The Budget Statement

Mr Seth Terkper,Finance MinisterTHEME“Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy” 1

 

SECTION ONE:

INTRODUCTION

 

  1. Rt. Hon. Speaker and Honourable Members of Parliament, on the authority of His Excellency, John Dramani Mahama, President of the Republic of Ghana, I beg to move that this Honourable House approves the Financial Policy of the Government of Ghana for the year ending 31st December, 2015.
  2. Similarly, Rt. Hon. Speaker, on the authority of His Excellency, John Dramani Mahama, President of the Republic of Ghana, and in accordance with Article 179 of the 1992 Constitution, permit me to present the Budget Statement and Economic Policy for the year 2015 to this august House.
  3. Mr. Speaker, this presentation is an abridged version of the 2015 Budget Statement and I would like to request the Hansard Department to capture the entire Budget Statement and Economic Policy.
  4. Furthermore, Rt. Hon. Speaker, in accordance with Section 48 of the Petroleum Revenue Management Act, 2011 (Act 815), permit me to present the 2014 Annual Report on the Petroleum Funds to the House.
  5. It will be recalled that, exactly a year ago, precisely on Tuesday 19th November 2013, I had the privilege of presenting the 2014 Budget Statement and Economic Policy of the Government to Parliament. Subsequently, on Wednesday, 16th July, 2014, I presented the Mid-Year Review and Supplementary Estimates to the 2014 Budget to you. Rt. Hon. Speaker, I am grateful to the House for approving both presentations and, where necessary, passing relevant laws in support of the measures proposed.
  6. Mr. Speaker, in those presentations, I outlined among others, measures to address the major causes of the twin Budget and Current Account deficits

 

 

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy” 2 that occurred at the end of 2012. Moreover, after consolidating the policies and measures into the Home Grown Policy with inputs from Senchi, we presented them to the Board of the International Monetary Fund (IMF), as part of its consideration of the staff report on Ghana’s Article IV Consultations that took place in February this year.

  1. Mr. Speaker, I stand before this august House to report that we have made progress in resolving several of these challenges. The successes that the measures have achieved include the following:
  2. completion of the migration of almost all public sector workers on the central payroll to the Single Spine Salary Structure (SSSS)after many failed attempts in over two decades. This remarkable progress, will help address many unfair features of the payroll system;
  3. clearing of all outstanding SSSS-specific salary arrears of about GH¢3 billion that started to accumulate from the beginning of the programme in 2010. Moreover, the Scheme now moves into the productivity phase, as part of the on-going public sector-wide improvement or reform Programme;

iii. virtually eliminating the spectre of long queues for fuel as well as the huge budget overruns of about GH¢339 million in 2012 and GH¢135 million in 2013 that resulted from past failures to adjust prices through the “automatic adjustment” pricing formula; and

  1. an improvement in the revenue estimation process of the production and sale of crude oil, thus, eliminating another of the major causes of the budget overrun of about GH¢384 million that occurred at the end of 2012; and

 

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy” 3

  1. a demonstration of our ability to raise both domestic and external funds to complete several projects that were put on Government budget without adequate source of funds.
  2. Mr. Speaker, notwithstanding these successes, however, our resolve at rebalancing the Budget was severely tested again when the economy came under additional significant shocks in 2013. Many of these shocks continued into the 2014 fiscal year. The challenges we continue to face include major exogenous setbacks such as the following:
  3. the continued disruption in the supply of gas from the West African Gas Power Pool (WAGP) from August 2012 through August 2014, due to the damage caused to the pipeline. This has had significant adverse effects on power supply, national output, foreign exchange reserves, and tax revenues;
  4. the fall in gold and cocoa prices has had similar effects and, required sacrifices by our hardworking cocoa farmers as well as Government in the form of curtailed producer price and export duty respectively. Hence, we have reason to commend our farmers and return the favour with the producer price increase that we announced this year;

iii. the sluggish inflow of grants from some Development Partners for the third year in succession (it is about 75 percent below what was pledged to support the budget); and

  1. while the slump in petroleum prices during the third quarter of 2014 has benefitted our automatic adjustment policy, it is also a factor that becomes important in our quest to utilise the petroleum funds under the PRMA for savings, stabilisation and investment.

 

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy” 4

  1. Mr. Speaker, besides the continuing adverse impact on national output as well as losses in foreign exchange and tax revenues, these latter setbacks had a major impact on the value of the Cedi in early 2014. It took several additional bold efforts and the reversal of compliance measures announced by the Bank of Ghana (BOG) to reverse and stabilize the currency. Thankfully, the Ghana Cedi has started showing signs of recovery, an explicit enunciation of the recovery and bright near term prospects.
  2. Mr. Speaker, it was also at this critical juncture that the Government decided to request the IMF for Balance of Payments support that only vcomes from a funded IMF Programme. Indeed, the enhancements to the Home Grown Policies which would have expired in 2016/17 and outcome of the Senchi consultations have been used as vital input for the on-going Programme discussions with the IMF.
  3. Mr. Speaker, the discussions have been progressing well and at the appropriate time, when we expect the IMF Board to approve the Programme, we will return to this august House with an update.
  4. Mr. Speaker, while Ghanaians and the markets were taking the essence of Ghana’s announcement of an IMF Programme in its stride, we achieved another important and significant success in launching our third Sovereign Bond of US$1 billion in early September 2014. Similarly, on the same day as the Bond issue, the Ghana COCOBOD also signed an agreement for US$1.7 billion, which was the result of another successful bid to access the international capital markets.
  5. I mention these latter events in my update because the success of the Sovereign Bond and COCOBOD programmes was against the expectations of many people both at home and abroad. We do not gloat, rather they provide us with the occasion to put the management of our economy in a more balanced perspective. As with the 2014 Mid-Year Review, the market

 

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy” 5 activities were occasions to make a strong case for our positive and bright medium-term prospects.

  1. Mr. Speaker, while we are aware that some deliberately choose to ignore that narrative, permit me to restate some features of that promising outlook for our nation:
  2. the economy continued to grow at respectable rates, led by the Agriculture Sector, even during the period that it was undergoing serious setbacks and challenges;
  3. the completion of Ghana’s own gas pipelines and processing plant to utilise the free 200 billion cubic feet (bcf) of gas from the Jubilee field. Indeed, the tie-in of the pipelines with the Floating, Production, Storage and Offloading (FPSO) and the plant has been completed and the commissioning of gas flows from the oil fields to the plant has started;

iii. the future coming on stream of additional gas and crude oil production and supplies from the Sankofa and Tweneboa-Enyenra-Ntomme (TEN) fields; and

  1. the prospects for further boosts to the economy from the energy sector have become even more promising with the signing of the Millennium Challenge Corporation (MCC) Compact II Agreement with the United States of America (USA).
  2. Mr. Speaker, indeed, the 2015 Budget will be unique in one major respect. It will usher the country into the gas era and Phase II oil-gas production. Hence, just as with the prudent foresight it exhibited in taking the nation into the crude oil era, the NDC Government is poised to:

 

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy” 6

  1. propose amendments to enhance effective implementation of the Petroleum Revenue Management Act 2011, (Act 815) to harness our oil resources for savings, stabilisation and development;
  2. outline firm policies for the energy sector that include the following key elements:

iii. implementation of the over US$400 million US MCC Compact II under the Power Africa Program that is planned to attract significant private investment into the energy sector;

  1. a major overhaul of the pricing, tax and levy structure for energy utilities and petroleum products;
  2. a vigorous use of alternative financing instruments for energy and nonenergy investments, mainly the insurance and Partial Risk Guarantee (PRG) tools of the World Bank and the African Development Bank (AfDB) to boost private sector participation in the sector and the economy; and
  3. as part of the new debt management strategy approved by this august House, we will continue to enhance the use of oil and gas resources to leverage the Capital Markets for development of the energy sector.
  4. This last initiative will involve the issuing of energy bonds through plans that draw on synergies among the Balance Sheets of capable State-Owned Enterprises (SOEs) and the private sector. In this context, we will also consider the possibility of a second line of longer term Cocoa Bonds by COCOBOD to fund its long term capital and infrastructure needs.
  5. Mr. Speaker, this innovative financing plan is key for the energy sector, where recent negotiations involving gas pricing and GNPC’s aggregator.

 

 

 

 

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy” 7 arrangements clearly suggest the need for strong Balance Sheets. It is in this context that we must see the relevance of (a) the proposed energy levy in the new pricing structure; and (b) GNPC’s recent successful access to the capital markets to raise US$700 million to support infrastructure development.

  1. Mr. Speaker, I would like to emphasise that this loan is a GNPC loan and not a central government loan. The cost of borrowing at around 5 percent is highly competitive. The uses, as outlined by GNPC, are very clear and compelling, both commercially and strategically. The facility, together with

GNPC’s other resources, will be used to support such investment needs as

the pipeline and receiving facility in the Offshore Cape Three Points Project

(OCTP), which GNPC will finance with US$493 million out of the loan

proceeds, to provide a significant boost to monetizing Ghana’s natural gas.

It will result in a lower gas price. Similarly, the US$36 million to US$45

million investment to link the Tweneboa natural gas to the Jubilee FPSO will

enable cheaper processing of the gas by the Atuabo Plant. In addition,

GNPC plans to use between US$200 million and US$300 million as part of

measures to provide adequate financial security for the OCTP gas project.

  1. In short, the facility is expected to be as much a game changer as the

investment of about US$1.0 billion in our first gas infrastructure. These are

all critical to our long term national energy security.

  1. It is in this vein that Government has approved the takeover of the Ghana

National Gas Company Limited (GNGC) by GNPC to create a gas subsidiary

for the latter. The consolidation of GNPC and GNGC will make it possible to

enhance a more integrated management and continue financing of projects

in the oil and gas enclave immediately. It will make it possible to ease the

conditions that investors impose for the national gas aggregator and start

financing projects in the oil-and-gas enclave immediately. Government will

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appoint a transaction advisor for these purposes and request them to advise

on a further consolidation involving TOR and BOST.

  1. Finally, we will consult with, and learn from, the experiences of Sovereign

Wealth Funds (SWFs) on the continent (e.g. Nigeria and Angola) and

elsewhere, as well as start exploratory talks on financing energy and nonenergy

infrastructure with the newly established Global Infrastructure Fund

of the World Bank and the Africa50 (Infrastructure) Fund of the African

Development Bank.

  1. Rt. Hon. Speaker, against this background, permit me to re-echo H.E.

President Mahama in stating that while we see a bright future encompassing

the services, agriculture and industrial (most notably, energy) sectors, we

are not yet out of the woods. Therefore, as we seek to enhance our ongoing

fiscal consolidation measures and policies under a prospective IMF

Programme, we are reminded that we will not be merely continuing our

stabilisation effort. In the near term, an IMF Programme will dovetail into

the promising environment we plan to create for inclusive growth, value

addition, and diversification. This outlook is embodied in the theme for

the 2015 Budget Statement and Economic Policy “Transformational

Agenda: Securing the Bright Medium Term Prospects of the

Economy”.

