Public Finance

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Growth and Foreign debt the Ethiopian Experience : 1964- 1986
(AERC, 1992-11) Befekadu Degefe
Revenue productivity implications of tax reform in Tanzania
(AERC, 1993-09) Osoro, Nehemiah E.
CONSTRAINTS TO THE DEVELOPMENT AND DIVERSIFICATION OF NONTRADITIONAL EXPORTS IN UGANDA, 1981-90
(AERC, 1994-11) SSEMOGERERE, G. N.; KASEKENDE, L. A.
The foreign exchange cash-flow of Uganda has reached a crisis. Expenditure requiring foreign exchange is on the increase as the economy grows, while foreign exchange receipts have dwindled over the past four years from about US$400 million to a cash flow position of about US$100 million. This study investigates the constraints which prevent exports receipts from increasing in response to the exchange rate reforms since 1981. The first conclusion drawn from this study is that exchange rate policies, unless pursued within a consistent macroeconomic stabilization framework, cannot enlist a significant response from exports producers. Second, it is clear that other constraints encompassing institutional reforms and infrastructural reconstruction must also be addressed before a the country can develop a dynamic comparative advantage.
Ghana: The burden of debt service payment under structural adjustment
(AERC, 1995-03) OSEI, BARFOUR
Abstract not available
TANZANIA'S TRADE WITH PTA COUNTRIES: A SPECIAL EMPHASIS ON NONTRADITIONAL PRODUCTS
(AERC, 1995-04) MUSONDA, FLORA M.
This study investigates Tanzania's trade with other Preferential Trading Area (PTA) countries to observe how the formation of PTA and other trade incentives have affected trade. The results indicate a huge increase of trade in non-traditional goods. Although intra-country trade has increased, intra-industry trade between Tanzania and Kenya (which is analysed in detail) has not increased. Kenya exports more to Tanzania than Tanzania exports to Kenya, which suggests the need for internal adjustment in the production of manufactured products in Tanzania in order for the country to benefit more from the PTA arrangement. Policy considerations in the study suggest urgent improvements in infrastructure and other instruments to encourage increased trade within PTA region.
TAX REFORMS IN TANZANIA: MOTIVATIONS, DIRECTIONS AND IMPLICATIONS
(AERC, 1995-10) OSORO, NEHEMIAH E.
This paper provides a theoretical discussion on the relationship between buoyancy/elasticity and the existence of the underground economy and postulates an inverse relationship between the two. Such relationship is argued because the growth of the underground economy erodes the tax base and consequently reduces receipts, which in turn affects revenue productivity. In addition, the paper estimates the size of the underground economy in Tanzania for the period 1967-1990 in order to determine the magnitude of tax evasion. The resulting estimates show that the size of the underground economy is significant and grew from about 10% of official GDP in 1967 to 31% in 1990. These estimates suggest that tax evasion in 1990 was equal to more than one-third of total tax receipts in that year. The paper also provides an explanatory link between measured revenue productivity (buoyancy/elasticity) and tax policies. In this connection, the empirical results suggest that measured productivity is influenced by tax policies in place during a specific period. The lower rates/higher buoyancies in the 1970s and the higher rates/lower buoyancies in the 1980s demonstrate the laffer curve effect. Finally, the paper discusses what type of reforms could penetrate the underground economy. The paper concludes with important policy implications for tax reform.
FISCAL OPERATIONS IN A DEPRESSED ECONOMY: NIGERIA, 1960-90 —
(aerc, 1996-03) EKPO, AKPAN H.; NDEBBIO, JOHN E.
