Interest rate developments
Mr Speaker, developments in interest rates for 2013 in general indicated a downward trend on year-on-year basis. The Bank of Ghana Policy Rate which was increased to 16.0 per cent in May 2013 remained unchanged till the end of the year.
The rate on the 91-day and the 182- day Treasury bills went down by 390 and 433 basis points (bps), respectively, from 23.12 per cent and 22.99 per cent at the end of December 2012 to 19.22 per cent and 18.66 per cent at the end of December
The 1-year note, 2-year note, 3-year and 5-year bonds rates decreased from 22.90 per cent, 23 per cent, 21 per cent and 23.00 per cent in December 2012 to 17.0 per cent 16.8 per cent, 19.24 per cent, and 19.04 per cent at the end of December 2013, respectively.
During the year under review, the interbank weighted average rate de- creased by 77 bps to 16.34 per cent on year-on-year basis. The Deposit Money Banks' average 3-month time deposit rate remained unchanged on year-on-year basis at 12.50 per cent as at December 2013. The Savings rate gained 50 bps year-on-year to settle at 5.75 per cent as at December 2013.
The average lending rates decreased by 15 bps on year-on-year basis to 25.56 per cent as at December 2013. The spread between the borrowing and lending rates also narrowed from 13.22 per cent at end- December 2012 to 13.06 per cent at end- December 2013.
Exchange rate developments
Mr Speaker, the Ghana Cedi generally traded weak against the currencies of the major trading partners during the review year. In the Inter-Bank Market, the Ghana Cedi recorded cumulative annual depreciation of 14.6 per cent against the US dollar during the review period. The recorded annual depreciation of 14.6 per cent in 2013 was however lower than the
17.5 per cent annual depreciation recorded in 2012. The Ghana Cedi recorded depreciations of 16.7 per cent and 20.1 per cent against the Pound Sterling and the Euro, respectively, in 2013.
On the Forex Bureau Market, the Ghana Cedi also traded weaker against the major currencies and recorded cumulative depreciations of 16.3 per cent, 17.5 per cent and 19.3 per cent against the US dollar, the Pound Sterling and the Euro, respectively.
Mr Speaker, fiscal policy outlined in the 2013 Budget aimed to achieve fiscal prudence and debt sustainability by reducing the budget deficit from 11.5 per cent of GDP in 2012 to 9.0 per cent of GDP in 2013. The fiscal and other related targets were to be achieved through the following measures:
improved revenue mobilisation through the Ghana Revenue Authority's (GRA) on-going Modernisation Programme;
enhancing the efficiency of public expenditures through the ongoing Public Financial Management (PFM) reforms, (including GIFMIS); and
reviewing capital expenditures and the strategy for financing them.
Provisional end-year fiscal data for 2013 indicate that both revenue and expenditure were below their respective targets for the year.
However, the shortfall in revenue far exceeded the shortfall in expenditure, resulting in a cash fiscal deficit equivalent to 10.1 per cent of GDP against the original budget target of 9.0 per cent and the revised target of 10.2 per cent. This compares to a deficit equivalent to 11.5 per cent of GDP recorded in 2012, as shown in Table 2.
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Mr Speaker, total revenue and grants for the period was GH¢19,471.6 million, equivalent to 20.8 per cent of GDP, against a target of GH¢22,533.4 million, equivalent to 25.4 per cent of GDP. The shortfall in total revenue and grants was partly as a result of low disbursement of grants from our development partners and, mainly due to the lower than anticipated performance of domestic revenue. The outturn was 13.6 per cent lower than the budget target and 16.8 per cent higher than the outturn for the same period in 2012.
Domestic revenue, made up of tax and non-tax revenue, amounted to GH¢18,732.1 million, against the budget target of GH¢21,275.0 million. The shortfall in domestic revenue was due to weak tax revenue performance in all tax types, except corporate income tax from the oil companies and communication service tax. The outturn was 12.0 per cent lower than the budget target and 20.8 per cent higher than the outturn for the same period in 2012, as shown in Table 3.
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Non-oil tax revenue, excluding exemptions for the period, amounted to GH¢12,708.3 million (13.6% of GDP), 18.7 per cent lower than the budget target of GH¢15,634.5 million (17.6% of GDP). Including oil and exemptions, tax revenue amounted to GH¢14,307.7 million, equivalent to 15.3 per cent of GDP. This was 16.3 per cent lower than the target of GH¢17,090.8 million (19.3% of GDP). In nominal terms, tax revenue was 14.3 per cent higher than the outturn recorded in
Mr. Speaker, given the need for further fiscal consolidation, after the first half of the year, Cabinet and subsequently Parliament in July 2013, approved the following tax measures to improve revenue performance and support the fiscal consolidation effort:
National Fiscal Stabilisation Levy of 5 per cent of profit before tax of institutions in banking, insurance, other financial services, communication, and brewery sectors with a sunset clause to end at the end of 2014;
Special Import Levy of 1 and 2 per cent on some imported goods also with a sunset clause to end at the end of 2014;
a broadened base of the environ- mental tax and a reduction in the tax rate from 15 per cent to 10 per cent; and
re-imposition of import duty of 20 per cent and VAT on imported mobile handsets.
In total, these revenue measures yielded revenue of about GH¢168 million or 0.2 per cent of GDP in 2013. The full effect of these measures are expected to strongly impact on revenue performance in 2014 and contribute to the continuing fiscal consolidation, in line with the multi- year adjustment effort.
The weak performance of tax revenue in 2013 was partly due to the following factors:
lower import volumes which negatively affected import taxes;
decline in world commodity prices, particularly gold, which resulted in lower than expected corporate taxes and mineral royalties;
the slowdown in economic activities during the first half of the year, due partly to the energy crisis; and
low tax compliance and disruptions, due to tax administration reforms.