GLOBAL ECONOMIC PERFORMANCE AND OUTLOOK

  1. Mr Speaker, permit me to present a summary of the performance and

outlook for the global and domestic economies.

Growth

  1. Mr. Speaker, according to the IMF’s October 2014 World Economic Outlook

(WEO), the performance of global economies has been slower than

expected in the first half of 2014, reflecting a number of negative

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unexpected developments, including weaker growth in the U.S., China and

Latin America, as well as stagnant euro area growth. This has led to a

downward revision of the projected growth rate for 2014, from 3.7 percent

as reported in the April 2014 edition of the World Economic Outlook, to 3.3

percent. The world economic growth is projected at 3.8 percent in 2015.

  1. Mr. Speaker, economic growth has remained robust in most economies of

sub-Saharan Africa, driven by strong growth in public and private

investment, supportive external demand, and strong private consumption.

Growth is projected to remain robust at 5.1 percent in 2014 (same as 2013)

and 5.8 percent in 2015, on account of strong domestic and net external

demand.

Inflation

  1. Mr. Speaker, price pressures have been largely contained, with Consumer

Price Index (CPI) inflation generally below targets in advanced economies.

In emerging market and developing economies, inflation is projected to

decline to 5.5 percent in 2014, down from 5.9 percent in 2013 and remain

broadly unchanged in 2015, largely on account of the softening of

commodity prices, particularly food commodities, which have a high weight

in the consumer price index baskets for these countries.

Commodity Prices

  1. Mr. Speaker, commodity prices have declined in recent months and are

expected to fall further in line with futures markets, owing mostly to

improved supply prospects and weak global demand. Crude oil prices have

experienced a declining trend in recent times, dipping to under US$90 a

barrel in July, from a January average of US$107 and, declining further to

under US$80 per barrel in November 2014.

  1. According to the October 2014 WEO, crude oil prices are expected to

average US$99.4 a barrel in 2015, falling further to around US$97.3 in

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  1. However, recent market sentiments point to weaker crude oil prices

than those predicted by the WEO. Metal prices, which have experienced

declines in recent times, are projected to fall further by 7.5 percent in 2014

and by 1.8 percent in 2015, before rising by 0.6 percent in 2016. Food

prices are also expected to decline by 4.1 percent in 2014 and by 7.9

percent in 2015 and remain broadly unchanged in 2016, reflecting

favourable harvest conditions.

ECOWAS Activities and Protocols

  1. Mr. Speaker, Ghana continues to play an integral role in the integration

process of the Economic Community of West African States (ECOWAS). This

commitment is reaffirmed by the current status of His Excellency, President

John Dramani Mahama as the Chairman of the Authority of Heads of State

and Government of ECOWAS. In 2014, the Heads of Governments of

ECOWAS resolved, among others, to work at the abolition of the residence

permit and the introduction of the Biometric Identity Card for the

Community citizens; rationalization of the ECOWAS Convergence Criteria;

the streamlining of ECOWAS Institutions in line with the Vision 2020; and

approval of the revised roadmap for the second single monetary zone.

Implications of the Global Developments for Ghana’s Economy

  1. Mr. Speaker, our nations and region face ignorance, stigma, jokes and even

ostracization often from what ought to be informed sources the threat of

the Ebola virus in some West Africa countries; but which poses significant

risk to the region’s growth prospects, particularly its effects on the tourism

and the hospitality sub-sectors.

31.

  1. It is instructive to note that, His Excellency, President John Dramani

Mahama, in his capacity as the Chairman of Economic Community of West

African States (ECOWAS), has been at the forefront of the humanitarian

efforts to mobilise both financial and material resources to bring the

epidemic under control. Ghana has been designated as the UN centre for

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coordinating global response to the Ebola crisis, thanks to the sterling

leadership of H.E. the President. Many global leaders have commended this

effort very openly. As we note later Government is implementing several

safety measures already to protect our citizens.

  1. Mr. Speaker, Ghana has had to endure the harsh economic impact of the

recent declines in commodity prices. In particular, the declining prices of

gold have had adverse effects on jobs and revenues in the mining sector.

Our mining towns are taking the full brunt of the negative effect. The

projected decline in oil prices would also impact negatively on the fiscal

through lower revenues from oil exports whilst at the same time dampening

the effect of foreign exchange pressures arising out of oil lower import bill.

However, the prospects are that the developments in gas can neutralise

some of the adverse effects of crude oil earnings.

  1. Mr. Speaker, Government will take necessary steps to mitigate their

potential impacts. To sustain our medium term growth prospects, measures

are being put in place to reduce our vulnerability to external shocks through

such means as strengthening our tools for risk management, diversifying

and adding value to our exports, and supporting local production of

imported goods which can be produced domestically. The fiscal frameworks

would also be strengthened to foster medium-term planning and preserve

debt sustainability, as well as deepen structural transformation of the

economy.

MACROECONOMIC PERFORMANCE IN 2014

Growth

  1. Mr. Speaker, provisional Gross Domestic Product (GDP) data released by the

Ghana Statistical Service (GSS) for 2014 estimates an expansion of 6.9

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percent of the country’s economy, down from a revised target of 7.1

percent and the 2013 growth of 7.6 percent.

  1. In a reversal of trends in recent times, the Agriculture Sector recorded the

highest growth of 5.3 percent in 2014, followed closely by the Services and

Industry Sectors each by 4.6 percent.

  1. Mr. Speaker, in the medium term, real GDP is estimated to grow at an

average rate of 6.8 percent while non-oil GDP is projected to grow at an

average of 4.4 percent. The Industry Sector is projected to be the lead

sector over the medium term with an average growth of 11.4 percent,

followed by the Services Sector with 6 percent and the Agriculture Sector

with 3.6 percent.

  1. The growth in the Industry Sector will be fuelled mainly by increasing

growth in the petroleum industry due to expected gas production from the

Jubilee Field; and commencement of crude oil and gas production in the

Tweneboa-Enyenra-Ntomme (TEN) Field and the Sankofa-Gye Nyame (SGN)

Field in 2016 and 2017. The projection is also based on expected

improvement in manufacturing with the expected improvement in electricity

production.

  1. Projected growth in the Services Sector will be spurred on mainly by the

Financial Intermediation, Information and Communications and Transport

and Storage subsectors.

  1. Mr. Speaker, the growth in the Agriculture Sector is expected to result

mainly from planned Government interventions, including increasing the

number of Agricultural Mechanization Services Centres (AMSECs), as well as

enhancing the fertilizer and seed subsidy programme.

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Inflation

  1. Mr. Speaker, inflation rose to 16.9 percent in October 2014, from 16.5

percent in September 2014 and 13.5 percent at end-December 2013. The

rise in inflation pressures in 2014 reflected the sharp depreciation of the

local currency as well as pass through effects of fuel and utility price

adjustments. Inflation during the first ten months of the year was reflected

more in the non-food inflation than in the food inflation.

Money supply

  1. Mr. Speaker, BOG’s monetary statistics showed an increase in growth of

monetary aggregates. General money supply, (Broad money or M2+),

including foreign currency deposits, indicated a year-on-year growth of 33.6

percent by end of September 2014, compared with a growth of 17.4 percent

at the end of September 2013.

Interest Rate

  1. Interest rates increased for the period January to September 2014. The

average interest rate on the 91-day Treasury bill rose to 23.5 percent in

September 2014, from 21.59 percent in September 2013. However, the

difference between borrowing and lending rates declined to 14.25 percent in

September 2014.

Exchange Rate

  1. Mr. Speaker, the cedi continued to weaken on the domestic market amid

demand pressures, largely for oil imports, in the context inadequate foreign

exchange supply on the market. In the Inter-Bank Market over the nine

month period of 2014, the cedi depreciated by 31.2 percent, 29.3 percent

and 23.6 percent against the US dollar, the pound sterling and the euro

respectively. This compares with a depreciation of 4.1 percent, 16.7 percent

and 20.1 percent against the US dollar, the pound sterling and the euro,

respectively at the end of 2013.

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  1. With the boost from the inflow of the Sovereign Bond that was planned to

support capital investments and the COCOBOD syndicated loan to support

our farmers, the exchange rate has appreciated against the major

currencies and it is expected to remain stable for the rest of the year.

  1. Mr. Speaker, the main policy objective for over the medium term is to lower

inflationary expectations. Since the last quarter of 2013, the effects of fuel

adjustments, exchange rate depreciation and fiscal

pressures have steadily pushed up inflation from the medium term target of

about 9 percent. The Central Bank will continue to use its monetary policy

rate to signal and gradually ease inflation towards the medium term target

of about 9 percent.

Current Account Balance

  1. Mr. Speaker, the provisional trade balance for the period January to

September 2014, showed a narrower deficit of US$681.3 million, from

US$3.8 billion at the end of 2013. The improvement was on account of less

imports compared to exports, with imports reducing by 18.0 percent whilst

exports reduced by 2.8 percent.

Gross International Reserves

  1. The decline in the price of gold on the international market accounted for

the shortfall in export earnings. The decline in imports was attributed to

decline in non-oil imports which was affected by the depreciation of the cedi

against the major trading currencies.

  1. The country’s gross international reserves increased by US$46.9 million from

US$5.6 billion at the end of December 2013 to US$5.7 billion at the end of

September 2014. This was sufficient to provide 3.3 months of imports cover

compared to 2.9 and 3.1 months of imports cover as at end-September and

end-December 2013, respectively.

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  1. Mr. Speaker, external sector policy will continue to aim at building up

foreign reserves to more comfortable levels beyond three months to four

months of import cover in the medium term.

Fiscal Policy

  1. Mr. Speaker, the 2015 Budget has been developed within the broad

framework of the Ghana Shared Growth and Development Agenda (GSGDA

II), 2014-2017. The medium term vision of Government in the GSGDA II is:

“A stable, united, inclusive and prosperous country with

opportunities for all”.

  1. Ghana’s successful structural transformation rests on three strategic

interventions namely:

  1. strengthening and deepening the essential elements and institutions of

good governance;

  1. promoting export-led growth through products that build up on

Ghana’s comparative strength in agricultural raw materials; and

iii. anchoring industrial development through prudent use of natural

resources based on locally processed value addition.

  1. The GSGDA II will be linked to Ministry of Finance’s database, the medium

term expenditure and budget through the GIFMIS structures.

  1. Mr. Speaker, the medium term fiscal policy of Government will focus on

managing volatilities for a smooth near-term. We will continue to pursue the

fundamental policies and measures we have been implementing for some

time now.

