55102 Ghana - Economic Governance and Poverty Reduction Credit (Credit Number 4634 ­ GH) Second Tranche Release Document May 31, 2010 Recommendation 1. This memorandum summarizes progress in the implementation of the policy-based operation in support of the Ghana Second Growth and Poverty Reduction Strategy. The Memorandum focuses on the actions taken by the Government of Ghana (the Government) to meet the specific conditions for the release of the second tranche of the Economic Governance and Poverty Reduction Credit (EGPRC). The memorandum considers that the Government of Ghana has made satisfactory progress overall in implementing the program supported by through the Credit as set forth in its Letter of Development Policy dated June 12, 2009, and that the Government has fully met five out of the six second tranche release actions. In recommending the release of the second tranche the Task Team agrees with the Government's request to waive one second tranche release condition related to the requirement for Cabinet approval of the legislation concerning the proposed Ghana Petroleum Regulatory Authority and oil and gas fiscal regime. The Government decision to eventually partition the regulatory framework into various legal building blocks to give greater space for consultations among the various stakeholders can be considered legitimate and justified given the sensitive political economy of resource management in Ghana. Indeed, public consultations held on the legislation raised fundamental issues of ownership, participation and control, roles, responsibilities and accountability, legitimacy and capacity of institutions that underpin effective performance of such a green field sector in the Ghanaian economy, and it became apparent that a more comprehensive multiple legal framework would be needed. A first bill has been approved by Cabinet, and the remaining two are being processed along the Parliamentary calendar as detailed in Paragraphs 21-24 below of this Memorandum. Background 2. The Board approved the two-tranche Economic Governance and Poverty Reduction Credit of SDR 193.8 million (US$300 million equivalent) on June 30, 2009 to support the Government of Ghana's second Growth and Poverty Reduction Strategy (GPRSII). Following the Board approval, the Financing Agreement for EGPRC was signed on July 15, 2009 by the Borrower and the International Development Association (IDA). The Credit was declared effective July 16, 2009 with the first tranche of SDR 96.9 million (US$150 million equivalent) being released upon effectiveness. 3. The EGPRC aims to support the authorities' efforts, in the midst of the current global crisis, to bring their fiscal stance to a sound and sustainable track and protect the development objectives set in Ghana's Second Growth and Poverty Reduction Strategy (GPRS II) for the period 2006-2009. The GPRS II emphasizes the centrality of private-led growth to reduce poverty, along with human development and governance efforts to promote equity. 1 Specifically, the EGPRC supports actions to: (i) restore budgetary discipline and (ii) tackle long-standing public sector and energy issues, while (iii) protecting the poor. 4. As a result of the policy actions that were designed for the first tranche release, the Government of Ghana has (i) opened a single treasury account in the Bank of Ghana and has identified the accounts of Ministries, Departments and Agencies(MDAs) to be connected to the said account; (ii) ensured that at least 80 percent of the total number of procurement contracts processed in 2008 by MDAs covered in the Public Procurement Authority survey sample (which covers 80 percent of total MDAs transactions in value) have followed procurement methods and procedures compliant with the Recipient's Public Procurement Act, (iii) begun regular publication of comprehensive and detailed quarterly fiscal out-turns with no more than one quarter lag, (iv) implemented a net hiring freeze in the public sector (excluding the absorption of trainees in education and health) through the completion of an employment audit and the elimination of ghost workers from the payroll of the Ghana Health Service, and the approval of all MDAs' hiring decisions by the Recipient's Ministry of Finance and Economic Planning and the Office of the Head of Civil Service, (v) reconstituted the boards of Volta River Authority, Electricity Company of Ghana, Ghana National Petroleum Company, Tema Oil Refinery and the Public Utilities Regulatory Commission, and (vi) increased the number of households covered by the Government's "Livelihood Empowerment Against Poverty Program" since June 30, 2008. 