On Wednesday. 28th October, the Finance Minister, Ken Ofori-Atta presented the budget for the first quarter of 2021 captioned “Expenditure in Advance of Appropriation.”
The budget presentation forms part of an election year tradition, to ensure the smooth transition of power, and the implementation of government plans before handing over, in first three months in the year after an election.
Q1 2021 Budget – Purpose of the GH¢27.4 billion request
Presenting the budget to parliament, the Finance Minister requested for GH¢27.4 billion to
“carry on the services of government until the expiration of three months from the beginning of the 2021 Financial Year.”
Ken Ofori Atta stated that the budget will be used to cover
“compensation of employees, ex gratia awards, interest and amortization payments, transfers to statutory funds, critical programmes and Goods and Services, and Capex allocations of MDAs.”
One of such critical programmes indicated by the Finance Minister in the Q1 2021 budget reading was the “Agenda 111 District and Regional Hospitals” which is aimed at providing deprived communities with health facilities.
The Finance Minister gave the breakdown of the GH¢27.4 billion as follows:
1. Compensation of Employees (GH¢708,960,148)
2. Use of Goods and Services (GH¢1,595,571,683
3. Interest Payments (GH¢7,002,221,941)
4. Subsidies (GH¢259,087,194)
5. Grants to Other Government Units (GH¢4,340,216,517)
6. Social Benefits (GH¢41,271,000)
7. Other Expenditure (GH¢813,610,025)
8. Capital Expenditure (GH¢1,903,658,408)
9. Arrears Clearance (GH¢350,000,000)
10. Amortisation (GH¢3,419,583,605)
Q1 2021 Budget – Source of funding
According to Ken Ofori-Atta, the government plans to finance the Q1 2021 budget by borrowing from the international bond market which comprises the issuance of sovereign bonds of US$3billion, with the option to increase it to US$5billion should market conditions prove favourable. Out of the amount, US$1.5billion will be used to support the 2021 budget and US$3.5billion for liability management.
“Mr Speaker, to support the 2021 budget and liability management, we plan to source funding from the international capital market. This will comprise the issuance of sovereign bonds of US$3 billion with the option to increase it to US$5 billion should market conditions prove favourable. Out of the amount to be raised, US$1.5 billion will be used to support the 2021 budget and US$3.5 billion for liability management,” he said.
Economic recovery from COVID-19
Commenting on how the government swiftly moved to mitigate the threat that COVID-19 posed to businesses and individuals, the minister said, by
• “implementing the GH¢1,342million Covid-19 Emergency Preparedness and Response Plan to protect lives;
• operationalising the GH¢1.2 Billion Coronavirus Alleviation Programme (CAP) to support businesses;
• launching a GH¢2 billion Guarantee Scheme to enable SMEs borrow at a more affordable rate;
• supporting the GH¢3 billion credit and stimulus package by commercial banks in Ghana to revitalize industries, especially pharmaceutical, hospitality, services and manufacturing sectors;
• supporting households and businesses with electricity and water subsidies in excess of GH¢1.3 billion; and
• funding the provision of cooked food to 1.83 million and 917,000 vulnerable persons within Accra & Kumasi metropolis, respectively,”
Ghana’s economy thrived in the face of the global pandemic that has desolated some economies. According to Ken-Ofori Atta, despite the benefit of all these programmes in ensuring Ghanaian businesses and the economy as a whole thrives, it will leverage on the Africa Continental Free Trade Area (AfCFTA) agreement to continue to grow the economy.
“I want to assure this House that we will recover, we will revitalise, and we will transform the economy. We will pivot off the AFCFTA headquarters in Accra for Ghana to become a dynamic regional hub. We have planted the seeds for a fast-paced and more inclusive recovery. Recognising the role of capital and credit, we are certain that the cleaned-up and revitalised financial sector will support our recovery efforts and sustain growth,” he said.
The Finance Minister made it known that a more detailed 2021 Budget Statement and Economic Policy of Government will be submitted to parliament by March 2021.