Parliament approves 2021 Budget Statement after a rowdy headcount

Parliament has adopted the 2021 Budget Statement after a long drama reminiscent of the selection of the Speaker.

After a heated debate for days, the adoption of the budget had to be determined by a headcount.

Legislators who were in favour of the motion for the budget to be approved were 137 while the Members of Parliament (MPs) in opposition were 134 after a headcount.

Three MPs were absent.

Following fierce debating, Member of Parliament for Ofoase-Ayirebu moved for Parliament to adopt the budget which was presented to parliament on Friday, March 12.

The Minority had opposed the numerous taxes which dominated the budget.

They also raised concerns about debt, and some expenditures they claim were missing.

The minority further insisted that the 2020 budget deficit of 11% was understated.

But the Majority defended the budget stating how the debt had been a spill-over from what was inherited by the government.

Citing COVID-19 expenditures, the Majority highlighted the need for the expenditure request towards a recovery and growth of the economy.

In the absence of Speaker Alban Bagbin, the First Deputy Speaker of Parliament Joseph Osei Owusu who presided over business put the motion to a voice vote.

There was an equal loud “YES” and “No” vote to the motion leading to a stalemate.

Mr Osei Owusu said the YES vote from the Majority side had it but the Minority opposed.

At that time, the Speaker had arrived in the chamber.

After assuming his seat, Minority Leader Haruna Iddrisu indicated that MPs who had opposed the budget were more than those in favour.

The Speaker of Parliament ruled for a headcount since the Minority had challenged proceedings.

Meanwhile, the budget estimated stated in the police document are scheduled to be debated the following week.

How much does government intend to spend in 2020?

The government intends to spend in excess of 54 percent of what it intends to generate as revenues for 2021.

The government is seeking parliamentary approval for GHȻ 111.3 billion as total expenditures while expecting total revenues and grants of GHȻ 72.1 billion for the year.

The expenditure for 2021 is also 13 percent higher than the GHȻ 98.1 billion approved by parliament on December 23 for the 2020 year.

The key drivers of expenditure growth include the wage bill, interest payments, Covid-19 related expenditures, security, and funding of Government flagship programmes.

The revenue constitutes 16.6 percent of Gross Domestic Product (GDP) which the expenditure will consume 25.7% of GDP.

The deficit of GHȻ 39.2 is expected projected at -9.0 of GDP which exceeds the 5percent deficit cap permitted under the Fiscal Responsibility Act.

Parliament, however, suspended the cap in 2020 on account of ballooning expenditures associated with COVID-19.

Revenue source 

Ghana’s revenue is hinged on crude oil projected at a benchmark price US$54.75 per barrel, up from US$39.1 per barrel for 2020.

The gas price for 2021 is also projected at US$$5.29 per MMBtu, up from the 2020 projection of 4.31 per MMBtu.

Ghana is targeting 2021 BR crude oil output of 64.86 million barrels (177,701.66 barrels of oil per day).

Oil from Jubilee, TEN and SGN is expected to contribute 56.23 million barrels in 2021.

The sources of petroleum revenues projected for 2021 will amount to US$885.7 million.

This is made up of Royalties (US$201.0 million), Carried and Participating Interest (US$524.9 million), Corporate Income Tax (US$158.5 million) and Surface Rentals (US$1.30 million).

Total revenue and grants for 2021 is expected to increase from an outturn of GH¢53,842 million (14.0% of GDP) for 2020.

Revenue is estimated at GH¢70,665 million and represents an annual growth of 33.9 percent over the recorded outturn for 2020. Of the total Domestic Revenue amount of GH¢70,665 million, Non-oil Tax Revenue will constitute about 75.8 percent and amount to GH¢53,598 million (12.4% of GDP), reflecting the impact of expected improvements in tax compliance and reforms in revenue administration.

Non-Tax Revenue (excluding oil) is projected at GH¢7,078 million (1.6% of GDP) and constitutes 10.1 percent of Total Domestic Revenue. Of this amount, GH¢5,893 million will be retained by Internally Generated Fund (IGF) generating institutions with a potential yield of GH¢200 million from the IGF capping policy.

Receipts from upstream petroleum activities are projected at GH¢5,427 million (1.3% of GDP), representing a 51.6 percent growth over the outturn for 2020 mainly on the back of expected increase in both production and world market prices of crude oil.

Total receipts from Other Revenue (comprising of ESL and SSNIT Contribution to NHIL) will amount to GH¢4,562 million (1.1% of GDP), indicating an increase of 75.4 percent over the outturn of GH¢2,601 million in 2020.

Grants disbursement from Development Partners is estimated at GH¢1,465 million (0.3% of GDP), reflecting a nominal growth of 38.8 percent over the 2020 outturn of GH¢1,056 million. The anticipated higher inflow is expected mainly from Project Grants.

Expenditure areas

Wages and Salaries are projected to amount to GH¢26,300 million and constitute 23.6 percent of the Total Expenditure (incl. Arrears clearance). As a percentage of GDP, the wage bill is projected to increase to 6.1 percent from the 6.5 percent recorded in 2020.

Use of Goods and Services is also projected at GH¢6,456 million (1.5% of GDP). This represents 5.8 percent of the projected Total Expenditure (incl. Arrears clearance). The per annum reduction of 27.6 percent reflects Government’s policy of expenditure realignment and rationalisation.

Interest Payments are projected at GH¢35,325 million (8.1% of GDP). Of this amount, domestic interest payments will constitute about 78.8 percent and amount to GH¢27,829 million.

Capital Expenditure remains very low and projected at GH¢11,423 million (2.6% of GDP) and a decline of 4.1 percent over the 2020 outturn. Of this amount, Domestic financed Capital Expenditure is estimated at GH¢3,310 million (0.8% of GDP). An amount of GH¢8,112 million has been estimated for Foreign Financed Capital Expenditure and this will be funded by a combination of Project Grants and Loans.