5. Since July 2009, the Government's macroeconomic stabilization program is also supported by a Poverty Reduction and Growth Facility (PRGF, which has since been renamed Extended Credit Facility, ECF), in the amount of SDR387.4 million (US$600 million equivalent). A joint first and second review of the ECF by the IMF Board of Executive Directors is scheduled for June 9, 2010. An IMF assessment letter dated March 31, 2010, is annexed to this Tranche Release Document. Recent Macroeconomic Performance 6. Since mid-2009, the economy has shown strong signs of stabilization, while weathering the impact of the global financial crisis. Following large expenditure slippages in 2008, both the fiscal and current account deficits were significantly reduced in the course of 2009, under the impact of positive exogenous shocks (high hydroelectric reserves with good rains, low oil prices, high cocoa and gold prices, good cocoa harvest) and significant fiscal stabilization efforts and achievements (see Tables 1 and 2). 7. The fiscal deficit (on a cash basis) reached 9.7 percent of GDP in 2009 (against 14.5 percent a year earlier) while the balance of payments' current account registered a 5.1 percent of GDP deficit (against 18.7 percent a year earlier). Since July, the exchange rate stabilized and even slightly appreciated against the US$ (following a 45 percent depreciation in the previous twelve months). Consumer prices also broadly stabilized, growing at an annual pace of 6.7 percent over the period June 2009-April 2010. As such, the year-on-year inflation target set forth by the Bank of Ghana for December 2009 ­ 14.6 percent - was almost 2 attained (15.9 percent), and within the range agreed upon with the IMF. By May 2010, 6- month T-Bills were subscribed at 13.5 percent, down from 28.4 percent a year earlier.1 8. Estimates2 for 2009 put real GDP growth at 3.5 percent in real terms, down from an estimated 7.3 percent in 2008. A number of indirect indicators tend to support this estimate, from indirect tax revenue and import demand to energy supply and private sector credit growth. And while exports (gold, cocoa) continued to enjoy high world prices, growth in domestic demand is likely to have decelerated, under the combined impact of fiscal stabilization, tighter credit conditions, and lower private transfers and foreign direct investments. Latest data suggest that the economy started to regain strength towards the end of 2009, rebounding from the sharp deceleration in the first half of 2009. 9. Not being greatly exposed to international financial markets (on both assets and liabilities sides), Ghana's financial sector (mostly banks) was not directly affected by the global financial crisis. Banks' balance sheets continued to expand rapidly in 2009 (31 percent increase between December 2008 and December 2009), while significantly elevating capital adequacy ratios.3 Yet, GDP growth deceleration, exchange rate depreciation, related currency mismatches, and large public arrears likely contributed to rising Non Performing Loans (NPLs), which attained 20.0 percent of total loans in February 2010 (up from 7.7 percent by end-2008). 10. By March 2010, Ghana was considered by the IMF to have met all its quantitative targets under the ECF in 2009, but two, the September ceiling on the fiscal deficit (only marginally exceeded) and the limit on non concessional borrowing.4 Estimates for end-2009 point to a fiscal deficit at 9.7 percent of GDP (on a cash basis), that is, slightly above the fiscal target of 9.4 percent of GDP set forth in the Budget Law 2009. Higher than anticipated domestic interest costs, wage bill and lower than anticipated grants and indirect tax revenue contributed to the slippage. In contrast, primary expenditures (goods and services, transfers and domestically financed investment expenditures notably) were severely compressed (although the share of pro-poor expenditures was largely protected5) with regard to the Budget Law. 11. Measured on a commitment basis, the fiscal deficit was about 11.0 percent of GDP in 2009, down from an estimated 20.1 percent in 2008 (including Government arrears to private 1 The decrease in interest rates was only partially transmitted to the private sector, given banks' need to provision for the large stock of NPL and meet new capital requirements. 