Ghana Plans 21% Spending Surge in 2020 as Election Looms - BLOOMBERG
- Budget deficit for next year projected at 4.7% of GDP
- Nation plans to raise up to $3 billion in international market
Ghana will ramp up spending by a fifth next year and plans to raise as much as $3 billion in international markets as it prepares for an election in 13 months.
Total expenditure, including the clearance of arrears, is projected at 85.9 billion cedis ($15.5 billion), 21% more than the projected outcome for 2019, Finance Minister Ken Ofori-Atta told lawmakers in his budget presentation on Wednesday. Wages and salaries will make up 27% of that. Capital spending is projected at 9.3 billion cedis, 54% more than this year.
With the President Nana Akufo-Addo’s New Patriotic Party expected to seek a second straight term in power when Ghana goes to the polls in December 2020, investors have been looking out for signs of excessive spending, something the incumbents have done in the past. Ghana ended its 16th bailout program with the International Monetary Fund in April, and the government has pledged to maintain fiscal discipline.
Ghana’s economy expanded more than 6% annually since 2017 on the back of additional oil exports. The government will target growth of 6.8% next year, Ofori-Atta said. That compares with the IMF’s forecast of 5.6%.
“It’s an expenditure for growth,” Lord Mensah, a senior finance lecturer at the University of Ghana, said by phone. “It looks like some of the revenue streams which the government failed to unlock this year will happen next year. If they can put a lid on expenditure leakages, the growth target is plausible.”
Ofori-Atta raised the budget deficit forecast for next year to 4.7% of gross domestic product, compared with a prediction of 4.5% given in August. Despite this increase, the shortfall will stay below the legislated 5% until at least 2023, according to his presentation. Ghana will finance the gap with 8.3 billion cedis from domestics sources and 10.6 billion cedis from foreign investors, including as much as $3 billion in a planned international capital-market program, the minister said.
“Despite the year being an election year, President Akufo-Addo and his government will ensure that the perennial excessive spending during such periods will not happen in 2020,” Ofori-Atta said. “We shall work within the 2020 appropriation resource envelope and adhere to the fiscal responsibility act to maintain fiscal discipline.”
The government has started talks with independent energy producers to renegotiate supply contracts under which the state has to pay about $450 million a year for excess power that it doesn’t use. The negotiating teams are close to completing the first round of these discussions, Ofori-Atta said.