In accordance with Article 179 of the Constitution, the Minister for Finance, Ken Ofori-Atta, on behalf of the President lay before Parliament, the 2022 Budget Statement and Economic Policy of Government on Wednesday, 17th November 2021.
Finance Minister Presents 2022 Annual Budget
The budget primarily focused on expanding on the economy’s recovery from the COVID-19 pandemic, as well as creating a climate-friendly entrepreneurial state to address unemployment and import substitution.
As a result, digitalization of the economy, skills development, and entrepreneurship featured prominently in the presentation on the floor of Ghana’s Parliament.
On the Economy
Although Ghana’s economy has grown by roughly 4% this past year, the country’s high budget deficit—which stems largely from exits of foreign investors—is a major source of worry for the ruling government.
Ghana’s economy is powered by small and medium-sized enterprises which struggle to stay in business over time but the 2022 budget made provisions for young people who want to go into the sector. The government is pledging startup capital of up to GHC50,000 to would-be entrepreneurs through a district-based scheme to be managed by the Ghana Enterprises Agency (GEA).
Microeconomic Developments in 2021
According to the Minister of Finance, data on the performance of the economy as of September 2021 indicate that the implementation of the 2021 budget is largely on track. Provisional GDP data released by the Ghana Statistical Service in September 2021 indicate that overall real GDP grew by 3.1 percent in quarter one and 3.9 percent in quarter two. Thus, the economy grew by an average of 3.5 percent in the first half of 2021 against 0.8 percent in the same period in 2020.
Headline inflation declined sharply from 10.4 percent in December 2020 to 7.5 percent in May 2021, broadly reflecting well-anchored inflation expectations, exchange rate stability, and favorable food prices. However, inflation picked up to 10.6 percent in September 2021 on account of shocks from domestic fuel price adjustments and increasing domestic food prices arising partly from climate-related factors, input supply bottlenecks, delayed harvests, and world food price increases. Inflation rose further to 11.0 percent in October, driven by non-food inflation.
Fiscal Performance
Also, preliminary data for the first nine months of the year indicate that the government’s fiscal operations resulted in a cash deficit of GH¢33.9 billion, equivalent to 7.7 percent of GDP, compared to the revised target of GH¢32.6 billion, equivalent to 7.4 percent of GDP.
The fiscal adjustments to save lives and preserve livelihoods during the pandemic, although well-intentioned, have elevated global debt levels. The situation in Ghana is no different. The provisional nominal debt stock, including financial sector bailout costs and energy sector IPPs payments, stood at GH¢341.76 billion, equivalent to 77.5 percent of GDP as at end-September 2021, up slightly from GH¢291.63 billion, equivalent to 76.1 percent in December 2020.