Government revises fiscal deficit to 5.1%, expects good economic outlook
Government on Thursday revised its fiscal deficit target for 2011 to 5.1 per cent from 4.1 per cent of Gross Domestic Product (GDP) to allow for more fiscal space and clearance of more arrears.
Minister of Finance and Economic planning, Dr Kwabena Duffuor, said in spite of the need for more fiscal space resulting in the increase in the deficit target for 2011, government was mindful of the importance of fiscal and debt sustainability.
“Hence the revised fiscal deficit target indicates a further reduction from 6.5 per cent of GDP in 2010 to 5.1 per cent in 2011,” he said.
The minister said provisional data for the five months to May on the implementation of the 2011 budget indicated that domestic revenue was 11.2 per cent higher than the budget target, but grants were below target by 28.7 per cent.
“On the back of strong domestic revenue performance, total revenue and grants were higher than the budget target by 5.7 per cent.
On the other hand, expenditures were higher than estimated by 6.5 per cent,” Dr Duffuor said.
He said the higher expenditure led to a cash fiscal deficit equivalent of 1.8 per cent of GDP, against a target of 1.9 per cent of GDP.
Dr Duffuor said the outturn indicated a narrowing of the deficit equivalent to 1.8 per cent during the first five months of the year compared to a deficit equivalent to 3.3 per cent of GDP recorded during the same period in 2010.
He said that total revenue and grants amounted to GH¢4,478.8 million equivalent to 7.9 per cent of GDP, compared to a budget target of GH¢4,237.4 million equivalent to 7.5 per cent of GDP.
Dr Duffuor said domestic revenue totalled GH¢4.063.9 million, equivalent to 7.2 per cent of GDP and the outturn was 11.2 per cent higher than the budget estimate of GH¢3,655.4 million.
Dr Duffuor said total tax revenue amounted to GH¢3,296.5 million, equivalent to 5.8 per cent of GDP, which is higher than the budget target of GH¢2,893.9 million by 13.9 per cent, and 48.7 per cent higher than the outturn recorded during the same period in 2010 due to improvement in import duties, petroleum taxes and VAT.
He said a special task force had been set up in the Ministry of Finance and Economic Planning to identify bottlenecks and adopt appropriate strategies to improve the disbursements of project inflows.
Dr Duffuor said total expenditure in the first five months of 2011, including payments made for the clearance of arrears and commitments, amounted to GH¢5,833.2 million, equivalent to 10.3 per cent of GDP.
He said the outturn was 6.5 per cent higher than the budget target of GH¢5,480.4 million.
Dr Duffuor said the higher-than-estimated expenditure for the period was mainly the result of higher expenditure on personal emoluments and domestic-financed investment.
He said during the period under review, a total amount of GH¢1,067.0 million was paid in respect of arrears clearance carried over from previous years.
According to the minister, government is optimistic that developments in the first half of 2011 pointed to a good outlook, expressing determination to strictly enforce budget plans for the rest of the year in spite of fiscal challenges from domestic and external developments.
“We expect a further reduction in inflation and increased GDP growth in 2011. Effective collaboration and coordination of our fiscal and monetary policies will be used to dampen any exogenous shocks to ensure a favourable budget outturn for 2011,” said Dr Kwabena Duffuor.
He said as promised in the 2011 Budget Statement and Economic Policy, far reaching measures had been adopted to efficiently manage the stock of domestic arrears both in the short and medium term.
Dr Duffuor said as a first step towards the management process, the scope of domestic arrears had been widened to include liabilities of Tema Oil Refinery, Volta River Authority and Bulk Oil Storage Transport (BOST) arising from short and long term loans and other commitments owed to their creditors.
The Minister said the change in definition of arrears to include liabilities of the SOEs resulted in total domestic stock of arrears amounting to GH¢3.8 billion as at end 2010. Of this amount, the SOE’s arrears amounted to GH¢1,771.8 million.
Dr Duffuor said a detailed strategy for liquidating the stock of arrears either through cash payments or securitization had been developed as part of the arrears management process.
He said: “The decision on the quantum of cash payments takes into consideration government’s cash flow over the medium term as well as possible inflationary impact of cash injection into the economy.
Dr Duffuor said in furtherance of the job creation agenda as contained in the 2011 budget, a new youth employment programme, known as the Local Enterprises and Skills Development Programme (LESDEP), commissioned by President John Evans Atta Mills, would be aimed at empowering the youth through the acquisition of skills supported by equipment and machinery.
He said the initiative would provide opportunities for the critical mass of unemployed youth to acquire skills in specific areas such as mobile phone and laptop repairing, construction, agro processing and packaging, local foods and catering, local garment and fashion and a lot more.
LESDEP is a public-private partnership programme under the auspices of the Ministry of Local Government and Rural Development that seeks to create and facilitate the acquisition of technical and entrepreneurial skills among the youth.
The overall vision of LESDEP is to train and equip 20,000 unemployed youth in the MMDAs by 2012. The programme has already been inaugurated in the Northern, Western, Central and Eastern Regions.
Source: GNA