Fiscal deficit goes haywire

For the first four months of 2013, Government’s fiscal deficit was equivalent to 3.8 percent of Gross Domestic Product (GDP) as against a target of 3 percent.

This came to light after the Bank of Ghana (BoG) gathered provisional estimates on Ghana’s broad fiscal data.

The bank’s latest Monetary Policy Committee report stated that such a development was on the back of a significant shortfall in revenues with expenditures marginally below target.

“Total revenue and grants was GH¢6.3 billion against a target of GH¢7.1 billion. Of this, domestic revenue amounted to GH¢5.9 billion below the target of GH¢6.4 billion on account of lower tax revenues.

“Total revenue amounted to GH¢4.2 billion below the target of GH¢4.9 billion and the low tax revenue collection over the period was the result of lower company profits and lower imports due to the general slowdown in economic activity.”

It said grant disbursement also reduced by 38.3 percent, reflecting non-disbursement from the Multi-Donor Budget Support partners.

While non-tax revenues registered higher than budgeted at GH¢1.6 billion compared to target of GH¢1.5 billion, 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 (3.8 percent of GDP) in the four months of the year, as against a target of GH¢2.7 billion (3 percent of GDP).”

The deficit was financed mainly from domestic sources, resulting in net domestic financing of GH¢2.7 billion, higher than the budget target of GH¢2.2 billion.

The foreign financing component of the budget amounted to GH¢687.2 million, also higher than the GH¢482.1 million target.

The last surveys conducted in March and April by the Central Bank showed weakened sentiments by both businesses and consumers.

“The business index declined to 99.0 percent in March 2013 from 104.1 in December 2012. This was partly due to the energy crisis, which in turn lowered business optimism about growth prospects and heightened inflation expectations over the medium-term horizon.

Similarly, the Consumer Confidence Index also fell to 96.1 in April, from 105.0 in January 2013.”

Also, the Bank of Ghana’s Composite Index of Economic Activity, which measures the pace of economic activity contracted by 0.6 percent in March 2013 as against 14.8 percent growth in March 2012.

“All the components of the CIEA recorded negative yearly growth rates with the exception of tourist arrivals, domestic VAT and domestic money banks’ credit to the private sector.

On global developments, international commodity prices broadly softened in the first quarter of 2013.

Crude oil price ended the first quarter at US$112.56 per barrel, and are projected to end the year at US$100 per barrel. Gold prices declined sharply to US$1,400 per ounce as at May 21, and are forecast to rise only slightly to US$1,455 per ounce by year end.

However, cocoa prices were at US$2,176 per tonne in the first quarter and it is expected to end the year at US$2,475 per tonne.