Fiscal PolicyGhanaInsightsMacroeconomic update

20 November 2023

Ghana’s FY2024 Budget: MIND THE GAP

In brief

  • Our assessment of the 8M2023 fiscal performance showed that while the IMF-inspired frontloaded adjustment remained on track with the containment of payroll and CAPEX budget, revenue continued to underperform its target. This prompted the authorities to further cut FY2023 revenue target by GHS 1.0bn (0.1% of GDP) to GHS 133.9bn (IC Insights forecast: GHS 129.8bn).
  • When Compared to the pre-DDEP budget for 2023, the authorities chalked DDEP-induced interest savings of GHS 4.8bn (0.5% of GDP) in 8M2023. By FY2023, the total interest savings from the DDEP, which will partly finance the 2023 budget, could rise to GHS 6.2bn.
  • In our view, Ghana’s 2024 fiscal framework appears vulnerable to persistent revenue undershooting as we think the authorities’ expectations appear quite bullish against the observed trend growth in revenue, waning impact of inflation, and the new revenue measures. We forecast FY2024 revenue at GHS 164.3bn (16.0% of GDP) in the base case scenario. In our bull case outcome, we anticipate total revenue at GHS 172.8bn (+29.1% y/y), which would still fall below the authorities’ target by GHS 3.6bn (0.4% of GDP).
  • Our analysis of the estimated expenditure plan for 2024 in value terms and matched against the revenue outlook makes for uncomfortable reading in an election year, and keeps us mindful of the financing gap. We opine that adjusting for the projected election-related cost would make little impact on the planned spending growth.
  • For the second consecutive year, the financing options available to the Ghanaian Treasury is restricted to the domestic market with a complete reliance on Treasury bills as the domestic bond market remains closed. This financing outlook leaves us cautious on the expected pace of decline in yields for T-bills. The authorities have signalled plan to build a buffer of GHS 31.8bn to cover potential auction shortfalls in 2024. However, we are unable to confirm a credible funding source. We think the buffer would likely emerge from excess uptakes during weekly auctions where there is strong investor demand, which, in itself, could introduce some stickiness in the expected downturn in interest rates in 2024.

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