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General News of Wednesday, 27 January 1999

Source: --

Government revenue expected to rise

Accra, Jan. 27, '99-

Government revenue is expected to exceed current expenditure by about 4,420 billion cedis during the Medium- term Development Plan period (1997-2000), the Government's Vision 2020 document has indicated.

This compares with 1,115 billion cedis during the 1991-95 period.

The document released in Accra on Tuesday, said while the current account will be in surplus in each year during the Plan period, the estimated development expenditure amounting to 4,625 billion cedis will result in an overall budget deficit of 205 billion cedis during the period.

"Although this deficit (in nominal terms) is about five times the deficit during the period 1991-95, the ratio of overall budget deficit to Gross National Product (GNP) is expected to decline from 1.6 per cent in 1991 to 0.7 in 2000."

The document said the deficit will be financed by domestic and external borrowing.

"However, the mobilisation of resources to finance the deficit will be pursued in ways which will not create inflationary pressures on the economy or crowd out private sector credit needs", the document added.

The document said the revenue of central government is expected to rise by 22 per cent to 4,870 billion cedis next year.

Direct taxes are expected to account for 4.5 per cent, about the same percentage as non-tax revenue.

These include receipts from divestiture of state-owned enterprises and income from Non-Performing Assets Recovery Trust (NPART), plus non- revenue receipts or grants, mainly from abroad.

Revenue from direct taxes is expected to grow by 28 per cent per annum, following the growth of incomes and improvements in the tax collection machinery.

The document said despite the proposed review of taxes, which inhibits growth and the commitment of Ghana under the World Trade Organisation on taxes on foreign trade, indirect tax is projected to grow by 29 per cent per annum with the re-introduction of the value added tax (VAT).

This will make indirect tax 14.6 per cent of GNP or 63 per cent of total revenue receipts in the year 2000.

"This optimistic rate of growth is premised on anticipated increases in the volume of domestic and foreign trade and accelerated growth of domestic production."

The document said central government's current expenditure is estimated at 13,087 billion cedis over the period 1996-2000.

"Although this nominal amount will be nearly four times the amount spent during the 1991-95 period, current expenditure is expected to grow at 21.7 per cent per annum during the Medium-Term Development Plan period, compared with 45 per cent per annum during the period 1991-95.

The document said the wage and salary bill will account for about 50 per cent of total current expenditure, while other major commitments include debt-service payments, purchase of supplies and transfers to public boards, corporations and local authorities.

In terms of sectoral allocation, social services are estimated to absorb the largest amount of the total current expenditure reflecting government's commitment to the provision of increased availability and improved quality of social services, especially in the rural areas.

It said efforts will be directed to increase productivity and efficiency in the public service as an essential means to contain the future growth of current expenditure.