The Bank of Ghana (BoG) Monetary Policy Committee (MPC) report on the first quarter of 2013 pointed to significant revenue shortfalls while expenditures moved northward, howbeit remaining broadly within targets.
Broad fiscal data estimates showed government fiscal deficit rose to the equivalent to 3.8% of GDP, against a target of 3.0%, for the first four months of 2013.
Total revenue and grants was GH¢6.3 billion, against a target of GH¢7.1 billion. Of this outturn, domestic revenue amounted to GH¢5.9 billion, below the target of GH¢6.4 billion on account of lower tax revenues.
Total tax revenue amounted to GH¢4.2 billion, below the target of GH¢4.9 billion.The MPC attributed the low tax revenue collection to lower company profits and lower imports due to the general slowdown in economic activity.
Grant disbursements also fell short of target by 38.3 percent, reflecting non-disbursement from the Multi-Donor Budget Support (MDBS) partners. Non-tax revenues, however, turned in higher than budgeted at GH¢1.6 billion, compared to the target of GH¢1.5 billion.
Significantly though, expenditures for the period were marginally below target.Total expenditures, including payments for the clearance of arrears and outstanding commitments amounted to GH¢9.7 billion, lower than the budget target of GH¢9.8 billion. The wage bill amounted to GH¢3 billion, against a target of GH¢2.8 billion. Similarly, interest payments amounted to GH¢1.6 billion, against a target of GH¢1.1 billion.
These developments resulted in an overall budget deficit of GH¢3.4 billion, representing 3.8% of GDP, as against a target of GH¢2.7 billion representing 3.0% of GDP.The deficit was financed mainly from domestic sources, resulting in a Net Domestic Financing of GH¢2.7 billion, higher than the budget target of GH¢2.2 billion. Foreign financing of the budget amounted to GH¢687.2 million, also higher than the GH¢482.1 million target.
This resulted in the stock of public debt increasing to GH¢38.3 billion or 43.2% of GDP at end April 2013, from GH¢35.1 billion in December 2012. Of this, the stock of domestic debt amounted to GH¢20.3 billion compared to GH¢18.5 billion in December 2012. External debt stood at US$9.5 billion up from US$8.8 billion over the same period.
While government has put in place measures to address the revenue shortfalls and rationalise expenditures including a freeze on new projects to help with the fiscal consolidation efforts, as well as, a programme to restructure its debt by substituting the high cost short-term debt with longer-term instruments to help reduce the high interest payments, hints about government’s moves to impose 5% percent tax on the profits of businesses as stabilization levy is drawing the ire of some big business operators.Corporate commentators say if imposed, the levy would amount to an additional tax that would worsen the plight of corporate entities.
The tax is expected to be imposed on the profits of banks, financial services, mining and telecom companies and brewery firms and government is awaiting parliamentary approval on the implementation date for the proposed levy.
A similar 5% National Stabilization Levy imposed in 2009 resulted in affected companies putting a freeze on employment, thereby aggravating the country’s already challenging unemployment situation.
Analysts worry the current levy, if imposed, would have similar impacts, more especially as government’s freeze on new projects could already lead to the laying off of redundant labour, particularly in the construction sub sector of the economy.