BUDGET: Total revenue better than projected

Accra, Feb. 24, GNA - Provisional fiscal data indicate that total receipts in 2004, including donor grants, foreign loans and HIPC relief for 2004 amounted to C228,736.8 billion.

This is about A23,883.7 billion above the budget projection of C224,853.1 billion.


Presenting the 2005 Budget to Parliament on Thursday, the Minister of Finance and Economic Planning Mr Kwadwo Baah-Wiredu said total budgeted payments for the 2004 fiscal year were estimated at A224,853.1 billion.


He said the provisional out-turn for the period was A228,736.8 billion, consisting of A28,951.6 billion of statutory payments and =A219,773.2 billion of discretionary spending representing 31.2 percent and 68.8 percent of the total respectively.


Mr. Baah-Wiredu said the provisional fiscal outturn for 2004 shows an overall budget deficit of 3.2 percent of GDP. While the outcome exceeded the target of 1.7 percent of GDP, it is nonetheless a marginal improvement over the fiscal performance of 3.3 percent of GDP achieved in 2003.


The Minister said the overrun of A23,883.7 billion was due to four main expenditure items, two of which were self-financing. "First, the increased disbursement of project loans and grants made room for the financing of additional capital expenditure without exerting any pressure on domestic resources.


"Second, is the transfer of subsidies to TOR for under-recovery in their operations, resulting from the non-adjustment of petroleum prices to reflect the hike in crude oil prices on international markets. In the event, these subsidies, which were not accounted for in the budget amounted to A21,772.3 billion.


"The third reason is attributable to HIPC-financed expenditures which were fully covered by resources from debt relief. The fourth item relates to personal emoluments which exceeded the budget projection of =A26,632 billion by A2314.8 billion.


"This was due to transfers to foreign missions (to mitigate the effect of the weakness of the US dollar vis-a-vis the euro and pound sterling on the international markets) and subvented organisations." Mr. Baah-Wiredu said total domestic resources including divestiture receipts constituted 67.1 percent of the total resource envelope, with donor assistance accounting for the remaining 32.9 percent. Domestic revenues (tax and non-tax) amounted to A218,998.0 billion, exceeding the 2004 projection by 9.4 percent. In terms of GDP, the 2004 performance of 23.8 percent was a marked improvement over the 20.8 percent attained in 2003.

Non-Tax receipts of A21,136.3 billion exceeded the budgeted estimates by nearly 68 percent, mainly as a result of more effective implementation of the Financial Administration Act as it relates to State Owned Enterprises (SOEs).


The 2004 performance represented 1.4 percent of GDP compared to 0.5 percent of GDP in 2003.


Mr Baah-Wiredu said all tax categories improved in performance compared to 2003. The 30.1 percent improvement in tax collections over the 2003 amount of A213,379.5 billion to A217,403.0 billion reflects, in part, the intensified efforts devoted to tax administration and enhanced compliance.


The Internal Revenue Service (IRS) accounted for 30.7 percent of total tax receipts in 2004, a marginal improvement over the 2003 performance of 30.6 per cent.


Tax revenues credited to the Value Added Tax (VAT) Service in 2004 represented nearly 26 percent of the total, up from the 2003 outcome of 25 per cent.


The tax share attributable to the Customs, Excise and Preventive Service (CEPS) in 2004 amounted to 37.7 percent down from the 2003 outcome of 38.6 percent mainly on account of losses in ad valorem excise duties resulting from non-adjustment of ex-refinery prices to reflect world market trends.


"In terms of classification by tax type, Direct Taxes yielded =A25,3440.0 billion compared with A24,964.9 billion projected in the budget."


The Minister said taxes on International Trade amounted to =A23,808.9 billion exceeding target of 3,666.7. Indirect Taxes turned out to be A28,250.2 billion exceeding the budget projected by 8.0 percent.

Mr. Baah-Wiredu said with better implementation of the policies underpinning the budget for 2004, disbursement of external grants reached a record level of A24,940.3 billion equivalent to 6.2 percent of GDP compared to the 3.9 percent of GDP in 2003. This exceeded the budget estimate of A23,053.8 billion by A21,886.5 billion, equivalent to 61.8 percent.


Project grants amounted to A22,125.3 billion compared to the =A2870.7 billion projected for 2004, making room for the capital expenditure programme to be expanded during the year.