Fiscal federalism remains an important area of study especially in an economy characterized by regional or state organization. The Nigerian economy consists of states. Twenty-one states and the Federal Capital Territory (Abuja) made up the federation until 25 August 1991, when the federal government created additional nine states. Hence, the country now consists of 30 states plus the Federal Capital Territory. However, this study concentrates on the original 21-state structure. The pattern had developed from one with three regions to one with four regions between 1960 and 1966. From 1967 to 1971, the country operated a 12-state structure. A 19-state blueprint, which lasted until September 1987, was created in 1975/76. These reorganizations, though political, have reasonable doses of historical and economic considerations. From the economic sphere, the creation of more states affects an economy's fiscal operations. The nature and type of relationship(s) between the center and the states have to be worked out especially in terms of revenue sharing and expenditure. State fiscal structures have to be developed and fiscal functions of allocation, distribution, and stabilization should be properly monitored in order to ensure growth and development within the economy. The center must ensure that expenditure and revenue patterns in states or regions do not create distortions in the larger economy.
TAXATION OF FINANCIAL ASSETS AND CAPITAL MARKET DEVELOPMENT IN NIGERIA
(AERC, 1996-03) INANGA, ENO L.; EMENUGA, CHIDOZIE
Not available
Consequences and limitations of recent Fiscal Policy in Cote d’Ivoire
(AERC, 1996-11) OUSSOU, KOUASSY; BOUABRE, BOHOUN
N/A
Public Spending, Taxation and Deficits
(AERC, 1997-03) OSORO, NEHEMIAH E.
not available
Productivity of the Nigerian Tax System: 1970 1990
(AERC, 1997-11) Ariyo, Ademola
Given the negative impact of persistent unsustainable fiscal deficits on the Nigerian economy, there is now a consensus among interested parties on the need to address the problem effectively. The literature suggests three approaches for this purpose: an increase in revenue, reduction in expenditure, or a continuation of both. An appraisal of the budgetary process in Nigeria shows that annual expenditure proposals are always anchored on projected revenue, thus the accuracy of revenue projection is a necessary condition for devising an appropriate framework for fiscal deficit management in Nigeria. This study, therefore, evaluates the productivity of the tax system for the period 1970— 1990 to devise a reasonably accurate estimation of Nigeria’s sustainable revenue profile. This will assist in the design of an appropriate expenditure profile as a means of averting the persistent unsustainable fiscal deficit in the country. Overall, the study reports a satisfactory level of productivity of the tax system. Although the advent of the oil boom, encouraged some laxity in the management of non-oil revenue sources, this was rectified to a reasonable extent with the commencement of the structural adjustment programme. The study concludes that the current revenue profile is sustainable, with little prospect for significant improvement in the short run. It also suggests that a significant reduction in public expenditure and prudent management of financial resources are the most feasible solutions to the problem of unsustainable fiscal deficit in Nigeria. Finally, the report underscores the urgent need for the improvement of the tax information system to enhance the evaluation of the performance of the Nigerian tax system and facilitate adequate macroeconomic planning and implementation.
Fiscal operations, Money Supply and Inflation in Tanzania
(AERC, 1997-11) KILINDO, A. A. L.
Not available
Effects of budget deficits on the current account balance in Nigeria: A simulation exercise
(AERC, 1997-11) Egwaikhide, Festus O
This paper examines the effect of budget deficit on the current account balance in Nigeria, covering the period from 1973 to 1993. This is motivated by the fact that the magnitude of government has increased with amazing rapidity since the early 1 980s. Simultaneously, the current account balance recorded deficits, to the extent that there is a high correspondence between these variables. A macroeconomic model that captures the salient interrelationships between government budgetary developments, credit creation and the current account balance is constructed. Quantitative evidence suggests that budget policy affects the current account balance in Nigeria. In particular, simulation experiments show that budget deficit, engendered by increased expenditure, leads to a deterioration of the current account, whether it is financed through bank credit or external borrowing. It is argued that budget discipline is necessary for the achievement of external balance in Nigeria.
