4.5% of GDP recorded by September, surpassing the initial projection of 4.1% for the year. This shortfall indicates a lack of discipline in adhering to the set targets, posing challenges for maintaining fiscal responsibility in the upcoming year. Moreover, Gatsi emphasized the ongoing financial sector issues, particularly the significant funds allocated for the banking sector cleanup, which raises concerns about transparency and effective utilization of resources. While the establishment of a national development bank was mentioned in the budget, it was not seen as a novel initiative, rather a continuation from previous years. The discussion also touched upon the fiscal responsibility act of 2018, which limits the fiscal deficit to 5% annually. Gatsi expressed concerns about the feasibility of adhering to this cap given the prevailing revenue constraints and high expenditure levels. The act necessitates seeking parliamentary approval to exceed the deficit threshold, indicating potential challenges in aligning with both the fiscal responsibility requirements and budget targets. Overall, Ghana's 2020 budget faces uncertainties stemming from revenue underperformance, fiscal deficit constraints, and expenditure pressures, posing a critical test for the government's financial management strategies in the coming year.