<<Print>>

Ghana�s fiscal deficit widened to GH�3 billion in 2010 and was 6.8% of (new) nominal GDP, according to provisional figures published by the Ministry of Finance and Economic Planning. The figure shows the budget estimate was overshot by more than GH�1billion; and the deficit-to-income position could have been murkier - coming in at 11.5% of old GDP - but for the significant boost to output data after last November�s national-income revisions. The deficit-to-old GDP target was 7.5%, subsequently revised to 4.4% of new GDP. But both targets were missed on the back of less-than-projected revenue and grants inflows, and expenditure overruns. Net domestic financing of the deficit was GH�2.1billion, while net financing from foreign loans was GH�1.2billion. Exceptional financing was GH�93.5million. The reported deficit excludes TOR debt-financing of GH�445million, implying the actual fiscal-resource gap was in the region of GH�3.4billion (about 7.7% of (new) GDP). Both domestic revenue and (external) grants fell short of their targets, by GH�640million and GH�280million respectively. The domestic-revenue gap came mainly from non-taxes, which missed their target by GH�690million. Tax inflows totalled GH�6.3billion, exceeding the budgetary projection of GH�6.1billion and yielding a tax-to-GDP ratio of 14.2% for the 2010 fiscal year. The overrun on expenditure was GH�600million, with actual spending topping GH�11.5billion against a target of GH�10.9billion, the finance ministry reported. Key expenditure elements that were overshot include the wage bill, capital spending and interest-payments. Spending on wages and salaries was GH�.3.2billion, against a target of GH�3.1billion. Capital expenditure, comprising development-spending and transfers to statutory funds, was GH�3.2billion - exceeding its projection by GH�400million, while interest-expenses totalled GH�1.4billion - against a target of GH�1.3billion. In the year 2010, tax exemptions amounting to GH�386million - some 6% of total tax revenue -were awarded. Additionally, GH�131million was paid to utility companies in the form of subsidies. Significant payment-arrears remained on the fiscal books at end-2010, finance ministry data reveal, though some have since been settled by recent transfers to statutory funds and other payments to private-sector creditors. �Rebasing� and the fiscal numbers Last November�s national-accounts rebasing and revision has had a landmark effect on Ghana�s fiscal statistics, as the improved output data have altered key ratios that measure income-comparisons. For instance, the reportedly huge fiscal deficit-to-GDP ratio of 14.5% in 2008 has been revised to 8.5% by the International Monetary Fund in its latest regional report on sub-Saharan Africa. The Fund also estimates a decline in the ratio to 5.8% of GDP in 2009 - based on the new output figures. Thus, this new regime implied the government�s target for further deficit-reduction was 4.4% of GDP in 2010; but as the finance ministry has revealed, this limit was exceeded by some 2.4 percentage points. Also, Ghana�s tax effort has fallen sharply under the new figures, compared to its peers and the standard set for macro-economic convergence among countries in the West African Monetary Zone (WAMZ). A minimum tax-to-GDP ratio of 20% is prescribed under the WAMZ�s secondary convergence criteria, part of the subordinate requirements for the ushering in of a regional common currency and central bank. Ghana�s 2011 budget introduced some tax-boosting measures to rake in considerably more revenues. This involved a mix of higher rates, redefined thresholds to enhance collection, and the rationalisation of some exemptions.