2 GDP estimates are based on indirect indicators of supply and a 17-year old base year, 1993, possibly not reflecting structural economic changes which occurred since. National accounts are currently being re-based by the Ghana Statistical Services, and this exercise is likely to result in significant upward revisions in GDP levels. 3 The ratio of risk-weighted capital to risk-weighted assets increased from 13.8 to 18.2 percent between December 2008 and December 2009. 4 The ECF arrangement had provided for public guarantees of up to US$300 million for non concessional borrowing for Ghana National Petroleum Corporation (GNPC) to finance oil and gas investment projects. This borrowing facility was not used. Instead, a non guaranteed GNPC trade liability (for US$100 million, to purchase crude oil to be refined by the Tema Oil Refinery) was taken over by the Budget. The Government considered this action as critically needed to avoid the disruption in the supply of refined petroleum products in Ghana. 5 The share of pro-poor expenditure in total expenditure stood at 24.2 percent in 2009, against 24.9 percent budgeted. In comparison, the share of actual pro-poor expenditure in total expenditure stood at 22.3 percent in 2008 (against 24.5 percent targeted). 3 contractors and outstanding commitments to statutory funds)6. The review by Parliament in August 2009 of the 2009 budget execution at mid-year revealed an end-year 2008 stock of public expenditure arrears and outstanding commitments largely exceeding that budgeted to be cleared in 2009 (Ghana Cedi 1.13 billion - against Ghana Cedi 0.54 billion budgeted). By end-2009, the stock had gone up to an estimated amount of Ghana Cedi 1.43 billion, the result of the accumulation of new arrears and outstanding commitments exceeding repayments. However, government liabilities to State- Owned Enterprises (SOEs), in the energy sector in particular, were reduced from Ghana Cedi 0.67 billion to Ghana Cedi 0.32 billion between December 2008 and December 2009. From 2010 onwards, a progressive decline in the stock of domestic arrears and outstanding commitments and the non- accumulation of external arrears has been retained as quantitative performance criteria under the IMF ECF arrangement.7 12. The 2010 Budget Law, which was submitted to Parliament on November 19 2009, foresees a fiscal deficit at 7.5 percent of GDP in 2010. While structural reforms in energy (the implementation of the electricity financial recovery plan to avoid the recurrence of subsidies to utilities), public sector (conduct of payroll audits and elimination of ghost workers, restructuring of subvented agencies, civil service reform for effective decentralization and improved performance management) and public financial management (treasury single account, integrated financial management and information system, effective cash management and commitment control systems, inclusion of all MDAs in the payroll management system) are expected to prevent the recurrence of expenditure slippages, most of the fiscal adjustment is budgeted to stem from additional tax and non tax revenues. The latter is expected from the removal of important tax exemptions, the conversion of excise to ad-valorem taxes (to avoid inflation erosion), increased royalties from the mining sector, higher dividend distribution from State-Owned Enterprises, and better alignment of user fees with costs. 13. Nonetheless, discussions with IMF Staff subsequent to the Budget presentation have led to the identification of additional measures in anticipation of a possible revenue shortfall, given the optimistic revenue assumptions retained in the budget law and potential contingent liabilities.8 The Government and the IMF also agreed to revise upwards the 2010 fiscal deficit target (from 6.0 to 8.0 percent of GDP under the proviso that no new arrears will be accumulated) initially envisaged at the signature of the ECF, so as to accommodate for the liquidation over time of the stock of expenditure arrears and outstanding commitments uncovered afterwards. Such a revision nonetheless will not affect the targeted fiscal deficit for 2011, at 4.5 percent of non-oil GDP. 6 Statutory Funds (National Health Insurance Scheme, Social Security, Ghana Education Trust Fund, Road Fund, District Assembly Common Fund, HPIC and MDRI related funds) are legally funded through fixed tax revenue shares. 