Government is seeking parliamentary approval to spend an amount of GH¢113.7 billion for the 2021 fiscal year to promote rapid economic recovery as a result of the devastating effect of COVID-19 pandemic on the Ghanaian economy.
The amount, which is equivalent to 26.2 percent of GDP for 2021, represents a growth of 13.7 percent above the outturn of GH¢100.052 billion recorded in 2020.
Minister for Parliamentary Affairs and Leader of Government Business in Parliament Mr. Osei Kyei-Mensah-Bonsu announced the expenditure required when he presented the 2021 budget statement and economic policy of government to Parliament last Friday.
He explained that the expenditure will ensure economic recovery and macroeconomic stability through the rolling out of well-thought-through measures that will set the economy back in motion.
“Under President Akufo-Addo’s leadership, we took the required swift, drastic and decisive measures to mitigate the spread of the pandemic. We rapidly mobilized and deployed extensive internal and external resources to support Ghanaian households and enterprises.
“Mr. Speaker, we are now better positioned to recover and build back a more resilient economy not only because we know how to do it but also because the Grace of God has been assured for this journey,” he told Parliament.
2021 GDP growth & macroeconomic targets
Mr Kyei-Mensah-Bonsu said overall real GDP is projected to grow at 5.0 percent in 2021 while non-oil real GDP is projected to grow at 6.7 percent, End-period inflation of 8.0 percent, Fiscal deficit of 9.5 percent, primary deficit of 1.2 percent of GDP and Gross International Reserves to cover not less than 4.0 months of imports.
In terms of sectoral growth, the Agriculture sector is expected to grow at 4.0 percent, the Industry Sector at 4.8 percent, and the Service Sector at 5.6 percent.
Presenting a breakdown of the total expenditure, Mr Kyei-Mensah-Bonsu indicated that GH¢25.8 billion will be spent on wages and salaries, GH¢5.97 billion for goods and services of government machinery, GH¢35.86 billion for interest payments with capital expenditure projected at GH¢11.423 billion.
The caretaker Minister for Finance who is also the Majority Leader in Parliament indicated that GH¢27.4 billion had already been earmarked to run the country between January and March 2021, pending the preparation of the full budget that was presented on Friday.
In a three-hour-and-four-minute long presentation, the caretaker Finance Minister said GH¢25.79 billion for wages and salaries constitutes 22.7 per cent of the total expenditure (including arrears clearance) for 2021.
Also as a percentage of GDP, the wage bill is projected to be 5.9 per cent in 2021 compared to the 6.5 per cent recorded in 2020.
Use of goods and services is also projected at GH¢5.97 billion or 1.4 per cent of GDP. This represents 5.2 per cent of the projected total expenditure.
Mr Kyei-Mensah-Bonsu said interest payment is projected at GH¢35.86 billion, equivalent to 8.3 per cent of GDP in 2021.
Out of the total amount, domestic interest payments will constitute about 79.1 per cent, amounting to GH¢28.368 billion.
Furthermore, transfers to statutory funds as well as all other earmarked funds are estimated at GH¢18.081 billion (4.2 per cent of GDP), representing 52.2 per cent growth over the recorded outturn for 2020.
The capital expenditure is projected at GH¢11.423 billion (2.6 per cent of GDP) in 2021, a decline of 5.5 per cent over the 2020 projected outturn.
Of this amount, domestic financed capital expenditure is estimated at GH¢3.310 billion (0.8 per cent of GDP).
Additionally, an amount of GH¢8.11 billion has been estimated for foreign financed capital expenditure and this will be funded by a combination of project grants and loans.
Government in 2021, Mr Kyei-Mensah-Bonsu pointed out, will continue to implement the Earmarked Funds Capping and Realignment Act, 2017 (Act 947) to reduce budget rigidities and create fiscal space to fund growth-enhancing expenditures as had been done since 2017.
“Mr Speaker, transfers to earmarked funds include a proposed 20 per cent of the allocation for ABFA Capex to the Ghana Infrastructure Investment Fund (GIIF) for funding of Agenda 111 and other development expenditures. We will lay the necessary amendments to allow for this measure,” he added.