The Minister of Finance and National Planning, Zainab Ahmed, has said the federal government will borrow over N11 trillion and sell national assets to finance the budget deficit in 2023.
She also said the government’s budget deficit is expected to exceed N12.42 trillion if it should keep petroleum subsidy for the entire 2023 fiscal cycle.
Mrs Ahmed disclosed this on Monday while appearing before the House of Representatives Committee on Finance to defend the 2023-2025 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP).
Explaining two scenarios of the budget deficit to the committee, the minister said the first option involves retaining the petroleum subsidy for the entire 2023 fiscal year.
According to her, in the first scenario, the deficit is projected to be N12.41 trillion in 2023, up from N7.35 trillion budgeted in 2022, representing 196 per cent of total revenue or 5.50 per cent of the estimated GDP. In this option, she added, the government would spend N6.72 trillion on subsidy.
Mrs Ahmed said the second option involves keeping subsidy till June 2023 and that this scenario will take the deficit to N11.30 trillion, which is 5.01 per cent of the estimated GDP. In this option, PMS subsidy is projected to gulp N3.3 trillion.
She noted that the first option is not likely to be achievable based on the current trend while the second option would require tighter enforcement of the performance management framework for government-owned enterprises that would significantly increase operating surplus in 2023.
The projected deficit under the second option, the minister said, is expected to be financed through new borrowings from local and international sources. This will include a total of N9.32 trillion in new borrowings, comprising N7.4 trillion from domestic sources and N1.8 trillion from foreign sources. The government is expected to generate N206.1 billion from privatisation proceeds and N1.7 trillion in multilateral project-tied loans.
According to the existing Act, the deficit must not exceed 3 per cent of the GDP. However, the law makes provision for the President to cross the threshold with the approval of the National Assembly.
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