Growth And Foreign Debt: The Ugandan Experience
(AERC, 1997-11) Mbire, Barbara; Atingi, Michael
This paper analyses Uganda’s external debt problem. Like many other countries in the sub-Saharan Africa, Uganda is a severely indebted low-income country. Uganda’s total debt stock at end June 1993 was estimated at US$2.64 billion, with a debt service ratio of nearly 80%. A look at Uganda’s debt profile since the 1970s reveals a composition of debt mainly from multilateral creditors. The study particularly links debt to economic growth. A major observation is the acute debt servicing obligation of the country, and the fact that a large proportion of Uganda’s debt is not eligible for rescheduling. Debt payments have been a fundamental cause of low economic growth. Of great concern is whether the economy can sustain its current growth rate of 5% per annum and at the same time maintain adequate domestic investment, given the heavy reliance on foreign import capital flows. Debt relief is not enough; continued government commitment to structural reforms and sound debt management are essential. The need to continue the ongoing restructuring of the economy and promote further growth is apparent. But how sustainable and possible is this challenging path without accumulating more debt?
Tax reform and tax yield in Malawi
(The African Economic Research Consortium, 1998-03) Chipeta, C.
The problem of this study is to evaluate tax reforms as instruments for raising tax yield in Malawi. The study tests two hypotheses: that the yield of the tax system as a whole, of its major components and of individual taxes, is not buoyant; and that the yield of the tax system as a whole, of its major components and of individual taxes is not income elastic. In order to test these hypotheses, two sets of regression equations were estimated. In the first set, tax revenue was regressed on GDP. Tax revenue was again regressed on GDP in the second set, but in individual tax revenue equations, dummy variables were used to capture discretionary tax changes. Moreover, in the total tax revenue equation, tax revenue adjusted for discretionary tax changes was the independent variable. On the basis of the econometric analysis, a few taxes are buoyant. The tax system as a whole is not. In the context of Malawi, relying on increasing tax rates, extending existing taxes to new activities and introducing new taxes are not sufficient for raising buoyancy of the tax system. Only PAYE tax (pay as you earn) is tax elastic. The whole tax system is not. To improve tax elasticity, the tax base must grow relative to GDP.
Local Government Fiscal Operations in Nigeria
(AERC, 1998-03) Ekpo, Akpan H.; Ndebbio, John E.U.
The paper describes and analyses fiscal operations at the local level in order to improve understanding of fiscal federalism in Nigeria. The paper also tries to ascertain whether fiscal imbalances observed at both federal and state arms of government also exist at the local government level. The study is based on an analysis of primary data derived from administered questionnaires to randomly selected local governments. The results show that some local governments experienced surpluses during the period of structural adjustment. Deficits were financed through guaranteed state loans, state grants and commercial bank loans. The paper suggests that local government financial behaviour should be monitored in order to ensure accountability and financial discipline
Tax reform and revenue productivity in Ghana
(The African Economic Research Consortium, 1998-03) Kusi, Newman Kwadwo
This study evaluates the revenue productivity of Ghana’s overall tax system and of individual taxes on the basis of estimates of tax buoyancies and elasticities. It also looks at the links between the tax reform of 1983-1993 and revenue performance, as well as at ways of mobilizing additional revenue. The analysis shows that the tax reform has had significant impact on the productivity of both the individual taxes and the overall tax system. All the individual taxes, except for cocoa export tax and excise duties, showed buoyancies and elasticities of more than unity during the reform period, thereby causing the overall tax system to have a buoyancy and elasticity of more than unity each. The sharp improvement in the revenue productivity during the reform period was due principally to the successive devaluations of the exchange rate. It was also supported by the large inflow of foreign loans, the abolition of the price control and import licensing system, the simplification of the import tariff rates, and the complete overhaul of the tax administration. The tax reform succeeded in improving revenue generation, enhancing the efficiency of the tax administration and improving equity in the tax system. It also removed market distortions and strengthened economic incentives. Despite this, the share of government revenue in GDP remains low compared with the average obtained in developing countries, which calls for ways to mobilize additional revenue. Various revenue enhancement options were found to be available for use by the tax authorities. These options include the introduction of VAT to replace the existing sales tax, revaluation of properties to broaden the base of property tax, a review of the definition of income for the purposes of income tax, and further improvement in the tax administration to increase tax collection and to combat evasion and fraud.
