...to plug revenue shortfall
Government has outlined new measures to avert a fiscal explosion as expenditure continues to spiral ahead of revenues, threatening the attainment of key budgetary targets.
The measures include re-imposition of the fiscal stabilisation levy; additional import levies; increase in excise duties; review of user fees and charges; and a special audit of the revenue administration system to plug leakages.
These proposals, to be put before Parliament shortly, will boost tax revenue -- which was 14 percent short of target between January-April, Finance and Economic Planning Minister Seth Terkper said last week.
The fiscal stabilisation levy, introduced in 2009 but abolished in the 2012 fiscal year, is an additional profit tax on selected sectors of the economy -- including the financial services sector, mining companies and breweries.
Government will also take concrete steps to refinance portions of the public debt to reduce debt service costs, undertake more regular adjustment of utility prices to complement the recent increase in petroleum prices, and implement the Market Premium Policy approved by Cabinet for Single Spine salary negotiations.
“Given the fiscal outcome for the first four months of the year -- in particular, the cost of debt service and the burden of wage and other personal emoluments on the budget -- Cabinet approved the use of additional revenue, expenditure and debt measures to achieve the end-year targets,” Mr. Terkper said.
In his budget statement presented in March, Mr. Terkper said Government aims to cut the fiscal deficit from 12 percent of GDP in 2012 to 9 percent in 2013 through a combination of revenue and expenditure measures.
The budget deficit for the first four months of the year was however larger than expected, due to a shortfall in revenue and grants. The gap, which was GH¢3.4billion, was equivalent to 3.8 percent of GDP -- against a target of GH¢2.7billion or 3 percent of GDP.
Spending on wages was GH¢3billion, against a projection of GH¢2.8billion, while interest expenditure amounted to GH¢1.6billion compared to an estimate of GH¢1.1billion.
“One effect of the fiscal pressures we have outlined is that funds for social intervention programmes -- which fall under the goods and services category of the budget -- are being crowded out,” said Mr. Terkper.
“Government will ensure that part of the additional revenue to be generated will be used to resource this balance,” he added. Government will also uphold the objective of improving productivity in its negotiations with public-sector workers under the Single Spine pay policy.
A further risk to the budget, according to the Finance Minister, emanates from falling international commodity prices and import pressures. The price of gold, the economy’s number-one export earner, has slumped by more than 18 percent this year, and the cedi has depreciated by more than 3 percent, weighed down by strong foreign exchange demand.
Most of the new fiscal measures, Mr. Terkper said, will have sunset clauses because they are only meant to fix the current problems.
On the total public debt stock, he said although it increased by 7 percent over the figure for 2012 -- from US$18.83billion to US$20.12billion at the end of March 2013 -- the increase was as a result of disbursements in existing loan arrangements and not new ones.