  1. Mr. Speaker, Government is committed to addressing the short term

vulnerabilities that the economy faces to safeguard the nation’s bright

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medium term prospects for strong growth and job creation. Our goal for the

medium term is to progressively reduce the fiscal deficit to 3.5 percent of

GDP by 2017. This reduction will be driven mainly by improvements in tax

policy, revenue administration reforms, improved management of public

funds, expenditure rationalization, and the implementation of new debt

management strategies.

  1. Mr Speaker, in 2015, Government will implement the remaining VAT

measures for fee-based financial services and commercial real estate with a

change in the VAT on real estate to a flat 5 percent which the House has

already passed.

  1. In addition, Mr. Speaker we propose the following tax measures for

implementation in 2015:

  1. Imposition of Special Petroleum Tax of 17.5 percent as part of a

rationalization of VAT regime and change in the petroleum pricing

structure – this policy comes with a mitigation account to manage

extremely low and high prices that result in sporadic price increases or

decreases under the automatic adjustment formula;

  1. Reversal of the excise tax on petroleum from ad valorem to specific;

iii. Extension of the National Fiscal Stabilization Levy of 5 percent and

special import levy of 1-2 percent to 2017; and

  1. Increase the withholding tax on Directors’ remuneration from 10

percent to 20 percent;

  1. Mr. Speaker, we will continue to implement the on-going expenditure

measures that we have been vigorously pursuing under our Home-Grown

Policy. These include:

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  1. Government’s fiscal stance to negotiate public sector wages within

budgetary constraints to ensure the sustainability of the Single Spine

Pay Policy. Government is also mindful of the signal and pressure that

public sector base pay could have on the private sector’s application of

the minimum wage. In with another decision reached at the Ho forum,

we worked hard to complete negotiations on wage adjustments for

2015 before the Budget but could not achieve this goal.

  1. In a fiscal context, it is necessary that we continue to observe

budgetary constraints on the wage bill. Despite the benefits of the new

salary scheme, it is the cumulative overrun in the wage bill of over

GH¢1.9 billion in addition to over GH¢3 billion overrun in arrears for 3

years in a row that prevented government from paying all its

obligations on pensions, contractors and expenditures to run

government services smoothly. As noted, however, this was worsened

by factors such as the gas supply disruptions and fall in gold and cocoa

prices;

iii. Continuation of the policy of net freeze on employment into all sectors

of the public services (excluding education and health) and nonreplacement

of departing public sector employees in overstaffed areas;

and

  1. We will continue to implement the existing price adjustment

mechanisms for utility tariffs and fuel prices which as noted earlier, has

eliminated the spectre of long queues for fuel. As the gas supply

situation improves, we expect that consumers will also see the benefits

of the utility price adjustments.

Debt Management

  1. Mr. Speaker, Ghana’s public debt stock as a percentage of GDP has been

rising over the years. It increased from 36.3 percent in 2009 to 48.03

percent in 2012 and further to 55.53 percent in 2013. As at end September,

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2014 the debt stock stood at 60.8 percent, largely on account of increase in

external net disbursements for infrastructure projects and net domestic

issuance, and the depreciation of the cedi.

  1. Mr. Speaker, the provisional public debt stock as at end September, 2014

stood at GH¢69,705.90 million (US$21,733.51 million). This was made up of

GH¢40,644.15 million (US$12,678.62 million) and GH¢29,041.75 million

(US$9,054.89 million) for external and domestic debt respectively.

  1. It is worth noting that some of the loans contracted were used to finance

major infrastructure projects such as the following:

  1. Ghana National Gas Processing Plant to help solve the energy crisis,
  2. Refurbishment and Expansion of the Ridge Hospital

iii. University of Ghana Teaching Hospital

  1. Expansion of the Kpong Water Pumping Station
  2. Kwame Nkrumah Interchange
  3. Sofoline Interchange in Kumasi

vii. Tetteh-Quarshie – Madina road project

viii. Achimota-Ofankor road project

  1. Construction of Affordable Housing Units by OAS Construction
  2. Kumasi Central Market
  3. Kasoa Interchange

xii. 200 Buses for the Metro Mass Transit, and an additional

xiii. 295 Scania Buses for the Rapid Transport System

xiv. Parliament House- Job 600 Offices and reconfiguration of Parliament

from long term domestic bond proceeds

Eurobond Issue

  1. Mr. Speaker, you may recall that members of this august House on 31

December, 2013, approved the issue of up to US$1.5 billion on the

Eurobond market in 2014 of which US$1 billion was for capital expenditure

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in the 2014 budget and up to US$500 million for the refinancing of existing

debt. The prospectus is being distributed with this budget.

  1. Mr. Speaker, unlike earlier Eurobond transactions, the 2014 transaction

coincided with an announcement of a potential programme discussions with

the IMF. Despite this complication we were able to achieve an impressive

market result reflected in a competitive coupon rate of 8.125 percent and an

order book of US$2.9 billion of which Government accepted US$1billion.

Projected 2014 End Year Fiscal Outturn

  1. Mr. Speaker, the key objective of fiscal policy as outlined in the 2014

Budget, aimed at ensuring fiscal prudence and debt sustainability by

improving revenue mobilization and rationalization, enhancing efficiency of

public expenditures, as well as reviewing the financing methods and

implementation of new debt management reforms. In this regard, the 2014

Budget targeted a reduction in the fiscal deficit from 10.1 percent GDP in

2013 to 8.5 percent of GDP in 2014. However, due to both domestic and

global economic developments, the deficit target for 2014 was revised to

8.8 percent of GDP in mid-year review.

  1. Mr. Speaker, preliminary data for the first nine months of the year indicate

that, both revenue and expenditure were below their respective targets for

the period. However, the shortfall in revenue was lower than the shortfall in

expenditure, and this resulted in a fiscal deficit of 5.9 percent of GDP (cash

basis), against a target of 6.4 percent. As a result of projected shortfall in

revenue the 2014 end-year fiscal deficit is estimated 9.5 percent of GDP.

  1. Mr. Speaker, in the 2014 Budget Government announced that the President,

his Vice President, Ministers and Appointees have decided to take a

voluntary 10 percent pay cut for 2014 within the spirit of the Ho Forum on

the sustainability of the Single Spine Pay Policy. The realized amount is for

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special purpose CHPS compounds focusing on maternal and neo natal

health.

  1. Mr. Speaker, I’m glad to announce that as at the end of October 2014 an

amount of GH¢734,530 has been deducted and used for the intended

purpose.

MACROECONOMIC TARGETS FOR THE MEDIUM-TERM AND 2015

  1. Mr. Speaker based on the macroeconomic framework, the specific

macroeconomic targets to be pursued for the medium term (2015- 2017)

include the following:

  1. An average real GDP (including oil) growth rate of at least 6.8 percent;
  2. An average non-oil real GDP growth rate of at least 4.4 percent;

iii. An inflation target of 8 percent with a band of ±2 percent;

  1. An overall Budget Deficit of 3.5 percent by 2017
  2. Gross International Reserves which will cover not less than 4 months of

imports of goods and services by 2017.

  1. Mr. Speaker, the specific macroeconomic targets for 2015 are as follows:
  2. Non-oil real GDP growth of 2.7 percent;
  3. Overall real GDP (including oil) growth of 3.9 percent;

iii. An end year inflation target of 11.5 percent;

  1. Overall budget deficit equivalent to 6.5 percent of GDP; and
  2. Gross international reserves of not less than 3 months of import cover

of goods and services.

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RESOURCE MOBILIZATION FOR 2015

  1. Mr. Speaker, total non-oil revenue and grants for the 2015 fiscal year is

estimated at GH¢26.1 billion, or 21.2 percent of non-oil GDP. This

represents 31.5 percent increase over the projected outturn for 2014.

  1. The total revenue from oil is estimated at GH¢4.2 billion, or 3.1 percent of

GDP.Therefore, total revenue and grants, including oil, for the 2015 is

estimated at GH¢33.0 billion, or 24.0 percent of GDP.

  1. Domestic revenue, made up of tax and non-tax revenue is estimated at

GH¢30.9 billion, 28.9 percent higher than the projected outturn for 2014.

  1. Mr. Speaker, total tax revenue is estimated at GH¢25.4 billion, representing

18.8 percent of GDP. This shows an increase of 31.0 percent over the

projected outturn for 2014. Of this amount, non-oil tax revenue is estimated

to grow by 25.0 percent to GH¢23.1 billion, equivalent to 18.8 percent of

non-oil GDP.

  1. Taxes on income and property are estimated to increase by 28.6 percent to

GH¢11.2 billion in 2015, accounting for 44.2 percent of total tax revenue. Of

this amount, royalties and corporate income tax from oil is estimated at

GH¢2.3 billion.

  1. Taxes on goods and services are estimated at GH¢9.4 billion, representing

46.7 percent increase over the projected outturn for 2014 and 37.3 percent

of the estimated total tax revenue for 2015. The strong growth in taxes on

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22

domestic goods is mainly as a result of the policy measures on VAT and

petroleum.

  1. The 2014 estimate for taxes on good and services is made up of GH¢5.7

billion for total VAT, while Excise taxes, National Health Insurance Levy and

Communication Service tax are expected to yield GH¢2.4 billion,

GH¢1billion and GH¢306.2 million, respectively.

  1. International Trade taxes, are estimated at GH¢4.7 billion, representing 3.5

percent of GDP and 18.5 percent of total tax revenue. The estimate reflects

a 11.8 percent increase over the projected outturn for 2014. The increase in

international trade taxes is expected to be largely driven by import duties,

estimated to be about 75.4 percent of the estimated international trade

taxes for 2015.

  1. Mr. Speaker, Non-tax revenue, comprising mainly fees and charges by

Ministries, Departments and Agencies (MDAs), dividend received from public

enterprises and other internally-generated funds (IGFs) is estimated at

GH¢5.3 billion, equivalent to 3.9 percent of GDP or 17.1 percent of domestic

revenue. An amount of GH¢2.8 billion is expected to be retained by MDAs

for the funding of their activities and the rest lodged into the Consolidated

Fund. A total amount of GH¢1.9 billion is estimated as non-tax oil revenue.

  1. Mr. Speaker, Grants and Loans from Development Partners are estimated at

GH¢1.6 billion, equivalent to 1.1 percent of GDP. The expected grant

constitutes 4.8 percent to the estimated total revenue and grants for 2015.

RESOURCE ALLOCATION FOR 2015

Expenditure

  1. Mr. Speaker, total expenditure, including provision for clearance of arrears

and commitments in 2015 is estimated at GH¢41.4 billion, or 30.5 percent

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23

of GDP. These represents 15.6 percent increase over the projected outturn

for 2014. Of this amount, GH¢1.6 billion, or 1.2 percent of GDP and 3.8

percent of total expenditure will be used for the clearance of arrears and

commitments.

