By Yusef Taylor, @FlexDan_YT
Every year the Government estimates how much it expects to generate in revenue and how much it expects to spend, but how reliable are it’s estimates? A comparison between the Government’s approved estimates and actual’s in the same period can help understand how accurately the Government’s projections match actual revenues and expenditure. This article aims to identify if the government is over estimating or under estimating its projections and by how much.
Revenue in this article refers to the total tax and non tax revenue generated by the government. Expenditure in this article refers to Government’s Local Funding, commonly referred to as GLF. Total expenditure due to Loans and Grants have not been considered in this analysis.
2017 to 2018 Revenue: Actual vs Approved
In 2017 the Government approved to collect D9.1 billion, however, only D6.7 billion was actually collected that year, D2.3 billion less than what it projected to collect in revenue for that period. This represents an overestimation of 26%.
Likewise, in 2018 the Government approved to collect over D10.7 billion, however, only D7.3 billion was actually collected, almost D3.5 billion less than it projected. This is represents an overestimation of 32% and demonstrates that the Government’s projection to collect D12.2 billion is certainly questionable. For a Government which only collected a maximum of D7.3 billion in Revenues an approved projection to collect almost double it’s revenue D12.2 billion in 2019 is clearly over ambitious and unrealistic.
2017 to 2018 Expenditure: Actual vs Approved
In 2017 the Government approved to spend just over D12.08 billion, however, the Government actually spent just over D12.09 billion, which is very close to what it projected to spend that year. In monetary terms the Government overspent by D8 million, only 0.1% more than it projected for that year.
On the other hand, in 2018 the Government under spent by D265 million when it approved an expenditure of D13.5 billion. This means that the Government only spent D13.3 billion in 2018, 2% less than it projected to spend in 2018. This is also very close to what the Government projected to spend that year.
The figures from the 2018, 2019 and 2020 Estimates of Revenue and Expenditure demonstrate that the Government only increased its Approved Expenditure from D12.08 billion in 2017 to D13.5 billion in 2018. This is an increase of D1.45 billion, representing 12% of the previous year’s.
On the other hand, the Government’s Approved Expenditure for 2019 shot up to D17.1 billion, an increase of D3.5 billion from 2018. This represents an increase of 26.1% from the previous year, more than half of the percentage increase in 2018. This is also over ambitious and highlights that the Government has most likely overestimated it’s GLF expenditure in 2019.
Difference between Actual Revenue & Actual Expenditure
The chart above highlights that the Government’s actual spending continues to surpass revenue collected. In 2017 Actual Expenditure exceeded Actual Revenue by over D5.4 billion. Considering that the Government only collected D6.7 billion in 2017, GLF Expenditure was 79% more than Actual Revenues collected in 2017.
Similarly in 2018 Actual Expenditure exceeded Actual Revenue by almost D6 billion Dalasi. Considering that the Government only collected D7.3 billion in 2018, GLF Expenditure was 82% more than Actual Revenue collected in 2018. On average this analysis proves that Government’s Actual Expenditure has exceeded Actual Revenues by over 80%.
To increase the reliability of the Government’s Estimate of Revenue and Expenditure, there is an urgent need to address the increasing differences between Approved Revenue estimates and Actual Revenues collected. Overestimating Revenue could be in the Government’s favor as it appears as though it has more money to spend when it actually doesn’t. However, the challenges it presents is that Government will always end up spending beyond its means if it continues to overestimate revenue it expects to collect every year.