Successful domestic debt restructuring and the IMF program have improved the fiscal outlook for 2024
Firms can expect a rebound in public sector demand in 2024 that will center on the government’s flagship programs in infrastructure, agriculture, and healthcare. Multinationals should carefully examine the following projects: Agenda 111, Planting for Food and Jobs Phase II, and the One District One Factory initiative. As the December 2024 elections approach, firms should be prepared to capture sudden emerging opportunities associated exclusively with pre-election spending. However, stricter budget oversight measures amid the government’s ongoing debt restructuring process will constrain demand in most government departments, requiring multinationals to emphasize the cost-cutting attributes or long-term efficiency gains of their offerings. Firms selling to consumers should ensure distributors are well positioned to capture a rebound in demand among civil servants.
Overview
- Finance Minister Ofori Atta announced an ambitious 31% YOY nominal increase in the 2024 budget—from GHS 183.8 billion in 2023 to GHS 226.6 billion 2024—during the 2024 budget speech on November 15, 2023.
- Spending on compensation for employees is marked by a 24.4% YOY nominal increase following the pay-increase agreement between the government and the public labor union in early November. Procurement of goods and services and CAPEX spending will increase by 29% YOY and 40% YOY, respectively, in nominal terms in comparison to the 2023 revised budget allocations.
- Financing for the coming year will primarily rely on the domestic market through the issuance of treasury bills, as the country’s external debt restructuring process is still ongoing. The IMF-ECF program and the World Bank will be the country’s main external financing sources for 2024.
- New tax measures were announced in line with the IMF program and the government’s fiscal consolidation plan. This included the continuation of implementing an upfront VAT on taxable goods by unregistered importers and the amendment of the Fiscal Responsibility Act to improve budget oversight.
Our View
The ambitious increase in government spending is driven by successful domestic debt restructuring, IMF support, and upcoming elections in December 2024. Additionally, given Ghana’s track record of fiscal slippages during election years, the months prior to the December election could see the government spend beyond the allocated budget, generating unexpected new opportunities for multinationals. The magnitude of overspending in 2024 will likely be lower than in previous election years, as Ghana is still in the process of restructuring its external debt after its sovereign default in January 2023; the IMF program will limit the extent to which the government can overspend. There will also be variations in the execution rate of different budget allocations: compensation for employees will be fully executed, supporting consumer spending in 2024. The CAPEX budget will not be fully executed, because the government will struggle to raise funding on international credit markets for investment projects. Procurement of goods and services in 2024 is susceptible to overspending, but it will be lower than the anticipated 137% execution rate in 2023, which was driven by security spending.
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