  1. Mr. Speaker, Compensation of employees which comprises wages and

salaries, allowances, pensions, gratuities and social security contributions by

Government on behalf of its employees is estimated at GH¢12.3 billion,

representing 9.1 percent of GDP. Of this amount, GH¢10.3 billion (7.6

percent of GDP) is estimated for the payment of wages, salaries and

allowances, while GH¢750.9 million, GH¢216.0 million and GH¢1.1 billion is

estimated for pensions, gratuities and social security, respectively.

  1. Expenditure on goods and services is estimated at GH¢2.0 billion,

representing 1.5 percent of GDP.

  1. Total interest payment is estimated at GH¢9.6 billion, equivalent to 7.1

percent of GDP and 24.4 percent of total expenditure. Of this amount,

GH¢1.5 billion will be spent on external interest, while GH¢8.0 billion will be

for domestic interest payments.

An amount of GH¢50.0 million has been provided for the payment of

subsidies on petroleum products. Grants to other Government units,

comprising statutory payments into the National Health Insurance Fund,

Ghana Education Trust Fund, the Transfers to the DACF and GETFund are

estimated at GH¢7.4 billion.

  1. Transfers to the District Assemblies Common Fund and GETFund are

estimated at GH¢1.6 billion and 843.9 million, respectively.

  1. The Road Fund is expected to receive an amount of GH¢257.0 million, while

GH¢5.3 million will be transferred into the Petroleum-related Fund.

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  1. An amount of GH¢1.2 billion is estimated to be transferred into the National

Health Insurance Fund, while GH¢697.7 million from oil revenue, is

earmarked to be transferred to the Ghana National Petroleum Corporation

for its investments.

  1. Mr. Speaker, a total amount of GH¢7.0 billion is allocated for capital

expenditure representing a 27.1 percent increase over the projected outturn

for 2014 and 17.8 percent of the estimated total spending for 2015. About

36.8 percent of the total amount will be financed from domestic sources and

the remaining from foreign sources.

Overall Budget Balance and Financing for 2015

  1. Mr. Speaker, based on the revenue and expenditure estimates, the 2014

budget will result in an overall budget deficit of GH¢8.8 billion, equivalent to

6.5 percent of GDP.

  1. Financing of the deficit will be from both domestic and foreign sources. Net

Domestic Financing is estimated at GH¢7.6 billion, equivalent to 5.6 percent

of GDP, and financing from foreign sources are estimated at GH¢1.3 billion,

equivalent to 0.9 percent of GDP.

SECTORAL PERFORMANCE AND OUTLOOK

Over the past few years’ government has significantly increased spending on social

services by expanding facilities and implemented measures to increase access to and

quality of health and education services. In 2015 this trend will continue with an

allocation of over 7.6 billion to the Education Sector (including GetFund) and

4.2billion to the Health Sector.

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HEALTH

  1. Mr Speaker, Government continues to deliver on the healthcare needs of

our people from an expanded NHIL and allocations from the central budget.

We continue to make significant investment in the infrastructure, equipment

and personnel needs of our health sector. We have vigorously embarked on

the infrastructure to expand access to health care in all parts of the

country. These include:

  1. The 600-bed University of Ghana Teaching Hospital;
  2. The 420-bed Ridge Hospital Expansion Project;

iii. The 500-bed Military Hospital Project in Kumasi;

  1. The Second phase of the Tamale Teaching Hospital after the

completion of the 400-bed first phase of the project;

  1. The Police Hospital Project;
  2. The Ashanti Regional Hospital at Sewua-Kumasi; and
  3. The Upper West Regional Hospital
  4. Among others, we have also completed the following projects in our quest

to expand access to health care:

  1. Nineteen out of the twenty-one Health Centres at Locations that

include the following;

Amasaman, Doffor, Pokukrom, New Jejeti, Paakro, Gwollu, Funsi,

Sang, Buipe, Manso Nkwanta, Abuakwa, Mase, Sosokpe, Kedzi,

Adamso, Kayoro, Timonde, Bonsu Nkwanta and Dadieso

  1. Three District Hospitals under the same project have also been

completed at Edjumako, Essam, Zabzugu District Hospitals.

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iii. Construction of eye care centre at Komfo Anokye Teaching Hospital.

  1. Mr Speaker, under the National Hospital Equipment Replacement

Programme, government is providing modern hospital equipment to

enhance healthcare delivery. This initiative has ensured the construction

and equipping of New MRI and CT Scan Centres in the Komfo Anokye and

Tamale Teaching Hospitals.

  1. The Korle Bu Teaching Hospital alone benefited from a $57 Million project to

replace and rehabilitate obsolete equipment and theatres. Twelve operating

theatres for Pediatric and General Surgery (which had been closed for

nearly eight years), the Neo-natal Intensive care Unit and the Baby unit

were refurbished.

  1. Korle Bu also took delivery of Mammography, MRI, CT Scan, X-ray machines

and Oxygen plants.Under the same scheme, procurement and installation of

new X-Ray Equipment in 40 selected District Hospitals took place

nationwide; these include,

  1. Mr Speaker, the Community Health Planning and Services (CHPS) concept

remains the Ministry’s main strategy of bring basic helath services to the

community level. In this regard, a total of 724 CHPS zones were made

functional.

  1. Mr Speaker, family planning coverage increased from 13.9 per cent in 2013

to 16.6 per cent as at September 2014 whilst we increased our ambulance

stations to 126 by establishing new ambulance stations at Kasoa, Atomic

Junction in Accra, Tarkwa and Axim. A total of 14,322 cases were recorded,

comprising 8,232 inter-hospital transfers and 6,090 emergencies.

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  1. An evaluation conducted by the WHO this year and their findings indicate

that Ghana has successfully eradicated Guinea Worm disease, pending

certification.

EDUCATION

  1. Mr. Speaker, President John Mahama’s agenda for quality, accessible,

equitable and affordable education remains on course. At the second cycle

level, the pledge of the President during the 2014 State of the Nation

Address to this august house to implement progressively free Secondary

Education beginning 2015 is ready to take off. The agreed roadmap

beginning with day students has been adequately catered for in this budget.

  1. Mr. Speaker, President Mahama’s pledge to construct additional 200 Senior

High Schools by 2016 is very much on course. So far the first 50 are at

various stages of completion. This budget has also made provision for the

next 50. Under the World Bank supported Secondary Education

Improvement Project (SEIP), an additional 23 new Senior High Schools are

being constructed. Therefore This means therefore that so far funding has

been secured for 123 out of the promised 200 Senior High Schools. We

remain confident of meeting our target by 2016 in line with our prudent

fiscal policy that all major capital projects must be fully funded before they

are started.

  1. Mr. Speaker, still under the SEIP, 125 existing Senior High Schools are

receiving facilities upgrade, 125 Heads are receiving Leadership and

Management training, an additional 6,500 Science, Mathematics and ICT

Teachers are receiving capacity building whiles scholarships are being

provided for 10,000 students for their entire 3 year Senior High School

duration for which 60% are girls.

  1. Mr. Speaker, Cabinet has approved the draft bill for the public university to

be sited in the Eastern Region in line with our pledge to establish at least

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one public university in each of our 10 regions. It is gladdening to note that

this particular session of Parliament will be considering the Eastern

University Bill. I am happy in this light to report tremendous progress in the

new public universities in the Brong Ahafo and Volta Regions which this

august House assisted us to establish.

  1. Mr. Speaker, work is ongoing on the conversion of our Polytechnics into

Technical Universities. A roadmap has been agreed by cabinet and this

house will soon consider amendments to the Acts establishing the

Polytechnics.

  1. Mr. Speaker, in line with efforts to rebrand technical and vocational

education to make it more attractive to the youth and also to support

President Mahama’s Made in Ghana Initiative, the Skills Development Fund

(SDF) intervention under the Council for Technical and Vocational Education

and Training (COTVET) has so far disbursed GHs 136.5 million to 510

grantees.

  1. Mr. Speaker, at the basic level, as we approach the 2015 target year for the

Millennium Development Goals, we can all be pleased that Ghana has

achieved MDG 2 on universal basic education. In order to avoid

complacency and in line with our own FCUBE programme, Government will

continue to implement interventions aimed at retaining our children in

school such as eliminating schools under trees, free uniforms, free text

books, capitation grant, expanded school feeding programme, BECE

subsidies and redeployment of teachers. We will continue to carry out

effective redeployment of teachers and train more teachers in line with our

new reforms in the sector that led to an increase of teacher trainees in the

Colleges of Education by an unprecedented 63%. Teacher absenteeism

which has been brought down from 27% to 11% will be brought down

further by the new management practices we have embarked upon.

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CHILD RIGHTS PROMOTION, PROTECTION AND DEVELOPMENT

PROGRAMME

  1. Mr Speaker, in our effort to ensure that the weak and vulnerable are

provided for, government, provided shelter and care for 800 orphans and

trained 1,406 caregivers in all 10 regions, assisted in reuniting 983 children

in orphanages with their families and closed down 22 orphanages that did

not meet the requirements. The Ministry also placed moratorium on child

adoption in Ghana to address current challenges and protect adopted

children and their foster parents.

Social Development Programme

  1. As part of efforts to tackle extreme poverty and achieve the United Nations

Millennium Development Goal, the Ministry provided cash grants to a total of

77,000 households in 100 Districts in all 10 Regions under the Livelihood

Empowerment Against Poverty (LEAP) Programme. Out of the total

payment, 7,616 beneficiary households in 9 districts and 7 regions received

electronic payments of the LEAP Grants in 3 piloted ecological zones for the

purposes of ensuring timely and efficient transfer of cash to beneficiaries.

  1. The Ministry also developed M&E Framework and Manuals for the LEAP to

track progress, identify gaps and design timely interventions for

implementation.

  1. The Ministry will also expand the implementation of the LEAP to cover over

200,000 households’ beneficiaries to improve their socio-economic status

and ensure the survival and development of children as well as to promote

the welfare of the vulnerable and excluded in society.

FOOD SECURITY AND AGRICULTURE DEVELOPMENT

  1. Mr. Speaker, the objective of Government under the food security and

emergency preparedness programme is to reduce food and nutrition

insecurity through modernized agriculture, management of national

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strategic stocks for emergencies and the establishment of effective early

warning systems.