7 It is expected that capping the stock of arrears will give time to authorities to address the structural issues behind their accumulation, that is, (i) the rigidity in budget management imposed by statutory funds and (ii) the absence of commitment controls for Ministries of Energy and Roads and Highway. Such controls were relaxed in late 2007 to accelerate investment in the midst of the energy crisis. 8 In particular, the financial situation of TOR (and ability to operate) was stabilized by a Ghana Cedi 445 million equity injection from the Government in March 2010, which allowed the refinery to settle its debt with Ghana Commercial Bank. The financing of the operation was obtained with the issuance of a Ghana Cedi denominated 3- year Treasury Bill for non residents carrying a 15.0 percent annual interest. 4 14. Preliminary updates to the joint Bank-Fund debt sustainability analysis (DSA) using the latest debt data and projected financing flows suggest that Ghana remains at moderate risk of debt distress, in line with the 2008 and 2009 DSAs. In the baseline projections, external debt indicators remain below the threshold levels for debt distress. These results depend on the planned sustained reduction of the fiscal deficit to low levels. Debt dynamics based instead on the continuation of fiscal deficits at the average levels of recent years would quickly exceed the DSA threshold levels. Stress tests also indicate that the DSA outlook is sensitive to the economic growth and borrowing costs assumptions. The debt-to-GDP indicator is expected to be revised downwards over the course of 2010 as a result of the national accounts rebasing exercise which is projected to result in an upward revision to nominal GDP (of approximately 50 percent). Importantly, however, this would not affect the debt service to export and revenue ratios over the coming decade. Progress on EGPRC Second Tranche Release Actions 15. The Government has made significant progress in implementing the EGPRC. In particular, the six actions to be carried out before the release of the second tranche listed in the Financing Agreement have been implemented as summarized below. 16. Second Tranche Release Action #1: The Government has taken contingency fiscal measures, once the public wage rate increase for 2009 has been established, to correct any deviations with respect to the fiscal deficit and the share of pro-poor expenditures targets set forth in the Recipient's 2009 budget, in accordance with the provisions of paragraph 45 of the Letter of Development Policy. The Government successfully concluded wage negotiations with organized labor on July 7, 2009, and with the health sector group on July 24, 2009. Agreements reached on wage increases for the whole public sector for the year 2009 were within budget appropriations. The Government submitted to Parliament a supplementary Budget Bill for the remainder of 2009 on August 25, 2009, in order to account for higher arrears and interest costs than anticipated in the Budget Law 20099 approved in March 2009. End-year fiscal deficit and pro-poor expenditure targets were kept unchanged in the supplementary Budget Law, as taxes (mostly on imported goods, VAT and custom duties) were raised to finance additional expenses (arrears and interest costs). In the event, fiscal targets were very close to be met, as discussed in paragraph #10. The action is considered fully met. 17. Second Tranche Release Action #2: The Government has submitted to Parliament a freedom of information bill and, if approved, has adopted a related implementation plan including a budget, in accordance with the provisions of paragraph 50 of the Letter of Development Policy. The Freedom of Information Bill was submitted in January 2010 to Parliament and it passed through a first reading on February 5, 2010. Given the necessary time for debate and possible amendments requested by Parliamentarians, final reading of the Bill is planned for the second half of 2010. As such, the implementation plan cannot be discussed and approved before that. The action is considered fully met. 9 The Budget Law 2009 refers to the Budget Statement and Economic Policy, and the Appropriation Act, approved together by the Parliament in March 2009. 