Government seeks approval for GH¢1.5b supplementary expenditure

The government today presented a supplementary budget to parliament for approval.

The government is seeking approval for a total amount of GH¢1,463,123,559 to finance government expenditure.

Making the presentation in parliament, the Minister of Finance and Economic Planning, Dr. Kwabena Duffuor outlined the country’s macroeconomic developments and fiscal performance for the year 2010.

He said in 2010, real GDP grew significantly to 7.7% up from 4.0 % in 2009, and this he explained is based on the rebased national accounts. He indicated that Gross International Reserves increased to 3.8 months of import cover for goods and services against a target of 2.5 months.

Dr. Duffuor said based on the performance of revenue and expenditure for the first five months of 2011, the cash fiscal deficit amounted to GH¢1,050.1 million, equivalent to 1.8 percent of GDP, against a target of GH¢1,074.2 million equivalent to 1.9 percent of GDP.

During the period, the domestic primary balance registered a surplus of GH¢688.7 million, equivalent to 1.2 percent of GDP, he said, adding that this compares with an estimated domestic primary surplus of 0.7 percent of GDP and a deficit equivalent to 0.6 percent of GDP recorded during the same period in 2010.

He said the overall cash budget deficit was financed from both domestic and foreign sources.

“Net Domestic Financing of the budget amounted to GH¢1,226.7 million, against a target of GH¢843.8 million. The outturn compares to a Net Domestic Financing of GH¢1,355.1 million recorded during the first five months of 2010”, he said.

Dr. Duffuor outlined some of the developments in the domestic economy that have necessitated the revisions to the fiscal framework requiring a supplementary budget:

– the passage and implementation of the Petroleum Revenue Management Act, 2011, Act 815, coupled with changes in world crude oil prices and revised oil production levels;

– disbursement of World Bank budget support for 2010 in February 2011;

– receipt of proceeds from the sale of shares in Anglogold Ashanti issued in lieu of royalty payments;

– clearance of arrears and commitments from previous years; and

– exchange rate developments.

With the passage of the Petroleum Revenue Management Act (PRMA), there is the need to implement the provisions in the Act. Key provisions in the PRMA that have direct implications for the fiscal framework include the following:

– estimation of the Benchmark Revenue;

– determination of the Annual Budget Funding Amount (ABFA); and

– determination of transfers to the Ghana Petroleum Funds.

– In line with section 21(5) of the Petroleum Revenue Management Act, Act 815, the oil revenue would be spent in the following GSGDA priority areas;

– expenditure and amortisation of loans for oil and gas infrastructure;

– road infrastructure;

– agricultural modernisation; and

– capacity building (including oil and gas).

He indicated that revisions have been made to the fiscal and macroeconomic framework to reflect these changes.

The revised macroeconomic targets for the 2011 budget are as follows:

– Real GDP growth (excluding oil) of 7.5 percent ;

– Real GDP growth (including oil) of 14.4 percent ;

– Overall fiscal deficit revised from 4.1 percent to 5.1 percent of GDP;

– Average inflation rate revised from 8.8 percent to 8.7 percent;

– End-period inflation rate revised from 8.5 percent to 9.0 percent; and

– Gross international reserves of not less than three months of import cover of goods and services.

And he outlined the following as revisions to total revenue and grants.

He said total revenue and grants have been revised upwards by GH¢1,366.2 million to GH¢11,967.4 million, resulting mainly from revisions to both oil and and non-oil revenue.

Dr. Duffuor said  on the new oil price assumption of US$100 per barrel as well as the revised estimated average oil production of  84,737 barrels per day and the new exchange rate assumption, total revenue from oil including the National Oil Company’s carried and participation interest is estimated at GH¢1,250.8 million – of this amount, he said, the Benchmark Revenue is estimated at GH¢923.4 million. “The remaining is the amount due the Ghana National Petroleum Corporation (GNPC) as its equity and cash ceded to it,” he said.

By Emmanuel K. Dogbevi