  1. To this end, 40 hectares of primary materials of cassava and 5 hectares of

yam mini-set technology of newly released varieties were established out of

a target of 160 hectares. Even though the area cultivated fell below the

target, it led to a marginal increase in yield from 16.78mt/ha to 16.83mt/ha

and 18.27mt/ha to 19.13mt/ha for yam and cassava respectively. The

remaining 115 hectares of cassava and yam planting materials will be

established in 2015 and expected to increase yield as well as enhance farm

level productivity from 19.13mt/ha to 20.01mt/ha for cassava and

16.83mt/ha to 17.21mt/ha for yam.

  1. Mr. Speaker, to reduce post-harvest losses, government is collaborating with

the private sector increased the national food buffer stock centres from

seven (7) to ten (10) in 2014. The Ministry facilitated the establishment of

2 new warehouses with a capacity of 100,000mt each. The National Food

Buffer Stock Company (NAFCO) purchased and stored a total of 3,317.40mt

of locally-milled rice which was supplied to the school Feeding Programme.

  1. To improve access to mechanised agriculture services, a total of 89 AMSECs

which consist of tractors and implements, maize shellers and water pumps

have been established in 62 Metropolitan, Municipal and District Assemblies

(MMDAs). This has enabled 267,500 small holder farmers access

mechanised services on time which has resulted in the cultivation of about

107,000ha of maize, rice and soya beans this year.

  1. In 2015 additional 41 AMSECs is targeted to be established bringing the

total to 130. The Ministry will also carry out training programmes to improve

technical skills and competence of managers and machine operators to

avert premature and frequent break down of these equipment.

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  1. Mr. Speaker, the Ministry produced and exported 1.84 million and 700,000

doses of ND1-2 to Niger and Gambia respectively. Furthermore, a

Memorandum of Understanding (MoU) has been signed with Niger to supply

2 million doses of the same vaccine by the end of the year. Due to the

increased demand for the ND1-2 vaccines in the sub-region, the Ministry

plans to produce 32 million doses for both domestic and international

markets in 2015.

FISHERIES

  1. Mr. Speaker, to enforce Fisheries Laws and Regulations on Illegal,

Unreported and Unregulated (IUU) fishing, 79 fishing vessels were fitted

with Vessel Monitoring Systems (VMS). Since July this year, the VMS aided

the arrest of 14 vessels that were prosecuted for their involvement in IUU

fishing activities. In addition, over 1000 illegal fishing nets and 300

generators and accessories were confiscated by the Fisheries Enforcement

Unit. The Ministry will continue to undertake these monitoring activities to

reduce the incidence of illegal fishing activities on our waters. (Revision of

fisheries law)

TRADE AND INDUSTRY – Increasing trade

  1. Mr. Speaker, the Export Development and Agricultural Investment Fund

(EDAIF) Act has been reviewed to increase its resource envelop to support

manufacturing, particularly agro-processing and start-ups. An amount of

GHS154.7 million was approved to support fifty-five (55) projects, of which

GHS69.5 million was allocated to eighteen (18) companies under the Export

Credit and Projects Facility for manufacturing of export products including

pharmaceuticals, wood processing, food processing, domestic plastic wares,

alcoholic beverages and pineapples.

  1. A total of GHS32.8 million was approved under the Agriculture, Agro-

Processing Development and Credit Facility for fifteen (15) companies to

boost the production and or processing of various agriculture products for

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both local and export markets, and the remaining GHS52.3 million was

approved for twenty-two (22) projects of MMDAs, trade associations and

farmer based organizations under the Export Development and Promotion

Facility. In 2015, EDAIF will establish its presence in all the 10 regions to

ensure that it supports businesses in all parts of the country.

  1. Mr. Speaker, the Ministry in collaboration with the Ghana Export Promotion

Authority (GEPA) and other trade-related institutions carried out the

inception phase activities including, sensitization of focal persons of the

implementing agencies, establishment of Project Management and

Coordinating Unit (PCMU), preparation of work-plans, and a monitoring and

evaluation matrix towards full implementation of the National Export

Strategy (NES). The Ministry will in 2015 commence full implementation of

the strategy towards the realization of the USD 3.70 billion target from

NTEs. The pre-inspection conformity assessment program announced by the

Ghana Standards Authority will be put on hold pending further consultations

with stakeholders.

ENERGY

  1. Mr. Speaker, I started this presentation with a strong focus on power in the

context of the hopeful prospects for the economy. We recognise that

adequate supply of energy remains a major challenge for us. This year, the

cost of doing business in Ghana has gone up because of disruptions in

electricity supply. Government recognizes that energy remains an absolutely

critical requirement for sustainable economic growth and development.

Consumers in general have had to live with the discomfort of the power

outages and its attendant effect on the prices of goods and services.

  1. We take a serious view of this and Government therefore is strengthened in

its resolve to address the energy challenges holistically and provide relief to

both businesses and consumers. In this regard, Government is continuing

with the medium term objective of increasing power generation capacity.

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  1. Work on Tico expansion (110MW) is 90 percent complete and also expected

to commence operations by early next year. Feasibility studies and

Environmental and Social Impact Assessment are completed on the 12 MW

Solar plant in the Upper West Region.

INFRASTRUCTURE SECTOR

THE WATER SUB-SECTOR

  1. To achieve government’s target of delivering 76 percent of urban water

coverage by 2015, government has put in place a number of projects.

  1. Currently, the national urban water demand stands at 257 MGD. However,

the demand in Greater Accra Metropolitan Area (GAMA) alone is 150 MGD

which is about 60% of the national water demand.

  1. The major water treatment plants serving GAMA are Kpong and Weija which

have a total production capacity of 93 MGD. Currently, Weija produces 53

MGD while Kpong generates 40 MGD leaving a gap or deficit of 57 MGD.

  1. To address the deficit, various interventions are being made to add a total

of 65.3MGD into the GAMA water supply system. This will give us excess of

8.3 MGD.

  1. The interventions are as follows:
  2. The 3.3 MGD water treatment plant at Kpong (Siemens) is completed

and has been producing water since July, 2014. Dodowa, Ningo,

Prampram and the Akuapem Ridge area;

  1. Completion of the 9 MGD ATMA Rural Water Supply Project by

December, 2014;

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iii. Completion of the 40 MGD water treatment plant at Kpong by the end

of December, 2014; and

  1. Completion of the 13MGD sea water desalination plant at Teshie-

Nungua by the end of December, 2014.

  1. By the completion of these interventions 65.3 MGD will be added to the

water supply to GAMA which will bridge the supply-demand gap.

  1. In view of the ever increasing population in GAMA, additional projects have

been planned to ensure the reliability and sustainability of the water supply

to from 2015 to the year 2030. These include: Kpong Water Supply

Expansion Phase 2, Weija Water Supply Expansion and Asutsuare Water

Supply Projects.

  1. Here are details of the interventions to address the gap:
  2. Kpong Water Supply Expansion Project

The Kpong Water Supply Expansion Project is being carried out at an

estimated cost of US$273 million with funding from the Government of

Ghana and China Exim Bank. The project is envisaged to increase

water supply to GAMA by 40 MGD. Water will be supplied from Kpong

through Dodowa to the existing Terminal Reservoir at Okponglo and

newly constructed ones at Madina and Boi.

This is to improve water supply to areas including Adenta, Madina,

Kwabenya, Ashongmang, North, East and West Legon, Ashaley Botwe,

Haatso, Boi, Asofaa, Dome and many others. The project which is

94% complete is ahead of schedule and is expected to be completed

by the end of December, 2014 instead of the contractual completion

date of June, 2015.

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  1. Kpong Intake Rehabilitation Project

The Kpong Intake expansion project carried out to improve efficiency

by replacing all the existing pumps is complete.

As part of the project, a 3.3 MGD treatment plant was built to increase

water supply to Accra-Tema Metropolitan Area (ATMA Rural).

Communities to benefit from the project include; Dodowa, Ningo,

Prampram and the Akuapem Ridge. The project which is at the cost of

€16.5 million commenced production of water in July this year.

iii. Accra – Tema Metropolitan Area (ATMA Rural) Water Supply

Project

The major components of this project are:

? A new water treatment plant to produce an additional 9 MGD

? 4 new reservoirs at Adukrom, Dodowa, Atimpoku and Akorley.

? 92km of transmission pipelines.

This will improve water supply to the following areas: Michel Camp,

Afienya, Kpone, Prampram, Old Ningo, New Ningo, Ayitepa, Kponguno,

Omankope, Kodiabe, Doyumu, Agomeda, Adumanya, Menyum,

Dodowa, Odese, Nganompian, Bawalashie, Oyibi, Amanfro, Latehman,

Ashiyie, Fafraha, Abominya, Amanfro, Ayikuma, Abokobi, Pantang and

Ayi Mensah (all in the Greater Accra Region) and Akorley, Abonse,

Aperede, Adukrom, Awukugua, Dawu, Abiriw, Akropong, Mamfe,

Amanokrom, Tutu, Obosomase, Ahwerase, Aburi, Gyankama, Peduase,

Kitase, Berekuso, Frankadua, Apeguso, Aboasa, Kwanyako, Juapong,

Ogoli, Akwamufie, Mangoasi, Atimpoku, New Senchi, Akrade, Senchi,

Domeabra, Lolonyo, Agomanya, Manya Kpowonu, Odumasi, Menekpo,

Sra, Sawe and Ogome (in the Eastern Region).

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The project which costs €56.5 million is 98% complete and will serve

250,000 inhabitants.

  1. Teshie-Nungua Desalination Water Project

The Teshie-Nungua Desalination Water Project is a 13 MGD treatment

plant planned to serve about 500,000 people in the project area. It is

being implemented through a Build, Operate, Own and Transfer

(BOOT) mechanism. The project involves the desalination of sea water

and aims at improving water delivery to the following areas; Teshie,

Nungua, the Teshie Military barracks, Batsoona, Sakumono and parts

of La-Dadekotopon. The project is 92 percent complete and is

expected to be completed in November, 2014.

ROADS AND HIGHWAYS

  1. Routine maintenance was undertaken on 13,459km of the trunk road

network; 7,269km on the feeder road network; and 3,096km on the urban

road network representing 108, 32 and 85 percent respectively of the

approved programme. Periodic maintenance activities, comprising regravelling,

spot improvement and resealing works has been carried out on

76km, 776km and 645km on the trunk, feeder and urban road networks

respectively.

  1. In 2015, the Ministry will undertake routine maintenance on 11,199km,

22,500km and 8,200km of trunk, feeder and urban road networks

respectively. In addition, periodic maintenance activities including Spot

Improvement, Re-gravelling, Resealing, Asphaltic Overlay, Partial

Reconstruction, Maintenance of Bridges will be undertaken on 6,675km,

1,000km, 940km of trunk, feeder and urban roads respectively. Minor

rehabilitation and improvement works will also be undertaken on 900km of

trunk, 350km of feeder and 150km of urban roads.

