There was an overall budget deficit of GH¢897.1 million in 2006 due mainly to the financing of critical emergency expenditures, Mr Kwadwo Baah-Wiredu told Parliament on Thursday.
Mr Baah-Wiredu said domestic financing of the budget for 2006 amounted to a net borrowing of GH¢476.5 million, equivalent to 4.2 percent of GDP, against a budget target of a net borrowing of GH¢21.5 million.
He attributed the deficit to the shortfall in total revenue and grants, unanticipated transfers to Volta River Authority (VRA) as a result of the energy crisis, transfers to Tema Oil Refinery (TOR) for under recovery and the extraordinary pressures on the labour front, which led to effective nominal increases in the wage bill and the consequential increase in salary-related expenditures, such as, pensions, social security contributions and allowances.
Mr Baah-Wiredu said the main factors underlying the fiscal outturn were shortfalls in revenue target amounting to 0.8 per cent of GDP; shortfalls in divestiture receipts of about 0.7 percent of GDP; unbudgeted transfers of about US$90 million to the VRA for the purchase of crude oil for thermal operation in the face of the looming energy shortage and high crude oil prices; public sector wage overrun equivalent to 0.9 percent of GDP.
Mr Baah-Wiredu said the underlying overall budget deficit was still sustainable in 2007 and in the medium term.