Eurobond Commentary

Unbudgeted expenditure, largely occasioned by emergency spending to contain the spread of the corona virus pandemic that was first recorded on March 12 in the country, has astronomically shot up the budget deficit by nearly double in the first quarter of the year. Fiscal Development Report (May 2020) released by the Bank of Ghana shows that government operations in the first quarter of this year sent the budget deficit to GH¢13billion against a target of GH¢7.2billion. This means the budget deficit widened to 3.4 per cent of GDP against a pre-pandemic target of 1.9 per cent of GDP. Finance Minister Ken Ofori-Atta said in March government would secure a World Bank loan of GH¢1.7billion and an IMF Rapid Credit Facility of GH¢3.1billion. The former has subsequently given government a facility of US$500million, whereas the latter has given US$1billion to take care of budgetary and emergency needs. All these funds came in April, essentially meaning more debt will be piled onto the mounting debt stock. Government has projected an overall budget deficit to hit, at least, 7.8 percent of GDP from a pre-corona target of 4.7 percent.