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  1. The Ministry has procured three (3) number 50-Seater High Speed

Passenger Ferries, to improve passenger and cargo services along the Volta

Lake. One has been delivered to Akosombo and the other two are yet to be

cleared at the Tema port. In addition, one Modular Passenger/Freight Vessel

will be delivered by December.

  1. Procurement of 200 new buses to increase the number of existing fleet will

commence in 2015. This will help to increase the bus schedules on the

existing 324 routes and re-align operations on Intra-City as well as Rural-

Urban services and improve mass transport in the country.

  1. Mr. Speaker, Ghana ranked 67th out of a total of 189 countries in the 2014

Global ease-of-doing business report. It is our goal to improve upon this

especially in relation to port management. In this regard, Cabinet has

decided to set up a panel comprising the Ministries of Finance, Trade and

Industry and Transport to work out a synergy for a one-stop window to

ease clearing of goods at the Ports and minimize delays in import and

export. As part of the measures the Customs Division of GRA will from

January 2015 work 24 hours, 7 days a week on a shift basis to reduce time

and cost of clearing goods.

  1. With regards to railways, government will undertake front end engineering

design (FEED) of the railway network, particularly, the Western and eastern

rail lines.

  1. The telecommunications sector continued to register impressive growth rate

in subscription with a total subscription for both cellular and fixed lines

registering 29,101,767 and 27,803,710, representing 4.7 percent and 50.85

percent respectively.

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ENSURING PUBLIC SAFETY

Improving Law and Order

  1. Mr. Speaker, the Ghana Police Service expanded the Police Visibility and

Accessibility Programme to all regional capitals and selected urban areas

leading to a reduction in major crimes.

  1. In 2015, the Service in collaboration with other security agencies will

expand the intelligence-led policing through the informant system,

apprehend and prosecute offenders and will expand the capacity of the

Police Hospital to provide quality health service. The GPS will intensify the

visibility project and day and night patrols across the country.

Improving good governance through institutional Strengthening

  1. One of the significant issues discussed in Senchi was the recognition that

the country has experienced a weakening of its regulatory institutions which

has led to a sense of helplessness in certain key sectors of our economy. At

Senchi, the consensus was that, these regulatory institutions should be

strengthened to deliver their core mandate of enforcing standards in service

delivery.

  1. In 2015, regulatory institutions like the factory inspectorate, town and

country planning, birth and death registry, tourism authority, standard

authority, food and drugs authority and health inspectorate departments of

district assemblies will embark on a review of their existing standards and

rules, publish them and undertake monitoring visits to ensure compliance by

service providers. They will be supported to strengthen their capacity to

undertake these activities. We believe that Ghanaians should be treated

with respect and receive the quality of services that they deserve and pay

for.

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SANITATION AND WASTE MANAGEMENT

  1. Mr. Speaker, development and operation of compost and recycling plants

present an efficient and effective way of managing waste for the future.

Compost and recycling plants offer MMDAs a feasible and cost effective

alternative to landfilling. Solid waste helps meet the growing demand for

organic fertilizer and contribute to saving the environment by an efficient

method of disposing municipal solid waste. Compost and recycling plants

also package and process recyclable products like plastic, pellets and scrap

metal for industries. Over the medium term, government will encourage

MMDAs to partner the private sector to deliver compost and recycling plants

in some selected regions of the country.

REDUCING WASTE AND IMPROVING EFFICIENCY IN PUBLIC FINANCIAL

MANAGEMENT

Good Governance, Transparency and Anti- Corruption

  1. In 2015, the Government will implement initiatives to enforce the

recommendations of the Auditor-General’s Report. This will involve

sanctioning and possible prosecution of persons indicted by the report.

  1. Government in conjunction with the Commission on Human Rights and

Administrative Justice (CHRAJ) and other anti-corruption agencies will begin

implementation of the national Anti-corruption Action Plan (NACAP).

  1. In addition, government will strictly enforce the sanctions regime on payroll

fraud and all other financial misconduct and indiscipline as outlined in

Section 8 in the Financial Administration Regulation.

PUBLIC FINANCIAL MANAGEMENT (PFM) REFORMS

  1. Mr. Speaker, a pillar of our effort to build and enhance the capacity of our

institutions and processes, is the ongoing reforms in Public Financial

Management (PFM). To facilitate a holistic approach to the implementation

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of our PFM reforms, a draft PFM strategy has been developed. This will be

completed and implemented in 2015. In the meantime our current flagship

programme, the Ghana Integrated Financial Management System, (GIFMIS)

is ongoing. To sustain its implementation we have started to negotiate

GIFMIS II financing with the World Bank and other DPs.

  1. The key components and goals under the (GIFMIS) and Ghana Revenue

Authority (GRA) reform projects include increasing efficiency in processing

budget and financial accounting transactions; improvements in payroll

management; establishment of a Human Resource Information

Management system (HRMIS); improved domestic revenue mobilization

under the GRA reforms; and a comprehensive review of all the revenue and

expenditure laws.

  1. GIFMIS Budget Systems – the first phase of the project started in January

this year and I am pleased to inform the House that it was completed on

time and on budget. Indeed it was used to prepare the detailed 2015

Estimates that we will present to the various Committees of the House.

When fully deployed and integrated with the financial accounting system,

the nation will benefit from better controls such as enforcing budget and

cash ceilings as well as analysing variances between estimates and actual

revenues and expenditures.

  1. Programme-Based Budgeting (PBB): the 2014 Budget marked the first time

that we shifted the basis for allocating funds, and the preparation of MDA

budgets and estimates from “activities” (e.g., travel and per diem) to

“programs” (e.g., win the African Cup of Nations). The benefit is obvious: it

will enable heads of institutions and units within an organization to set

targets that relate to more measurable objectives and goals. As Honourable

Members will notice, this approach has reflected in a more compact and

concise Budget Document due to the focus on programmes and not

activities and Cost-Centres.

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  1. I am pleased to note that as part of the sensitization program, MOF staff

had the privilege of making a presentation on the PBB to this august House

and specifically to some of the select committees.

  1. Mr Speaker we will undertake a comprehensive review in 2015 to simplify

budget execution process and ensure effective budget and commitment

controls. In the meantime new expenditure management rules will be

developed and the following measures implemented,

  1. Contracts and Public Investment Management: The contracts database

we have been establishing since 2011 will now have an electronic link

to budget allocations whilst the cash management and fixed asset

modules within GIFMIS (Financial Accounting) System will be deployed.

  1. Under the Financial Administration Act (FAA), all institutions on

government budget are required to apply the GIFMIS system by

interface or integration. We will pursue this goal vigorously under

GIFMIS Phase II for all MDAs, MMDAs and subvented organizations—as

bases for improving budget outcomes and preparing the Public

Accounts that are eventually submitted to the House.

iii. Upgrade of the Payroll: In 2013, the Payroll upgrade under GIFMIS

was fast-tracked to help resolve many issues that were impeding the

smooth implementation of the Single-Spine Salary Scheme (SSSS). This

will be complemented with the HRMIS system and explore a continuing

active role for the private sector. It is our expectation that this will

improve effective payroll administration, including recruitment,

transfers, promotion, and termination of staff from the civil and public

services. It will also facilitate audits and the application of sanctions

against malfeasance.

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  1. On payroll management, we will ensure Full implementation of the

Electronic Salary Payment Voucher (ESPV) System and conduct

frequent payroll audits; and

  1. Use of Electronic Warrants: At the moment, the majority of MDAs have

replaced the manual warrants with electronic application of

expenditures. During 2015, the use of electronic warrants will be

extended to all recurrent and capital expenditures. The second

measure will include the use of warrants for all internally-generated

funds (IGFs) to ensure proper accounting and application of funds. In

connection with that, there will be no central processing and bulk

release of funds to all MDAs

  1. This is a major step that will complement the use of electronic

warrants to process IGF expenses. Furthermore, the CAGD has been

directed to collaborate with all banks secure electronic access to the

accounts of ALL government agencies, under the GIFMIS and BOG

systems Treasury Single Account initiative. This latter initiative will be

tied with the analysis that CAGD and the Debt Management Unit uses

to conduct their treasury market activities.

  1. Coding and classification: Mr. Speaker, in the 2011 Budget, we launched a

very important element of our PFM reforms, to make MDAs and MMDAs

adopt a uniform way of classifying the GSDA, revenues, expenditures,

functions and institutions in Budget, Estimates, and Public Accounts. The

coding and classification systems that we are adopting will be consistent

with international standards under the IMF

  1. The main benefit is that the Controller and Accountant-General’s

Department (CAGD) and all public sector bodies that are not classified as

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SOEs or government business entities (GBEs) will use the same basis or

classification to present their financial accounting records to Parliament.

  1. Accounting Standards: Mr. Speaker, Section 186 of the FAR requires that

CAGD and all public sector institutions prepare their accounting records on

accrual basis. It has been difficult to comply with this requirement and,

therefore, the ritual qualification of the accounts presented to PAC by the

Attorney-General.

  1. Two events will result in a gradual shift towards achieving this goal of

shifting the basis for public sector budgeting and accounts to an Accrual or

Commitment Basis. First, we are gradually incorporating modules such as

the contract database, accounts payable, accounts receivable and fixed

asset management in the GIFMIS reforms. Secondly, I had the privilege to

launch the adoption of the International IPSAS and modified Accrual

Accounting

  1. The implementation of the GIFMIS will be deepened through the completion

of the financial accounting and budget modules to improve efficiency and

effectiveness in expenditure management and commitment control.

Specifically The budget preparation module will be expanded to introduce

systems to improve the budget estimation process, reduce waste and check

fraud. The implementation of the Human Resource Management

Information System will be rolled out to all MDAs by 2017 to help with the

management of public sector workers.

  1. Payroll management measures such as payroll audits, electronic salary

payment voucher (e-SPV) and e-Pay slips will be intensified to reduce the

incidence of ‘’Ghost” workers on government payroll.

  1. The GRA revenue modernization programme will be deepened to improve

efficiency and enhance revenue collection through measures such as:

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  1. Adoption of self-assessment for all tax payers to enhance compliance

in tax payment;

  1. Implementation of the TRIPS (Total revenue Integrated Processing

System) tax administration software to automate the domestic tax

revenue division, integrate with the customs system and provide

management information for decision making; and

iii. Continuing integration of VAT and income tax in all domestic tax offices

as well as segmentation those offices as large, medium and small

offices..

  1. Ports will be allowed to operate on 24/7 hour basis to boost economic

activity and revenue mobilization.

  1. These will be accompanied with their respective regulations and will

harmonize all the financial laws in the country including related to SOEs,

JVCs and MMDAs as the first step towards general government budgeting,

accounting and reporting. It will also provide guidelines on contract,

procurements and commitments of government.

