Gov Misses Revenue Target

By: Masahudu Ankiilu Kunateh

Email:kankiilu@yahoo.com

Preliminary data on the implementation of the Budget for the 2012 fiscal year indicates that total revenue and grants were below the budget target.

At the same time, expenditures for the period were higher than the budget estimate. This resulted in an overall fiscal deficit equivalent to 12.0 percent of GDP, against a target deficit equivalent to 6.7 percent of Gross Domestic Product (GDP), the Minister of Finance, Seth Terkper, has disclosed.

He explained: “The deficit was financed mostly from domestic sources, resulting in a net domestic financing equivalent to 9.8 percent of GDP, against a target of 4.0 percent of GDP. Total revenue and grants for the period under review amounted to GH¢16,668.4 million, against a target of GH¢16,927.6 million. This was 1.5 percent lower than the target, but 30.2 percent higher than the outturn for the corresponding period in 2011.

“Total expenditure, including payments made for the clearance of arrears and outstanding commitments, totaled GH¢25,317.1 million, equivalent to 35.2 percent of GDP.”

The outturn was 17.2 percent higher than the budget target of GH¢21,596.6 million, and 64.0 percent higher than the outturn for 2011, Mr. Terkper added.

He added that the strong growth in expenditure was mainly as a result of higher recurrent spending and increased clearance of arrears, noting: “Based on revenue and expenditure outturns for 2012, the overall budget balance on a cash basis was a deficit of GH¢8,648.7 million, equivalent to 12.0 percent of GDP,”

This was against a deficit target of GH¢4,669.0 million, equivalent to 6.7 percent of GDP. The budget deficit recorded for the corresponding period in 2011 was equivalent to 4.0 percent of GDP, the Finance Minister told Members of Parliament recently.

The 2013 Budget Statement and Economic Policy of the Ghana indicated that the domestic primary balance also registered a deficit of GH¢1,172.1 million, equivalent to 1.6 percent of GDP, against a targeted surplus of GH¢1,737.5 million, equivalent to 2.5 percent of GDP.

Shortfalls in revenue and grants, combined with higher spending, were the sources of the fiscal slippage in 2012, while the Net Domestic Financing of the budget amounted to GH¢7,018.0 million (equivalent to 9.8 percent of GDP) against the budget target of GH¢2,760.6 million (equivalent to 4.0 percent of GDP).

About thirty-two percent of the domestic financing was from the Central Bank, and the remaining from deposit money banks and the non-banking public, according to the managers of the Ghanaian economy.

Foreign financing of the budget was GH¢1,630.6 million (equivalent to 2.2 percent of GDP), against a target of GH¢1,908.4 million (equivalent to 2.7 percent of GDP).

The soft-spoken Finance Minister added that the government’s macroeconomic management in the year was beset with challenges, arising in part from the high wage bill, which was the result of the implementation of the  Single Spine Pay Policy (SSPP), as well as the financial sector instability in early 2012 that stemmed from both domestic and external sources.

These challenges notwithstanding, the economy posted some significant successes in the areas of economic growth, and price and exchange rate stability, he assured the investor community.

 

Real Sector

Provisional GDP estimates released by the Ghana Statistical Service in September 2012 indicate that in real terms, the economy expanded by 7.1 percent. This compares with a growth target of 9.4 percent in 2012, and the actual outturn of 14.4 percent in 2011.

The 2012 provisional growth rate of 7.1 percent is still high, given that it is on top of the growth rate of 14.4 percent recorded in 2011, when the GDP first reflected the impact of crude oil production in commercial quantities.

Significantly, provisional data for 2012 shows that growth in the oil sector was negative, implying that our growth of 7.1 percent was robust, despite the slack in the oil and gas sector.

The 2012 provisional growth rate compares favourably with the global growth of 3.2 percent, and sub-Saharan Africa growth of 4.8 percent, according to the International Monetary Fund’s (IMF’s) World Economic Outlook (Jan 23rd 2013).