The outturn for programme grants at A2 1,762.5 billion, exceeded the budget estimate of A21,188.0 billion by A2574.5 billion. The Minister said HIPC debt relief from our multilateral development partners amounted to A21,052.5 billion and was higher than the projected relief of A2995.1 billion by A257.5 billion. Mr Baah-Wiredu said total disbursement of foreign loans in 2004 also exceeded the budget estimate of A22,601.5 billion by A2804.2 billion on account of project loans which exceeded the budget projection of =A21,621.5 billion by A2864.3 billion.


Programme loan disbursements, however, fell short of the budget estimate of A2980.0 billion by A260.1 billion, although this represented full disbursement of commitment from the Multidonor Budget Support (MDBS) mechanism.


Mr. Baah-Wiredu said divestiture receipts amounted to A2285.7 billion representing 67 percent of the target amount of A2426.8 billion with the shortfall attributed to delays in the evaluation and due diligence of SOEs earmarked for divestiture.


HIPC relief from bilateral and commercial creditor s amounted to =A21,064.8 billion, more than double the projection of A2512.9 billion.


"This was the result of our reaching the Completion Point under the HIPC initiative, and the subsequent acceleration in negotiations in respect of inflows of relief expected from some bilateral development partners."


Mr Baah-Wiredu said repayments on the principal component of external debt due was A21,920.1 billion, against a targeted amount of A22,686.6 billion, while payments on external interest amounted to A2927.4 billion, compared to a projection of A2972.1 billion.

The lower outturn is partly due to the fact that the budget estimates included contingent liabilities. However, none of these guarantees crystalised as the SOEs in question were able to service their debts as planned.


The Minister said debt service payments for Government of Ghana inflation-indexed bonds amounted to A2349.7 billion. This was the result of Government's decision to retire the inflation-indexed bonds that matured in the course of the year, and reflected higher capital appreciation than anticipated. In the event, the net retirement of the inflation-indexed bonds in 2004 amounted to =A2530.1 billion.


Interest payments on the domestic debt amounted to A22,545.0 billion, A288.5 billion higher than programmed, as a result of the payment of additional interest of A2339.4 billion on TOR bonds. Mr Baah-Wiredu said the Road Fund received a total of A2639.5 billion, compared to the projected A2607.7 billion.


Other Petroleum-Related Funds received A267.5 billion in transfers compared with a projected A274.6 billion. Total transfers into the two Funds thus exceeded the projection by A224.7 billion.


Transfers to households, comprising pensions, gratuities and social security contributions by Government on behalf of public servants, collectively amounted to A21,279.4 billion, against a budget of =A21,054.9 billion. The over-expenditure was associated with the commencement of implementation of the new policy on pensions computation.


Mr Baah-Wiredu said in 2004 current transfers into the District Assemblies Common Fund (DACF) amounted to A2749.4 billion, A237.8 billion less than the projection of A2787.2 billion. While the projection was based on the total tax projections for 2004, the effective transfers were based on actual tax revenues realised from the 4th quarter of 2003, through the 3rd quarter of 2004, as agreed with the Fund's Administrator.


Total transfers into the Ghana Education Trust Fund (GETFund) in 2004 amounted to A2823.4 billion, covering the twelve-month period of December 2003 through November 2004 ensuring that payments into the fund remained current. The transfers exceeded the budget estimate by about =A212.9 billion.


He said total discretionary payments exceeded the budget provision by 32 percent.

The outturn for personal emoluments amounted to A26,946.7 billion, exceeding the budget amount of A26,632.0 billion by A2314.8 billion. The overrun was partly as a result of payment of increased Additional Duty Hours Allowance (ADHA) for health workers as well as increased transfers to foreign missions and other transfers to subvented agencies as indicated earlier.


Expenditure in respect of Administration and Service totalled =A22,360.3 billion, against a budget of A22,734.3 billion, showing a lower outturn of A2374.0 billion.


Total Investment expenditure excluding those funded from HIPC resources and resources transferred into statutory funds amounted to =A25,805.2 billion, against a budget of A23,225.7 billion.


Mr Baah-Wiredu said expenditures financed from HIPC Debt Relief amounted to A21,869.6 billion, against the targeted amount of =A21,206.4 billion.


Payments in respect of subsidies amounted to A22,207 billion. The budget, allocated a total of A2392 billion as subsidies to VRA (for the purchase of crude oil for the operation of the thermal plant to ensure reliable supply of electricity) and ECG to address the needs of lifeline electricity consumers.


However, due to the higher-than-projected world crude oil prices, TOR had to be subsidized to the tune of A21,772.3 billion. In the event, additional domestic resources had to be mobilized to contain the situation.