5 18. Second Tranche Release Action #3: The Government has appointed a Minister of State in charge of public sector reform, and eliminated ghost workers from payroll in the Ghana Education Service, initiated employment audits in all remaining MDAs, and classified at least half of the total number of subvented agencies in preparation for their rationalization, divestiture or commercialization in accordance with the provisions of paragraph 56 of the Letter of Development Policy. By October 7, 2009, the Minister of State as head of the public sector reform secretariat had been appointed. On March 31, 2010, the Ministry of Finance and Economic Planning instructed the Controller and Auditor General Department and the Ministry of Education to immediately withhold the salary payment of all 2,383 identified ghost workers in the Ghana Education Service. On September 8, 2009, the Government initiated the headcount of all public sector workers (but in education and health), with a view to conclude it in the first quarter of 2010. On April 14, 2010, the public sector reform secretariat at the Office of the President acknowledged the receipt of the consultant report classifying all subvented agencies (a total of 196, against 98 expected under the trigger) in preparation for their rationalization, divestiture or commercialization. The action is considered fully met. 19. Second Tranche Release Action #4: The Government has completed, through its Ministry of Energy, consultations with stakeholders on an electricity sector financial recovery plan and, through its Cabinet, approved the said plan, in accordance with the provisions of paragraph 61 of the Letter of Development Policy. Stakeholders' consultations on the electricity financial recovery plan started on September 17, 2009, following the receipt of the consultant report. Participants to consultations included the Volta River Authority, the Electricity Company of Ghana, the Ghana Grid Company Limited, the Ministry of Energy, and the Ministry of Finance. On March 11, 2010, the Cabinet reviewed the electricity financial recovery plan jointly submitted by the Minister of Energy and Minister of Finance and Economic Planning, and agreed to accept a 33 percent electricity tariff increase starting no later than June 1, 2010. Following the independent Public Utilities Regulatory Commission (PURC) ruling on May 31, 2010 to increase electricity tariffs by 42 percent on average10 starting June 1, 2010, the Ministry of Finance will submit to Cabinet a costed time-bound proposal to (i) cover utilities' remaining financing gap in 2010, if any, through treasury transfers to utilities and/or the implementation of a temporary surcharge11 on electricity sales; and (ii) restructure the utilities' balance sheets during 2010-2011. The action is considered fully met. 20. Second Tranche Release Action #6: The Government has revised the classification of pro- poor public expenditures based on an assessment of their effective impact on poverty, for use in the Recipient's 2010 budget, in accordance with the provisions of paragraph 72 of the Letter of Development Policy. Two reports prepared by the Ministry of Finance and Economic Planning were put before the attention of the Minister of Finance and Economic 10 PURC ruling foresees increases in residential tariffs between 21 and 42 percent depending on quantities consumed, above 50kw/h per month. There will be no increase in tariffs for households consuming less than 50kw/h per month, and the impact on poverty is believed to be almost insignificant. Combined with commercial (26- 42 percent) and industrial (63-69 percent) tariffs increases, the increase in residential tariffs will significantly raise electricity utilities' ability to recover their operational costs, in an environment characterized with many uncertainties (hydroelectric reserves, oil prices, gas supply from Nigeria). 11 As considered a tax, the surcharge would not require PURC approval. 