A review of Government’s macroeconomic targets set in the 2014 budget indicates that Ghana has missed all major pointers aimed
at ensuring fiscal prudence and debt sustainability. The fiscal policy objective of the 2014 budget aimed at improving revenue
mobilization, rationalizing and enhancing the efficiency of public
expenditures, as well as implementing new debt management
reforms. In this regard, the budget emphasized overall
budget deficit as its fiscal anchor, and targeted a reduction
in the deficit from 10.1 percent of Gross Domestic Product
(GDP) in 2013 to 8.5 percent of GDP in 2014. However, preliminary data from January to May of this year indicates that, both revenue and expenditure were below their respective targets for the period. The shortfall in revenue was lower than the shortfall in expenditure, resulting in cash fiscal deficit equivalent to 3.6 percent of GDP, against a target of 3.5 percent. This compares to a deficit equivalent of 4.0 percent of GDP for the
same period in 2013. Total revenue and grants for the period was GH¢9,043.8 million, equivalent to 7.9 percent of GDP, against a target of GH¢9,527.9 million, equivalent to 8.3 percent of GDP.
This means that, from January to May this year, revenue generation and government expenditure have fallen below the expected target that is required to enable the economy
operate at optimum level. Explaining the development in parliament during the Mid-Year Review of the Budget and Supplementary Estimates, the Minister of Finance, Mr. Seth
Terkper stated that, the shortfall in total revenue and grants for
the period was as a result of low disbursement of project grants
from development partners, coupled with low domestic revenue
collections. According to him, grant disbursements from
development partners was 69.0 percent lower than the budget
target and 72.0 percent lower than the outturn recorded during
the same period of 2013. He stated that, the lower than
expected outturn of grants was due to the slow disbursement of
project grants from development partners, resulting in project
implementation delays in the signing of mixed credit agreements.
On domestic revenue mobilisation, total tax revenue amounted
to GH¢7,076.8 million, 2.7 percent lower than the budget target of GH¢7,273.7 million. He explained that the shortfall in tax
revenue compared to the target was partly due to the slowdown
in economic activity, the delay in the implementation of the
change in petroleum excise from specific to ad valorem, lower than anticipated revenue from excise taxes as well as the delay
in the implementation of the VAT on fee based financial services.
In addition, the decline in gold prices on the world market and rising operating cost led to lower corporate income taxes from the mining sector. In nominal terms tax revenue was 33.6 percent higher than the outturn recorded for the same period in 2013.
Mr. Terkper explained that the sturdy year-on-year growth in tax
revenue was mainly due to strong performance of oil tax revenue,
which was about 179.3 percent higher than the budget target, and 211.5 percent higher than the outturn for the same period
in 2013. He further stated that the strong performance of oil rev-
enue was mainly due to the payment of part of 2013 corporate
income taxes in the first quarter of the year as well as higher oil price and quantities. However, of the total tax revenue, non-oil tax revenue for the period was GH¢6,463.9 million, 8.3 percent
lower than the Budget target and 26.6 percent higher than the outturn for the same period in 2013. Total expenditure, including
payments for the clearance of arrears and outstanding commitments from January to May this year amounted to GH¢13,170.9 million, representing11.5% of GDP, against a target of GH¢13,587.5 million, showing 11.8% of GDP.
