In November 2015, the National Parliament passed the 2016 Budget with a planned total expenditure of K14.8 billion, which is 2.4 percent lower than the 2015 Budget estimate, and revenue of K12.7 billion.
The Budget deficit therefore is K2.1 billion or 3.3 percent of GDP.
Bakani, in his Quarterly Economic Bulletin said the K12.7 billion revenue is expected to be largely driven by the mineral and petroleum tax.
He said since the release of the 2016 Budget, international prices for mineral and petroleum has dropped further and are forecast to be even lower.
The IMF forecast for the two commodities are US$42.0 per barrel and US$9.5 per million metric British thermal units (mmbtu) in 2016.
However, Bakani is concerned that the Government’s price forecast of US$60. per barrel for oil and US$12. per mmbtu for LNG are on the high side and that the revenue targets may not be achieved.
He said the fiscal deficits have inflationary effects on the economy.
“In cases where there is revenue shortfall, it is crucial for the Government to cut and reprioritise its expenditure.”
He said with the accumulation of national debt to around K16.9 billion, Bakani stressed that money borrowed should be spent on productive and quality investments to grow the economy with more emphasis on the agriculture and the export sector as well as tourism.
“This should lessen the burden on future debt repayments and avoid more financial resources being diverted away from productive investments to debt repayments.”