6 Planning on April 15, 2010. The first report recommends a number of actions to improve the targeting efficiency of various social programs. The second report reviews the current definition of pro-poor expenditures and recommends the inclusion of several programs in the computation of public pro-poor expenditures in 2010. These recommendations were endorsed by the Ministry of Finance and Economic Planning, and will be implemented to report pro-poor expenditures in 2010 and subsequent years. The action is considered fully met. 21. Second Tranche Release Action #5: The Government has completed consultations with stakeholders on draft legislation concerning the proposed Ghana Petroleum Regulatory Authority and the oil and gas fiscal regime, and Cabinet has approved such draft legislation, taking into account the results of the consultations, in accordance with the provisions of paragraph 67 of the Letter of Development Policy. Initial stakeholders' consultations held on the oil and gas regulatory framework raised fundamental issues of ownership, participation and control, roles, responsibilities and accountability, legitimacy and capacity of institutions that underpin effective performance of such a green field sector in the Ghanaian economy. It became apparent that the consultations will take more time than initially anticipated. Ongoing dialogue with authorities, as part of this operation and through the EITI++ scoping mission carried out in parallel also helped clarify what is needed to establish a sound and effective regulatory framework for oil and gas in Ghana. 22. Initial stakeholders' consultations suggested in particular that more time and attention should be devoted to reaching a consensus on (i) the key features of the proposed new Ghana Petroleum Regulatory Authority, including the scope of responsibility of the regulator (one mega regulator for all utilities, or several small specialized regulators); (ii) the local content aspects (how ambitious should the law be); and (iii) the specifics of the oil revenue management proposals (in particular, the size of the proposed heritage and stabilization funds). Ongoing debates on these matters have shown significant divergences of views which will need to be reconciled to establish a nationally owned legal framework to govern the oil and gas industry in decades to come. 23. As a result, the initial plans to have one omnibus law as envisaged at the time of signing the EGPRC have evolved, and instead, a decision was made to sequence the effort into three legal building blocks: (i) amend the existing petroleum exploration and production legislation (Provisional National Defence Council, PNDC Law 84); (ii) pass the oil revenue management bill; and (iii) pass legislation to establish the new Petroleum Regulatory Authority. Cabinet approved on March 11, 2010 the revisions to the PNDC Law 84, and submitted them to the Attorney General for final drafting before submission to the Parliament. Following public consultations held country-wide in February and March 2010, Cabinet adoption of the Ghana Petroleum Revenue Management Bill - the new oil and gas fiscal regime - is scheduled for June/July 2010. Cabinet adoption of the Petroleum Regulatory Authority Bill is expected to follow in September 2010. The Government decision to eventually partition the regulatory framework into various legal building blocks to give greater space for consultations among the various stakeholders can be considered legitimate and justified given the sensitive political economy of resource management in Ghana. The change in the envisaged schedule to fully meet the prior action requires a waiver. 7 24. The social dialogue and recent EITI++ scoping mission have also revealed the need for improved capacity in several state institutions. A capacity building project for the oil and gas sector has been prepared to improve the ability of the institutions involved in regulating, taxing, ensuring the enforcement of environmental and social safeguards, and developing skills in this sector. In addition, the Bank will be supporting reforms to improve transparency and accountability through strengthening vertical and horizontal mechanisms of accountability. As part of the Multi Donor Budget Support (MDBS) Progress Assessment Framework (PAF) 2009-11, the forthcoming programmatic DPO scheduled in FY11 will support the revision of the EITI institutional framework to include oil and gas sectors (prior action), the adoption of the oil revenue management bill (prior action), and the adoption of the legislation establishing the new Petroleum Regulatory Authority (trigger). Following the completion of the Natural Resource and Environment Governance (NREG) DPO series in FY10, a new programmatic DPO series will be developed including the oil and gas sectors. On transparency, the work supported under the Governance Partnership Facility, which