Improving Efficiency in the Management of Vehicles and Fuel by

Public Institutions

  1. Mr. Speaker, inefficiencies in the procurement and use of vehicles and fuel

by public institutions has been identified as one of the causes of waste and

abuse in the use of national resources.

  1. In 2014, Government started a process to re-register government vehicles

in an effort to improve their management in the delivery of government

programmes.

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  1. In 2015, electronic solutions will be used to rationalize the procurement and

use of fuel for public institutions. This solution will ensure among others

that fuel procured by government is used only in designated vehicles. Full

accounting for all fuel purchases will also be ensured. This will be done in

conjunction with the on-going vehicle re-registration exercise.

POLICY INITIATIVES

  1. Mr. Speaker, a number of policy initiatives will be pursued in 2015 to

broadly address the prospects for the near term to enable government

deliver on its transformational agenda. These include existing and new

initiatives. Specifically, the areas to be covered will include initiatives in the

following Strategic areas, Energy, Tax Policy, Structural Measures, New

Debt Management, Export-Led Development, and Community Day SHS that

leads progressively to Free SHS.

COMPLETION OF WESTERN CORRIDOR GAS INFRASTRUCTURE

PROJECT

  1. Mr. Speaker, I am pleased to announce that the Western Corridor Gas

Infrastructure Project has now been successfully tied-in to the the FPSO

Kwame Nkrumah.

  1. Technical activities to facilitate the phased introduction of raw natural gas

commenced on November 10, 2014. Over the next few weeks, the full

commissioning of the gas processing facilities using the base stock gas will

allow for the production and full supply of up to 150 million standard cubic

feet of lean gas per day to the Volta River Authority at its Aboadze thermal

power energy needs.

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  1. We also expect to produce various natural gas liquids including over 500

metric tons of liquefied petroleum gas LPG per day to meet some of our

energy needs.

  1. Mr. Speaker, this milestone of bringing gas on-stream will provide better

power generation flexibility for our country. Indeed, the new Gas

infrastructure will position the nation to make significant savings over crude

oil imports for power generation.

  1. We also look forward to the future expansion of the facilities to receive gas

from the upcoming Tweneboa-Enyemra-Ntome (TEN) and Sankofa fields.

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TAX POLICY INITIATIVES

Sliding Scale Excise Duty

  1. Mr. Speaker, in November 2012, government introduced a sliding scale

excise duty on beer and malt. This was to provide an incentive for brewery

companies which use local raw materials as substitutes for their imported

raw materials. The object of this local content policy is to increase

employment opportunities, reduce our import bill, as well as increase capital

investment and acquisition of new technology. Subsequently, a four tier

excise regime was introduced. In 2015, government will review the policy to

ensure greater efficiency and compliance by the beneficiaries. In the

process, GRA will introduce appropriate guidelines and make

recommendations for improvement.

Excise Duty on Tobacco

  1. Mr. Speaker, Ghana’s excise tax as a percentage of cigarette prices is one of

the lowest in the region. It has been estimated that the excise tax as a

percentage of retail price is 14 percent while the average for Africa is 33

percent. It has also been established that in order to reduce the

consumption of tobacco and its related health hazards, excise tax should be

70 percent of the retail price. In pursuance of these goals the excise duty

rate will be increased from 150 percent to 175 percent.

Tax Identification Number (TIN)

  1. Mr. Speaker, in 2014, the GRA made it a must for all taxpayers to acquire

TIN before transacting business at the various ports. Tax payers are also

required to declare what tax office number they pay their taxes to customs

authorities. In conjunction with the National Identification Authority (NIA),

the requirement of the TIN will be extended to other sectors to facilitate the

identification of eligible taxpayers. Again, to ensure that the status of

persons on the Taxpayer Register is accurate, they will be required to

validate their data every two years.

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Amendment of National Health Insurance (NHIS) Act

  1. Mr. Speaker, after ten years of implementing of the National Health

Insurance Scheme, with the passage of the VAT Act 2013, (Act 870) to

include fee based financial services and real estates in taxable activities, the

National Health Insurance Act will be amended to conform to the new

provisions. This will generate additional resources for the scheme.

Support to Local Industries

  1. Mr. Speaker, as part of its policy to support local industries, Government, in

the 2014 Budget removed import duties and VAT on raw materials used for

locally produced exercise and text books under the supervision of Ministry of

Education and HIV/AIDS drugs under the supervision of the Ministry of

Health. In addition to these measures, Government in 2015 proposes to

remove VAT on specified locally produced pharmaceuticals and some of the

raw materials used for the production of these pharmaceuticals. The

exemption policy will be based on VAT on a select list of special essential

medicines not manufactured in Ghana and approved by the Minister of

Health. This will ensure neutrality and reduce the cost of pharmaceuticals

sold in Ghana and make them more affordable to Ghanaians.

  1. Government will also remove import duty and VAT on inputs for the

production of machetes and also the production of exercise books and

textbooks. This will benefit both our farmers and the printing industry.

  1. Mobile phone penetration is high in Ghana. However smartphones form only

15% of this penetration. Communication is shifting from voice to data and

mobile data is projected to grow 6.3 times between 2013 and 2018. It is

being proposed that in order to increase smart phone penetration, and in

line with Government’s policy of bridging the digital divide within the

country, import duties on smartphones will be removed. It is expected that

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the increase in smartphone penetration will increase revenue from

Communication Service Tax, VAT and corporate taxes.

Review of Exemptions

  1. Mr. Speaker, government recognizes the role that tax incentives play in

creating an enabling investment climate. Ghana still needs investments in

critical areas of the economy. However it is necessary to reduce abuses and

the granting of excessive exemptions.

  1. The Free Zones Act will be reviewed in 2015 to enhance the relevance of

activities in the sector so that greater emphasis is placed on manufacturing

and value addition. Additionally, the corporate tax rate of companies after

the enjoyment of the ten years tax holiday will be increased from 8 percent

to 15 percent.

  1. In 2015, government will abolish the use of the VAT Relief Purchase Order

(VRPO) in granting of relief. The Refund system will be beefed up to pay

refunds when the request are duly vetted and certified. Tax exemptions

granted in loan agreements will also be reviewed to reduce the scope of

exemption granted and the use of special permit will be drastically reduced.

The terms of draft Agreements must refer to the application of tax treaties,

where necessary.

  1. A more efficient refund system will be put in place to cover duty drawback,

VAT refund and corporate tax overpayments. The current VAT Refund

Account, into which 5 percent of VAT revenue is paid, will be replaced with

a General Refund Account into which up to 5 percent of GRA collection will

be paid for tax and duty refunds. The General Refund Account will be

audited annually and any balance standing in the account at the close of the

financial year, will be transferred into the Consolidated Fund.

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  1. Mr. Speaker, the upfront exemptions will be replaced by Tax Credit System

for entities benefiting from exemptions. Under Tax Credit System, exempted

entities will pay all import duties and taxes in full and apply for a Tax Credit

Note which will be used to offset future tax liabilities.

Compliance

  1. In 2014, the GRA initiated a taxpayer compliance monitoring measure which

involved the use of tax payer and third-party data to match taxpayers’

declaration in order to ascertain their compliance levels. This measure is

designed to improve Tax Payer Compliance using information reported to

the GRA by tax payers and a range of third parties. The exercise started first

with the use of data on importation from the GCMS and was subsequently

extended to GIFMIS data covering payments made to government’s

suppliers.

  1. Against the backdrop of the modest gains made, the GRA will scale up the

project in 2015, with a view to making it a permanent and a routine

compliance monitoring tool. In this regard, Customs procedures for the

clearance of goods at the Ports are being reviewed to include the

requirement for importers to indicate their TIN numbers and which domestic

tax offices they pay taxes.

  1. Also, the GRA will interface directly with the GIFMIS infrastructure so as to

acquire data in real time for the exercise. GIFMIS infrastructure can

subsequently be used to validate Taxpayer Identification Numbers (TIN).

STRUCTURAL MEASURES

Fiscal Rules

  1. Mr. Speaker, government has been reviewing all the tax and financial laws

and regulations currently in operation in the country to ensure that they

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boost revenue, enhance fiscal performance, and enforce sanctions for noncompliance.

  1. In this respect, the Ministry of Finance worked with Parliament to pass the

VAT and Excise Bills. Currently, the Customs Bill is before this august House

and the Income Tax and Revenue Administration Bills would be tabled soon.

The Ministry will, in the medium term, submit to Cabinet and subsequently

to Parliament, a new Loans Bill and a Financial Responsibility Bill which will

contain comprehensive provisions on budgeting and integrate the Financial

Administration Act and Financial Administration Regulation.

Enhancing Flexibility in the Budget

  1. Mr. Speaker, the national budget is increasingly becoming inflexible to

manage as well as to accommodate shocks and changes in government

priorities. These are mainly due to the earmarking of a huge component of

the budgetary resources as statutory transfers in addition to existing

statutory liabilities, such as wages and salaries, amortisation, and interest

payments.

  1. Most of the expenditures for which these transfers are made invariably have

to be funded from the Consolidated Fund, causing duplication of efforts.

Furthermore, as a result of these inflexibilities, during downturns almost all

the discretionary expenditures which are predominantly in the MDAs budget

are funded by loans from domestic and foreign sources.

  1. Mr. Speaker, in the medium term, government will propose measures to

realign expenditures under the Statutory Funds hitherto being catered for

under the Consolidated Fund. Starting with the 2015 Budget and as a

transitional arrangement, government will enhance the administrative

process for aligning statutory fund expenditures to national policies and

priorities.

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Ghana Infrastructure Investment Fund (GIIF)

  1. Mr. Speaker, thanks to this august House, the GIIF was established by the

Ghana Infrastructure Investment Fund Act, Act 877 of 2014. The Fund is to

mobilise, manage, coordinate and provide financial resources for investment

in the diversified portfolio of infrastructure projects for national

development. The GIIF is to begin effective operations in 2015 after the

announcement Board and Advisory Council Members. An executive search is

underway for the Chief Executive. The World Bank and the AfDB have

pledged their support in setting up the GIIF.

  1. Mr. Speaker, in the interim government will transfer key projects on

government balance sheet that meet the GIIF primary commercial loans

criteria to the Fund to manage. These complimentary escrow and on-lending

project loans including Bui Dam, Gas processing Plant and Pipelines.

Furthermore, funding requirements for self-financing projects being

undertaken with government guaranteed loans will be passed to GIIF. In

addition, counterpart funding for some selected commercial projects will be

provided from the Fund. Projects and loans associated with Special Purpose

Vehicle (SPVs), Joint Ventures and PPP projects will also qualify for funding

under GIIF. As the list shows, most of the projects to be covered by GIIF

will be in the energy, road and transport sectors.

