Fiscal policy Essay
Fiscal policy refers to the government’s choices regarding the overall level of government purchases and taxes. Fiscal policy is undertaken by government to manage, control and manipulate the economic variables in the economy like inflation, unemployment, consumption and so many more. The fiscal operations that has been taken place for the past decade in Ghana In the year 2000, Total revenue and grants amounted to 5,385.0 billion while total expenditure came to 7,524.9 billion. Out of an estimate of 1,319.0 billion, only 574.3 billion actually flowed in.
Tax revenue collections exceeded the original projections on account of good performance from direct taxes, indirect and trade taxes. The provisional actual tax revenue yielded 3,731.7 billion as against an estimate of 3,957.3 billion. Provisional figures for 2000 indicate an overall balance of payments deficit of US$194.8 million, compared with an initial projected zero balance. In 2001, Provisional outturn for 2001 indicates that overall fiscal balance was a deficit of 4.4 per cent of GDP. Tax revenues exceeded the budget projections of ¢6,255.2 billion by ¢301.7 billion, because of better-than-programmed yield from value added taxes and import duties.
Provisional fiscal data show total statutory payments of ¢5,474.5 billion and discretionary payments of ¢6,206.3 billion. These are lower than the respective targets of ¢5,574.8 billion and ¢7,498.7 billion. In 2003, The receipt of ¢3,118.8 billion, in total grants including multilateral HIPC relief in 2003 represented a disbursement rate of almost 98percent, the highest in many years. Compositionally, tax revenue exceeded the target of ¢12,556.3 billion by ¢205.8 billion. Also, real GDP growth was higher than expected — 5.2 per cent against a projected 4.7 per cent. The overall budget deficit was contained at 3.4 per cent of GDP against the targeted 3.3 per cent of GDP.
In 2004, Revenue has increased from ¢4.4 trillion representing 16.3 percent of GDP of ¢27,150 billion at end of 2000, to an all-time high of ¢17.4 trillion, equivalent to 21.8 percent of GDP of ¢79,800 billion at the end of 2004. Total budgeted payments for the 2004 fiscal year were estimated at ¢24,853.1 billion. The provisional outturn for the period was ¢28,736.8 billion, consisting of ¢8,951.6 billion of statutory payments and ¢19,773.2 billion of discretionary spending representing 31.2 percent and 68.8 percent of the total respectively. In 2005, In all, total receipts made up of Domestic revenue, grants, loans, divestiture receipts and exceptional financing are projected at ¢35,672.5 billion lower than the budget estimate of ¢35,801.3 billion by ¢128.8 billion for the year. Total payments for the 2005 fiscal year was budgeted at ¢35,801.3 billion.
This was made up of statutory payments of ¢ 12,240.4 billion and discretionary payments of ¢ 23,560.9 billion. Given the expected receipts and payments in 2005, the overall budget balance is projected to record a deficit of 2.4 per cent of GDP, compared to the budget estimate of 2.2 per cent of GDP. In 2006, an overall budget deficit of 4.5 per cent of GDP as result of expenditure exceeding total receipts amounted to ¢41,357.1 billion as against total statutory payments of ¢13,006.5 billion. In 2008, the overall budget deficit excluding divestiture hit a high of GH¢2,557.6 million, equivalent to 14.9 of GDP. As against a total receipts, comprising domestic revenue, grants and other receipts amounted to GH¢9,538.2 million, equivalent to 55.4 per cent of GDP.
And total payments for 2008, comprising discretionary and statutory payments, amounted to GH¢9,538.2 million, significantly higher than the budget estimate of GH¢7,107.2 million. In 2009, total revenue and grants are projected at GH¢7.2 billion, also indicating a drop of 3.5% below the original budget estimate. The projected outturn for the year is GH¢8.7 billion, showing 13.8%drop in spending. The overall budget deficit for 2009 is estimated at GH¢2.2 billion, equivalent to 10.2% of GDP. In 2010, based on the projected revenue and expenditure for the year 2010 the overall budget balance, showed a deficit of GH¢2,214.3 million, equivalent to 9.7 percent of GDP. As against
The above measures that have been put in place by the government to ensure stability and growth in the economy simply define the fiscal operations that have taken place for the past decade. It is quite obvious to come to conclusion that for that past decade we have being struggling to stabilize our economy as the budget deficit for each year increases significantly for almost a decade now.