Mr Speaker, Sir, I will now come to the New Revenue Measures for 2006.

x. REVENUE AND BUDGETARY MEASURES FOR 2006

138) Growth in domestic revenue slowed down in 2005 to less than 100% from the total revenues collected in 2004. This trend should be curbed, and revenue collections should be augmented to fully finance Government Operations. Moreover, to ensure that the 2006 budget can be properly funded, it is also necessary to implement bold measures to raise additional domestic revenues.

139) Government has, therefore, decided to introduce the following revenue measures for the 2006 Budget, with immediate effect;

i) The pump prices of the three petroleum products – Petrol, Diesel and Kerosene - will be increased by D3 per litter to the new pump prices od D30, D28 and D12 per litre respectively. The new pump prices are still lower than current petroleum prices in our neighbouring countries.

ii) Sales tax on non-oil imports is increased from 10 per cent to 15 per cent, in line with the 15 per cent sales tax on domestically produced goods. The 18 per cent sales on telecommunications remain.

iii) All Customs Tariff rates of 18 per cent are increased to 20 per cent to conform to ECOWAS Common External Tariff (CET) rates of 5 per cent, 10 per cent and 20 per cent, which will be introduced in January, 2006.

iv) The Excise duties on Cigarettes and Tobacco and on imported alcoholic drinks are doubled. The excise duties on Cigarettes are increased from D75 to D150 per kilo; on imported beer from D35 to D70 per litre; on wine from D50 to D100 per litre; and on spirits from D75 to D150 per litre.

v) An excise duty of 10 percent is now levied on Used Cars, in addition to the Customs Duties and Sales Tax.

vi) Vehicle license fees are increased by 30 per cent.

vii) Fishing licenses for all categories of fishing vessels are increased by 30 per cent; and

viii) License fees for Cellular Operators are now fixed at US$15million for a period of fifteen years, from 1st January, 2005. Mobile Phone Operators should make the first payment of US$1million before end-December, 2005.

140) These Revenue Measures will generate the resources required to finance the 2006 Budget deficit, and able Government to meet the fiscal targets under the current Staff Monitored Program, and its Poverty Reduction and Growth Facility Program (PRGF) to be negotiated with the IMF in 2006. The tax administration system will also be further strengthened to ensure that all monies due to Government are properly collected, and on time.

iii. Total Expenditure

150. Total expenditure, comprising recurrent and capital expenditures and net lending, is estimated at D3609.9 million, or 26 percent of GDP in 2005, representing a 7.6 percent drop over the 2004 budget of D3884.9 million, or 31 percent of GDP. This drop is attributable to a fall in capital expenditure of D233 million entirely on account of lower foreign financed capital projects. Recurrent expenditure is D2786.1 million and as a share of total expenditure, constitutes 77 percent, while capital expenditure accounts for the remaining 23 percent, which is equivalent to D904.7 million.

iv. Recurrent Expenditure

151. Recurrent expenditure is projected at D2786.1 million in the 2005 budget; this represents a marginal rise of 1.4 percent over the 2004 Budget figure of D2747.1 million. The two major components of recurrent expenditure are interest payments on debt and the purchases of goods and services of D949.68 million and D929.3 million respectively. Interest payments on the domestic and foreign debt represent 34% of total recurrent expenditure, while the purchases of goods and services account for 33 percent. Other recurrent expenditures are personnel emoluments, amounting to D503.8 million, and current transfers of D394.2 millions. These two items combined are 33% of total recurrent expenditure, with personnel emoluments constituting 18 percent.

v. Capital Expenditure

152. Capital expenditure is estimated to contract by 20.5 percent from the 2004 budget amount of D1138.8 million to D904.7 million in 2005. The loans and grants that partly fund these activities are revised downwards in the 2005 budget to D868.1 million and D178.8 million respectively. The estimated capital expenditure in 2005 budget is D914.7 million or 7.3% of GDP.

153. The sectoral allocations of Government expenditure have been guided by the need to focus public spending on the key poverty-reducing sectors identified in the PRSP. Accordingly, Health expenditures will account for 15.2 percent of the budget excluding debt service payments, while education expenditures comprise 16 percent of the total budget. The budget allocates 11.9 percent of total expenditure to works and infrastructure, and 6.5 percent to Agriculture.

154. The projected overall budget deficit, including grants, for 2005 is projected at 4.5% of GDP. The basic primary surplus is also estimated at 7% of GDP. Government has designed a balanced and fully financed budget, which has no financing gap. For the 2005 Budget, Government will not increase any existing tax rates, or introduce any new Revenue Measures.

-end.