Abstract
2019 Article IV Consultation; Press Release; Staff Report; and Statement by the Executive Director for Ghana
This supplement provides an update to the Staff Report (SM/19/264), based on additional information obtained by staff after the Report was circulated to the Executive Board, on (i) the 2020 budget law presented on November 13 and approved by Parliament on November 26, and (ii) the November 25 Monetary Policy Committee decision to maintain the policy rate unchanged. The update does not alter the thrust of the staff appraisal.
A. 2020 Budget Law
1. More granular information on the assumptions underlying the 2020 budget is now available (the deficit target remains unchanged):
• Revenues in 2020 are projected to be 1.5 percent of GDP higher compared to the expected 2019 outcome. The projected increase is larger than the annual average increase in previous years and may be optimistic given past challenges to domestic resource mobilization.
• Capital spending is projected to reach 2.3 percent of GDP, or 0.4 percentage point of GDP higher than the average capital spending execution in the past three years. Given existing execution capacity challenges and systematic postponement of investment projects in past years, actual capital spending in 2020 may turn out to be lower than budgeted.
2. This information does not change staff projections. Staff considers that a possible revenue underperformance is likely to be compensated by under execution of capital spending, following a pattern observed in past years. This would result in a 2020 headline deficit (excluding financial and energy sector costs) in line with staff’s projections of 4.9 percent of GDP and an overall deficit of 6.4 percent of GDP.
B. November 2019 MPC Meeting
3. The Monetary Policy Committee (MPC) of the Bank of Ghana maintained the policy rate unchanged at its November 25 meeting. Inflation increased slightly to 7.7 percent (y-o-y) in October from 7.6 percent in September but remains below the center of the target band (8 percent). The MPC kept the policy rate at 16 percent. Staff views this monetary policy stance as appropriate.