Fixed Income Analysis /

Ghana: Finance minister presents 2023 budget with 7.7%-of-GDP deficit

    24 November 2022
    • Deficit will be lower than revised projection of 9.9% for 2022
    • Revenue measures expected to bring 1.35% of GDP to boost revenue and grants to 18% of GDP
    • Expenditure measures include lower ceiling to statutory fund transfers, continuation of 30% cut in state official salaries, cap on SOE wage adjustment
    • Budget is based on 2.8% GDP growth, eop inflation of 18.9%
    • Main risk for implementation of budget is political given slim majority in parliament

    Finance minister Ken Ofori-Atta presented the 2023 draft budget in parliament with a deficit (on commitment basis) of 7.7% of GDP, down from a revised target of 9.9% for 2022. The total revenue and grants are projected at GHS 144.0bn or 18.0% of GDP, up from revised projection of GHS 98.1bn (15.9%) for 2022, which was underpinned by the revenue measures, the effect of which is expected at 1.35% of GDP. The total expenditure including clearance of arrears is projected at GHS 205.4bn or 25.6% of GDP, up from GHS 159.0bn (25.8%). The primary expenditures (commitment basis) are expected to decline by 0.3pps compared to the expected outcome for 2022 as the government consolidates its finances.

    Draft 2023 budget
    GHS mn% of GDP
    Total revenue and grants143.95618.0
    Total expenditure205.43125.6
      Compensation of employees44.9905.6
      Use of goods and services8.0481.0
      Interest payments52.5506.6
      Grants to other govt units30.0793.8
      Capital expenditure27.6943.5
      Other (energy sector levy transfers, energy sector payment shortfalls)26.7393.3
    Primary balance8.925-1.1
    Source: Finance ministry

    Revenue measures

    On the revenue side, the measures that the government plans are expected to bring 1.35% of GDP. These include:

    - VAT rate increase to 15% from 12.5% with the threshold reviewed and major reforms undertaken with regards to exemptions;

    - Reduction of the e-levy rate to 1.0% from 1.5%, and removal of daily non-taxable threshold

    - Introduction of additional personal income tax bracket of 35%;

    - Review of upper limit for vehicle benefits, as well as other income tax regime changes;

    - Reform of excise tax regime including review of tax on tobacco and alcohol;

    - Phase-out of benchmark discount policy;

    - Conversion of National Fiscal Stabilisation Levy (NFSL) will be converted into a Growth and Sustainability Levy (GSL) of 2.5-5.0% and will cover all entities.

    Other measures include sale of 5G spectrum; enhancing rent tax compliance; a revision of the profit income tax, and pursuing additional oil entitlement in Jubilee field.

    Expenditure measures

    As for expenditure, the government plans to introduce measures such as:

    - reduction of the threshold for transfers to statutory funds to 17.5% of tax revenue from current 25%;

    - migration of all statutory funds onto the Ghana Integrated Financial Management Information System (GIFMIS) platforms and ensure that the platform is used to process all their revenue and expenditures transactions;

    - continuation of the 30% cut in the salaries of the president, vice president, ministers, deputy ministers and political office holders;

    - placing a cap on salary adjustment of SOEs to be lower than the negotiated base pay increase for each year;

    - freezing all new recruitment in public sector;

    - negotiation of public sector wages within the context of burden-sharing and ability to pay.

    The government said it would preserve social spending, by doubling the payments under the Livelihood Empowerment Against Poverty (LEAP) from current GHS 45 per month per household, and increasing the number of beneficiary households. The budget for school feeding programme will also be increased.

    Macroeconomic framework

    The 2023 budget is based on GDP growth of 2.8%, non-oil growth of 3.0%, eop inflation of 18.9%, primary surplus of 0.7% of GDP and gross international reserves of 3.3 months of imports. The benchmark oil revenue is USD 1,115.6mn of which USD 780.9mn will go for the budget and USD 334.7mn will be transferred to the petroleum funds. The total oil revenue that is expected it USD 1,484.5mn, but of it USD 368.8mn will be transferred to the Ghana National Oil Company (GNPC). The benchmark oil price and production are not specified in the budget speech but should be provided later in the budget statement and economic policy.


    The 2023 budget appears reasonably realistic in its macroeconomic framework part, as it has seemingly been aligned with IMF projections. We note that the government is in the process of discussing an IMF deal and the finance ministry said it expected to incorporate the key aspects of such a potential programme into the 2023 budget. However, the main risk for the budget is a political one as it will again be difficult to pass it and all of its measures given the slim one-seat majority the ruling NPP holds (138 MPs vs. 137 MPs for the opposition). The minority has already indicated it will not support any "draconian" measures and some MPs pointed to the VAT hike as one of the unacceptable ones. The slim majority means that the absence of any MP, or the speaker (as happened last year) could mean the budget fails. The opposition NDC has indicated it realises the importance of the budget passage given the IMF talks but also demanded that there are more radical spending cuts instead of tax measures. It is yet to see how the debates will go and whether the government will be able to convince legislators to back the budget. The proceedings start on Tuesday, Nov 29, will go.