Cameroon’s fiscal policy and economic growth
(The African Economic Research Consortium, 1998-11) Amin, Aloysius Ajab
Cameron has experienced periods of economic growth and decline. During the growth period public expenditures increased the size of the public sector. The decline period, which started in 1986, has been characterized by government expenditures that outstripped revenues. The government's recovery program has meant drastic reduction in public expenditures and desperate efforts to raise revenue. Since the programe started, Cameron's key macroeconomic in dictators of performance have continued to show adverse trends. There are few single country studies relating government budget to growth through private investment. Moreso nothing has bend one on Cameron. This study analyzes the relationship between publican and private investment, stressing the crowding in or crowding out of private investment by public expenditures. Based on secondary data from the public sector, the results of a growth model show that the relevant factors have positive effects on growth while those of the investment model show the crowding in of infrastructures and social sector. The study concludes by recommending the reallocation of more resources to productive sectors and increasing and sustaining of spending on those productive sector for those components of public expenditures that crowd in the private sector.
Macroeconomic Effects of VAT in Nigeria: A Computable General Equilibrium Analysis
(The African Economic Research Consortium, 1999-03) Ajakaiye, Olu D.
This study analyses the impact of value added tax on key sectoral and macroeconomic aggregates, using a CGE model considered suitable for Nigeria. A survey of VATable Nigerian manufacturers, distributors, importers and suppliers of goods and services, organizations was conducted to gain insights into the way VAT is treated by these organizations. The survey shows that a majority of the VATable organizations treat VAT in a price cascading manner by regarding it as cost contrary to expectations. Evidence from the way VAT revenue is being shared among the three levels of government in Nigeria suggests that this revenue is being re-injected into the economy. Against this background, model simulations were run for three scenarios. The simulation results shows that if VATable organizations treat the VAT in the expected non-cascading manner and the VAT revenue is re-injected via increases in sectoral government consumption expenditure, the general price level will increase by 5%, total private consumption expenditures will fall by over 128, total consumption expenditure inclusive of government component will fall by only 6.7%, total gross output and GDP will fall by about 3% and 5% respectively, but the share of wages in total factor income will increase lightly. Private savings wilI increase by over 14% in order to secure the savings-investment balance because government and foreign savings will fall by about 4% and 11.6% respectively. If the VATable organizations treat the VAT in a non-cascading manner but the VAT revenue is sterilized the results show that although the price effects will be the same, the effects on the other sectoral and macroeconomic aggregates will be more deleterious than in the first scenario. Finally, when VAT is treated in a cascading manner by the VATable organizations and the VAT revenue is re-injected into the economy the price, consumption expenditure, output and income effects will be most deleterious. It turns out that this scenario where VAT will have the most adverse effects on price, consumption, output, employment and income best approximates the Nigerian situation. It will, therefore, be necessary to consider strategies for securing appropriate treatment of VAT by the VATable organizations while taking steps to ensure that the VAT revenue is targeted at sectors most likely to ameliorate the inadvertent adverse effects of VAT on consumer welfare, production, employment and income.
External Debt and Economic Growth in Sub-Saharan African Countries: An Econometric Study
(The African Economic Research Consortium, 1999-03) lyoha, Milton A.
This econometric study takes a sumulation approach to investigate the impact of external debt on economic growth in sub-Saharan African countries using a small macroeconometric model estimated for 1970-1994. An important finding was the significance of debt overhang variables in the investment equation, suggesting that mounting external debt depresses investment through both a “disincentive” effect and a “crowding out” effect. Policy simulation was undertaken to investigate the impact of alternative debt stock reduction scenarios (debt reduction packages of 5%, l0%, 20% and 50%), effective in 1986, on investment and economic growth in the subsequent years. It was found that debt stock reduction would have significantly increased investment and growth performance. A 20% debt stock reduction would, on average, have increased investment by 18% and increased GDP growth by 1% during the 1987-1994 period. Thus, the results demonstrate that debt forgiveness could provide a much needed stimulus to investment recovery and economic growth in sub-Saharan Africa.

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