On the agric sector, it recorded a growth rate of 2.6 percent against a target of 4.8 percent in 2012, and an actual outturn of 0.8 percent in 2011. With the exception of the Forestry and Logging sub sector, all the other sub-sectors recorded higher growth rates than those of 2011, with the Crops and Fishing sub-sectors making the largest contribution to agricultural output, in terms of shares.

The low growth in Forestry and Logging sub-sector can be attributed largely to the decline in the reforestation programme which started in 2010, a reduction in the number of permits awarded to timber contractors, and the effective enforcement of the ban on illegal logging activities in pursuit of environmental sustainability.

Additionally, the Industry Sector, the second largest sector, recorded a growth rate of 7.0 percent in 2012, against a target of 15.8 percent, and an actual outturn of 41.1 percent in 2011.

The lower performance in 2012, compared to the actual outturn in 2011, is due largely to the base effect of crude oil production in 2011. The year 2011 witnessed significant growth in the output of the Mining and Quarrying subsector, as a result of the introduction of oil production in commercial quantities.

The Mining and Quarrying sub-sector registered a growth rate of 5 percent, against a target of 31.9 per cent, due mainly to a contraction in the oil and gas production, occasioned by production difficulties in the Jubilee Field in the first half of the year. Recent data on oil production, however, shows a growth of 8.9 percent as at end-December 2012.

The Services Sector, the largest sector of the economy, recorded the highest growth rate in the year under review. The sector exceeded its 2012 target of 7.7 per cent by 1.1 percentage points, to register a growth rate of 8.8 percent.

The sub-sectors which contributed to this remarkable performance include Hotels and Restaurants (13.6 per cent), Transport and Storage (11.4 per cent), Financial Intermediation (11.4 per cent), Information and Communication (12.1 per cent), and Business Services (13.5 percent).

 

Global food prices remain stable

First forecasts for the 2013 wheat harvest point to production increasing to 690 million tonnes – 4.3 percent up on 2012. This would be the second largest crop on record, according to the latest issue of FAO’s quarterly Crop Prospects and Food Situation report.

The production hike is expected mostly in Europe, driven by increased plantings in response to high prices and a recovery in yields in some countries, notably the Russian Federation.

The outlook in the United States, while less favourable because of earlier drought conditions, has improved somewhat over the last few weeks.

Meanwhile, the recently lower prices of wheat and, to some extent, maize kept the FAO Food Price Index – also published recently — unchanged at 210 points for the second consecutive month in February. That is 2.5 percent, or five points, less than in February 2012.

Since November 2012 the Index has moved within a narrow 210 – 212 point range as increases in the prices of dairy products and oils/fats were largely balanced out by declines in the prices of cereals and sugar.

At this stage of the season, with the bulk of the coarse grains and paddy crops yet to be planted it is still too early for even a preliminary global cereal forecast for 2013.

But prospects for the first 2013 coarse grains crops in the southern hemisphere are generally favourable. Rice prospects are also encouraging in several countries below the equator.

The Crop Prospects and Food Situation report focuses on developments affecting the food security situation of developing countries. In its review of food insecurity hotspots, the report highlights the following countries, among others:

Regarding international food prices, FAO’s Cereal Price Index averaged 245 points in February, down by just less than 1 percent from January but still 8 percent higher than in February 2012.

The FAO Oils/Fats Price Index averaged 206 points in February, up 0.4 percent from January. The rise was driven by palm oil, mainly reflecting the expected seasonal production slowdown and reduction in inventories from their current high levels.

The FAO Dairy Price Index averaged 203 points in February, 2.4 percent, or 5 points up from January, representing the most substantial increase since September 2012. The rise was principally a reflection of falling production in Oceania due to hot weather.

The FAO Meat Price Index averaged 178 points in February, the same as January.  Poultry prices were slightly lower and pork marginally higher, while other types of meat remained largely unchanged.  The meat index has remained substantially stable since October 2012.

The FAO Sugar Price Index averaged 259 points in February, down 3 percent, or 8.6 points, from January. Prices declined for the fourth consecutive month, on the expectation of a relatively large world production surplus and improved export availabilities in 2012-13

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