In brief
- The Ghanaian Treasury updated the legislative house on the macro-fiscal performance for 1H2024 with a revision to some of the targets for FY2024 on 23rd July 2024. Our assessment of the fiscal performance showed lingering issues with revenue mobilisation in first half of the year, although a strong outturn in 2Q2024 helped to ease the shortfall in the prior quarter. Against the backdrop of the revenue underperformance, the authorities restrained the CAPEX plan for 1H2024 (-27.2% vs target) while cash flow relief from external debt restructuring supported to keep the budget balance on track (on commitment basis).
- Our estimations revealed that total revenue and grants in 2Q2024 was GHS 44.3bn against a target of GHS 38.4bn. This translated into a revenue over-performance of GHS 5.9bn in 2Q2024, which significantly reduced the shortfall from the prior quarter to leave the 1H2024 revenue gap at a modest GHS 1.4bn. The strong revenue performance partly reflects ongoing structural improvement in VAT invoicing, which raises our optimism about the revenue outlook.
- We remain cautious on the spending plan, although the high CAPEX budget offers room for adjustment in the event of revenue underperformance. Against the sharp reduction in estimated interest payment on external debt, the authorities raised domestic interest payment by GHS 4.6bn. We think this reflects expected stickiness in domestic yields. The increase in primary expenditure also underscores the election-related pressure to sustain public spending, which will likely ramp up in 4Q2024 as the cut-off date for the third IMF review is set at end-June 2024. Based on the improved revenue outlook, we lower our forecast FY2024 overall budget deficit (Cash) to 5.5% of GDP ±0.5pp (vs 6.3% prior), compared to the GOG’s revised target of 5.3%.
- We view the Government’s revised growth target of 3.1% for FY2024 as more reflective of the emerging growth pulse in the Ghanaian economy than the previous target of 2.8%. However, we are less bullish on the authorities’ unchanged inflation target of 15.0% for year-end 2024 given the raft of cost-push factors in the near-term outlook, unless a tighter monetary stance is adopted at the next MPC meeting.
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