GUTA hails mid-year budget

-Calls for consolidation of economic gains

By Isaac AIDOO, Accra

The Ghana Union of Traders Association (GUTA) has commended the mid-year budget review, viewing it as a strong indicator of Ghana’s economic recovery.

GUTA called on the government to consolidate the gains made so far to ensure sustained progress.

Dr Mohammed Amin Adam, the Minister of Finance, made this known during a presentation of the Mid-year Budget Review on the floor of Parliament.

GUTA President, Dr. Joseph Obeng, emphasized the significance of maintaining the momentum achieved in recent months. He praised the government for its success in reducing inflation, stabilizing the foreign exchange regime, and ensuring overall macroeconomic stability.

“The available data shows remarkable progress,” Dr. Obeng noted, adding that the country has transitioned from a period of economic challenges to a more optimistic outlook.

Reflecting on the domestic debt restructuring program, he acknowledged the initial adverse impact on businesses and how many had feared the worst for the economy at that time.

Dr. Obeng highlighted the need for pragmatic measures to sustain these gains, particularly the importance of a stable business environment for growth.

“Stability, especially regarding the local currency, is crucial to prevent further depreciation that could negatively affect business operations,” he said.

He also called for ongoing efforts to reduce inflation to further enhance economic stability.

Impact of cedi depreciation

Discussing the relationship between the cedi’s stability and inflation, Dr. Obeng explained, “Currency depreciation leads to higher business costs and subsequently triggers inflation.

It’s imperative that we prioritize the stabilization of the local currency to maintain the current economic momentum.”

Addressing the need to manage government expenditure in an election year, Dr. Obeng remarked, “We’re happy to hear the minister say that he won’t spend outside budgetary allocations. Excessive spending often throws the economy out of gear.

If they can abide by this promise, it will augur well for all of us.” He observed that government overspending typically results in businesses bearing the brunt, as taxes are levied to cover the excess expenditure.

The GUTA Boss also appealed to the government to reconsider the proposed 5% tax on plastics.

“The minister should look into that because, at this time, we are not expecting any additional tax that will increase the cost of doing business,” he stated.

Dr. Obeng reiterated GUTA’s support for the government’s economic management efforts and called for a continued focus on creating a stable and conducive environment for businesses to thrive.

Economic targets upwards for 2024

Government revised the 2024 macroeconomic framework due to recent domestic and global economic developments, including the debt restructuring programme with external and domestic creditors.

Primary balance remains 0.5% to GDP

The development has also led to the upward revision of fiscal framework with the expectation that the primary balance on a commitment basis remains unchanged at the targeted surplus of 0.5% of Gross Domestic Product (GDP).

Key revisions

Key revisions to the macro-fiscal targets for 2024 include, overall real GDP growth rate revised upwards from 2.8%  to 3.1%, non-Oil real GDP growth rate of revised upwards from 2.1% to 2.8%  and growth in GDP deflator scaled down from 20.2% to 17.5%.

The Nominal overall GDP had been revised from GH¢1.05 trillion to GH¢1.02 trillion with non-Oil GDP revised from GH¢979 billion to GH¢977 billion and end-period headline inflation remaining unchanged at 15%.

Gross international reserves, including oil funds and encumbered/pledged assets was expected to cover not less than three months of imports.

Total revenue and grants had been revised upward by 0.5% from GH¢176.4 billion, thus 16.8% of GDP to GH¢177.2 billion representing 17.4% of GDP.

The upward adjustment was to reflect increase in Non-Oil Non-Tax Revenue, which had been increased from GH¢14.8 billion, thus cent of GDP as a result of dividends from interest accrued in the ESLA accounts.

Total expenditure on commitment basis had been revised downward by 2.1%, from the original budget projection of GH¢226.7 billion representing 21.6% of GDP to GH¢219.7 billion, equivalent to 21.5% of GDP.

This revision is largely on the back of Interest payments which has been revised downwards by GH¢7.9 billion to reflect the impact of the external debt restructuring on external interest payment.

The overall balance on commitment basis had been revised from a deficit of GH¢50.3 billion, 4.8% of GDP to a deficit of GH¢42.5 billion, thus 4.2% of GDP.

He explained that the cash deficit of GH¢54.1 billion,5.3% of GDP was expected to be financed from both foreign and domestic sources.

Net foreign financing would amount to GH¢15.2billion,1.5% of GDP, representing 28.1% of the total financing for 2024.

Foreign financing would include disbursements from the second and third tranche of the International Monetary Fund (IMF) programme and the World Bank Development Policy Operation (DPO) funding.

The Domestic Financing will amount to GH¢38.9 billion (3.8% of revised GDP), representing 71.9%  of the total financing for 2024.

This is expected to be sourced from the issuances of debt at the short end of the domestic market and inflows from Ghana Petroleum Funds