approved a Ghana proposal in January 2010, will deepen the mainstreaming of the transparency and accountability agenda. Follow up on EGPRC 25. More generally, the World Bank will continue to provide support in the domains above mentioned. On transparency, additional financing to the e-Ghana project will support the development of the Ghana Integrated Financial Management Information System. On public sector reform, the Economic Management and Capacity Building Project (EMCBP) will support the rationalisation of Subvented Agencies. On social protection, the social opportunities project will support the development of solid social safety nets. And the next general DPO scheduled in FY11 will continue to support cross-cutting policy reforms on public financial management, electricity, public sector reform, and social protection. 8 Table 1: Selected Economic and Financial Indicators, 2007-12 2007 2008 2009 2010 2011 2012 (Annual percentage change; unless otherwise specified) National accounts and prices Real GDP 5.7 7.3 3.5 4.5 20.1 6.8 Real GDP (non oil) 5.7 7.3 3.5 4.5 5.6 6.0 Real GDP per capita 3.0 4.6 0.9 1.9 17.2 4.2 Consumer price index (annual average) 10.7 16.5 19.3 10.6 8.9 6.8 External sector Exports, f.o.b. (percentage change, in US$) 11.9 26.3 10.8 12.2 48.5 2.8 Imports, f.o.b. (percentage change, in US$) 19.4 27.3 -21.6 29.4 17.9 3.4 Export volume -3.7 7.5 -1.0 5.5 8.0 5.8 Import volume 14.6 14.1 -10.1 21.8 16.1 2.7 Terms of trade 11.5 5.3 28.9 -6.6 -9.3 -4.9 Ghana Cedi per U.S. dollar (end of period) 0.97 1.21 1.42 .. .. .. Money and credit Net domestic assets 27.8 46.2 -4.5 15.4 22.2 14.6 Real private sector credit (% annual changes) 41.9 25.4 0.5 10.2 15.4 16.1 Broad money (excluding foreign currency deposits) 43.0 31.2 21.2 22.6 34.8 24.8 (Percent of GDP; unless otherwise specified) Investment and saving Gross investment 33.8 35.9 30.1 34.8 32.8 30.4 Private investment 19.5 20.3 17.8 24.1 23.2 21.5 Central government investment 14.4 15.7 12.3 10.7 9.7 8.9 Gross national saving 21.8 17.3 25.0 22.0 24.7 22.9 Private savings 14.1 12.5 19.6 16.7 15.6 12.9 Central government savings 7.7 4.8 5.4 5.3 9.1 10.0 Foreign savings 12.0 18.7 5.1 12.8 8.1 7.5 (Percent of non-oil GDP; unless otherwise specified) Government operations Total revenue and grants 28.8 27.5 27.5 30.3 33.9 32.3 Total expenditure including arrears (cash basis) 38.1 42.0 37.1 38.3 38.4 35.7 Overall balance (cash basis) -9.2 -14.5 -9.7 -8.0 -4.5 -3.5 Net domestic financing 1.3 9.8 4.7 6.5 2.6 2.5 External sector Current account balance (including official transfers) -12.0 -18.7 -5.1 -12.8 -8.1 -7.5 Gross international reserves (millions of US$) 2,837 2,036 3,165 3,576 4,526 5,902 Total donor support (millions of US$) 1,171 1,478 1,703 1,515 1,443 1,064 Memorandum items: Nominal GDP (billions of Ghana Cedi, including 14.0 17.6 22.0 25.9 33.9 39.0 Source: Source: IMF, April 2010. 9 Table 2: Central Government Budgetary Operations, 2007-12 2007 2008 2009 2010 2011 2012 (Percent of non-oil GDP) Total revenue and grants 28.8 27.5 27.5 30.3 33.9 32.3 Direct taxes 6.7 7.1 7.8 8.5 12.7 12.6 Indirect taxes 9.3 8.7 8.8 9.3 9.4 9.4 Trade taxes 4.1 4.1 3.5 4.0 4.1 4.1 Nontax revenue 2.6 2.9 2.4 3.4 3.3 3.3 Grants 6.1 4.7 5.0 5.1 4.5 3.0 Total expenditure 38.1 42.0 37.2 38.3 38.4 35.7 Wages and salaries 10.1 11.3 11.3 12.0 11.4 11.1 Goods and services (*) 4.0 3.7 2.8 3.4 3.4 3.4 Subsidies to energy (**) 0.2 1.5 0.3 0.3 0.3 0.3 Transfers 4.1 3.5 2.4 4.4 3.8 3.7 Reserves fund 1.4 1.6 0.8 1.4 1.4 1.4 Domestic debt interest costs 2.3 2.7 3.5 4.0 3.6 2.8 Foreign debt interest costs 0.8 1.1 1.2 1.1 1.1 1.0 Domestically financed capital expenditures 9.2 10.5 4.9 5.0 6.0 7.3 Foreign financed capital expenditures 5.2 5.2 7.4 5.7 5.1 2.9 Arrears clearance and VAT refunds 0.7 1.0 2.5 1.0 2.4 1.8 Primary balance (cash basis) -6.1 -10.7 -5.0 -3.0 0.1 0.5 Overall balance (cash basis) -9.2 -14.5 -9.7 -8.0 -4.5 -3.5 Net arrears accumulation 0.5 5.6 1.3 -0.4 -2.0 -1.6 Overall balance (commitment basis) -9.7 -20.1 -11.0 -7.6 -2.5 -1.9 Domestic debt 26.4 29.0 27.9 30.2 28.8 27.6 External debt (***) 24.8 27.8 32.5 34.9 33.3 31.6 Source: Source: IMF, April 2010. (*) includes wage allowances category 1 reclassified in 2010 as part of item 1. (**) includes the lifeline program and oil safety nets to protect vulnerable households against energy price variations. (***) does not include savings in oil funds. 10 11 12 13 14 15 16