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Weekly Insights – Ghana – 10/03/2017 – Nimed Capital Limited

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THOUGHT OF THE WEEK


Understanding the 2017 Budget

Understanding the budget statement helps in making prudent investment decisions and financial forecasts. The budget statement helps inform businesses and citizens on how much Government expects to generate as revenue and how it intends to spend those revenues. Think of the budget as a projected income statement, which states clearly government’s expected revenue and expenditure.
In reading the budget, you first look at the revenue outlook for the year. In the 2017 budget. Government anticipates to generate revenue of GHC 44.96 billion in 2017 compared to GHC 33.67billion in 2016. Almost 76.5% of the projected revenue is expected to come from taxes with the other 23.5% projected to come from grants, social contribution and royalties.
The expenditure section should be the next step in reading the document. This will tell you how Government will spend the anticipated GHC 44.96billion revenue. In the 2017 budget, Government expects to spend a total of GHC 58.14billion to pay compensations, service interest on the debts, expend on capital expenditure and grants to other Government units.
A careful look at the GHC 44.95 billion revenue and GHC 58.14billion expenditure indicates that, Government anticipates spending about GHC13.19billion more than it generates as revenue. This is what we call a budget deficit. The approach Government uses to fund this deficit has a direct impact on the overall investment landscape and economy.

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