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Expenditures outstrip income for two years

The government in 1996 and 1997 spent 848.2 billion cedis more than revenue. In 1996, revenue from taxes and non-tax sources amounted to 1,998.3 billion cedis as against an expenditure of 2,260.6 billion cedis, resulting in a deficit of 262.3 billion cedis. Revenue in 1997 was 2,358.4 billion cedis against a projected revenue of 2,944.3 billion cedis which gave rise to a revenue variance of 585.9 billion cedis.

THE BUDGET AND ECONOMIC POLICY FOR 1998

The Minister of Finance, Mr. Kwame Peprah, presented the budget and economic policy for 1998 to Parliament in February. In a review of the economic performance for 1997, the minister reported a 5.1% growth in GDP. The appreciable growth of real GDP was due to the strong growth of the service (6.2%) industrial (5.7%) and agricultural (3.3%) sectors of the economy. Although the 15% target for end of period rate of inflation for 1997 was not achieved, the actual rate of inflation of 20.8% was much lower than most economic observers had projected.

The cedi depreciated by 22.7% in 1997 in spite of the government's efforts to trim it down from the previous year's 16% deprecation rate. Inspite of the tight monetary policies in 1997, the monetary authorities had a lot of difficulty in reducing the growth in money supply. Money supply grew by 39.5% in 1997 a slight increase from the 39.4% rate in the previous year. The main thrust of the 1998 budget was directed at strengthening budgetary discipline and increasing savings.

In line with government's medium term objectives, the macroeconomics targets projected for 1998 are as follows : · A real GDP growth rate of 5.6%. · An end-of-period rate of inflation of 9.5%. · An overall broad budget deficit equivalent to 5.8% of GDP. · A primary budget surplus equivalent to 4% of GDP.

Overall balance of payment surplus $80 million. To be able to achieve these objectives we are of the opinion that government should adopt measures that will slow down the growth in state expenditure and pursue policies that will expand revenue during the year.

The continuing but gradual improvement in the economy over the last couple of years will provide the impetus that is needed to attract more Foreign Direct Investment into the country.


                        1995   1996    1997    1998*
Real GDP Growth (%)     4.5     5.2     5.1     5.6
Inflation:
Annuak Average (%)      59.5    46.5    27.9    15.0
End-of-Period (%)       70.8    32.7    20.8    9.5
Merchandise  Exports(fob) US$M  1,431   1,571   1,481   1,625
Merchandise Imports (fob) US$M  1,688   1,937   1,753   1,978
Trade Balance US$M      (256)   (366)   (272)   (354)

Current Account(including official transfer)US$M
                        -143.7  -322.7  (213.8) -311.1
Capital Account US$M     459     286     239     391
Overall Balance US$M     249     (19)    25       80

Source: Bank of Ghana