Introduction of Pre-Budget Statement

  1. Mr. Speaker, to facilitate better engagement with the Legislature and

improve participation of the Citizenry in fiscal policy management,

Government will enhance the use of Budget guidelines for MDAs by piloting

a Pre-Budget Statement in 2015. The pre-budget statement will provide the

broad framework as well as parameters which will be the basis of the

budget to be presented to Parliament. It will also signal government policy.

The Ministry of Finance will engage Parliament to work out modalities with

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the view to introducing the Pre-Budget Statement as part of the budget

process.

Debt Management Strategy

  1. Mr. Speaker, Government debt management strategy will continue to focus

on providing a more cost-effective access to the international and domestic

capital markets. It will also support multilateral as well as improvements of

the domestic capital market to meet national development needs.

  1. As you may recall, in 2014, Government tapped the Eurobond market to

obtain long-term funds for debt restructuring, counterpart funding and

financing of capital expenditure. This is in line with the objective of

diversifying sources of funding, extending the tenor of public debt and

reducing the overall cost of borrowing.

  1. In 2015 government will consolidate its policy of using short-term

borrowings primarily for liquidity management purposes and long term

borrowings for capital expenditure. In this regard, government will continue

to work towards extending the yield curve to 10 years.

  1. Key initiatives to consolidate sustainability and efficiency in debt

management are indicated as follows:

Sinking Fund

  1. Mr. Speaker, government will operationalize the Sinking Fund to manage

the orderly redemption of Sovereign Bonds and other debt instruments in

2015 in accordance with sections 88-93 of the Financial Administration

Regulations (2004) L.I. 1802. Under the Sinking fund, Government will set

aside funds to liquidate debt maturing debt.

  1. The experiment we conducted with the cap of the Stabilisation Fund that

Parliament approved, clearly shows that the Sinking Fund can be financed

from the excess over the cap set aside for debt servicing. In this regard we

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are proposing the concept of a moving cap and percentage allocation to

address all the goals of the stabilization Fund-growing the Fund,

contingency and debt service.

On-lending and escrow arrangements

  1. Mr. Speaker, in 2014, Government introduced an on-lending and escrow

account initiative to minimize the impact of loans on the public debt

portfolio with debt service accounts opened at the Bank of Ghana. In this

regard, a number of on-lending agreements have been signed with some

SOEs and MMDAs, to facilitate the recovery of these loans. Government will

continue with the on-lending and escrow arrangements in 2015, as a

permanent feature of our debt strategy. We will tie the policy firmly to

counter-guarantees and standing orders from reputable banks. We propose

to extend the recovery to prices that MDA charge for use of debt financed

projects. The use of these fees as IGFs without setting aside funds for

maintenance and replacement is anomaly that must stop.

Capital Market Development

  1. Mr. Speaker, a well-developed domestic capital market is critical to

Government’s ability to mobilize the necessary funds to support

infrastructure projects. In addition, such markets are necessary for

enhanced financial stability, better integration into the global financial

system, and provide a platform for private sector firms to diversify their

sources of capital by tapping into the domestic capital market.

  1. Mr. Speaker, Government is widening the scope of financing opportunities

through measures such as the issuance of the 7-year domestic bond and

the regular publication of an issuance calendar among others. We will

initiate steps with Bank of Ghana and SEC to float the Government 3-year,

5-year and 7-year bonds on the stock exchange. We shall use the book

building approach in allocating the issue similar to the method we used for

the Eurobond on the international and domestic capital markets.

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Ghana EXIM Bank

  1. Mr. Speaker, the transformation agenda, which has been articulated by His

Excellency the President clearly indicates the need to transform our

economy into an export oriented economy. It is necessary to adopt policies

that tilt our economy predominantly towards exports. To achieve the

desired transformation, Cabinet has approved the creation of a Ghana

Export-Import Bank to lead in the strategic positioning of Ghana as an

export-led economy.

  1. The establishment of the EXIM, will also enable us to take advantage of

international trade initiatives such as African Growth and Opportunity Act

(AGOA) and Economic Partnership Agreement (EPA). The Cabinet approval

includes the use of 50percent of EDAIF funds to set up the bank. Ghana

Exim will be a vehicle for the consolidation of the current export finance

activities of the EDAIF, Eximguaranty Company and Export finance

company.

  1. In this regard, Cabinet also approved the setting up of a Presidential

Committee to implement the scheme.

Export-led Development Strategy

  1. Mr. Speaker, over the years, Ghana has been relying on a few primary

products, especially gold and cocoa and in recent times oil as the main

export commodities. As part of the strategies to boost foreign exchange

earnings, in 2015 and the medium term we will focus on expanding nontraditional

exports from about US$2.3 billion to US$5 billion. The strategy

will be to take advantage of the purchasing power of consumers in the

ECOWAS, BRICS and global market.

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  1. Mr. Speaker, as part of the expanded export-led development strategy,

government will intensify the campaign to promote made-in-Ghana goods

and services.

ENHANCING DOMESTIC PRODUCTION TO REDUCE IMPORTS

  1. Mr. Speaker, in 2013, import of rice, fish, poultry and tomato products was

almost $1 billion. Government will continue with its policy to enhance the

local production of these commodities as follows:

  1. Revamping of the Broiler Programme

Mr. Speaker, this programme is aimed at reducing the importation of

chicken by 40 percent by the end of 2016. This is being implemented

by the Ministry of Food and Agriculture in collaboration with the

Ministry of Trade and Industry and the Ghana National Poultry Farmers

Association. Under this programme, 20 million broilers will be produced

and this will result in 60,000mt of Poultry meat. It is expected that

Ghana will save about US$132 million and reduce poultry import by

38.9 percent.

Mr. Speaker, during the year, government initiated the process of

modernising the mode of grains and tuber trading as announced in the

2014 Budget. Two new markets for the trading of agriculture

commodities were started. A taskforce was set up and the services of a

consultant procured to provide technical advice for the implementation.

  1. Fish Production

Mr. Speaker, government will rationalise the fisheries regulations and

EU issues to enable the country accrue over 500 million dollars in

export earnings in 2015 and beyond. The tuna industry will also be

revamped to increase foreign exchange earnings for Ghana. The export

of other fishery products including smoked fish, tilapia and ornamental

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fish will earn over US$100 million US dollars as additional export

revenue for the country.

COMMUNITY DAY AND PROGRESSIVELY FREE SHS

  1. Mr. Speaker, in fulfilment of our promise to construct more Community Day

Senior High Schools, Government began the construction of the first 73

Senior High Schools in as many selected districts across the country. In

2015, the second phase of the construction of the Community Day Senior

High School Project will commence with an additional 50 Schools.

  1. Mr. Speaker, Government is committed to making secondary education

progressively free starting from 2015/2016 academic year. In this regard, in

2015, Government will absorb GES-approved examination, library,

entertainment, SRC, science development, sports, culture, and internet fees

charged to secondary level students. This is expected to benefit about

367,565 day students in the 2015/2016 academic year.

CONCLUSION

  1. Mr. Speaker, I wish to conclude by giving a firm assurance on behalf of

H.E., President Mahama, to this August House and to all Ghanaians, that the

medium term prospects for this country’s economy is bright, and that the

transformational agenda of the NDC government is on course.

  1. In the near term, we will have access to additional oil and gas revenue,

employ risk management tools, smoothen forex flows and increase value

addition through diversification and effective tariff classification and

variation. In addition, government will put in place measures to boost

Ghana’s foreign exchange resources so as to improve its foreign exchange

reserves and maintain exchange rate stability even after the IMF

programme.

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  1. We believe that the measures we have outlined in this budget to address

the structural and fiscal weaknesses, will lead to an improved fiscal

situation, strengthened rules for PFM, and create an enabling environment

for increased local production and an expansion of the economy.

  1. Mr. Seaker, I wish to renew government commitment to the people of

Ghana that with this budget,

  1. We will stabilise the economy through measures that are beginning to

bear fruits;

  1. We will introduce new rules and deploy systems to strengthen

expenditure management notably in pay roll management which will

reduce waste and corrupt practices as well as facilitate the application

of sanctions;

iii. We will strengthen state institutions and improve the governance of

this country;

  1. we will build the 50 secondary schools and begin the progressively free

education programme we promised;

  1. We will expand health facilities and complete the over 100 CHPS

compound including those that Ministers are committed to building ;

  1. We will complete a number of roads and water systems we started ;

vii. We will increase the generation capacity of energy to reduce power

outages and complete various ongoing infrastructure projects;

viii. We will provide cash grant to over 150,000 households and over

400,000 individual beneficiaries so that the extremely poor will not go

to bed hungry; and

  1. We will ensure that we increase opportunities for Ghanaians to have a

better life.

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy”

59

  1. Mr. Speaker, we are strengthened in our resolve to implement this budget.

However to do this we will need help, help and support from this August

house and the entire people of Ghana. We have not wavered in our

commitment to provide a better Ghana for our people, a commitment that is

bold and pragmatic to acknowledge challenges and plan to resolve them.

Above all, we believe that this budget offers another opportunity for us to

work together to achieve the goals of promising medium term opportunities.

Mr. Speaker, we wish the Black Stars well in today’s match, an “activity”

that will boost the objectives of a “programme” to qualify for the African

Cup of Nations.

  1. Rt. Hon. Speaker, I beg to move.

 

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy” 1

 

SECTION ONE:

INTRODUCTION

 

  1. Rt. Hon. Speaker and Honourable Members of Parliament, on the authority of His Excellency, John Dramani Mahama, President of the Republic of Ghana, I beg to move that this Honourable House approves the Financial Policy of the Government of Ghana for the year ending 31st December, 2015.
  2. Similarly, Rt. Hon. Speaker, on the authority of His Excellency, John Dramani Mahama, President of the Republic of Ghana, and in accordance with Article 179 of the 1992 Constitution, permit me to present the Budget Statement and Economic Policy for the year 2015 to this august House.
  3. Mr. Speaker, this presentation is an abridged version of the 2015 Budget Statement and I would like to request the Hansard Department to capture the entire Budget Statement and Economic Policy.
  4. Furthermore, Rt. Hon. Speaker, in accordance with Section 48 of the Petroleum Revenue Management Act, 2011 (Act 815), permit me to present the 2014 Annual Report on the Petroleum Funds to the House.
  5. It will be recalled that, exactly a year ago, precisely on Tuesday 19th November 2013, I had the privilege of presenting the 2014 Budget Statement and Economic Policy of the Government to Parliament. Subsequently, on Wednesday, 16th July, 2014, I presented the Mid-Year Review and Supplementary Estimates to the 2014 Budget to you. Rt. Hon. Speaker, I am grateful to the House for approving both presentations and, where necessary, passing relevant laws in support of the measures proposed.
  6. Mr. Speaker, in those presentations, I outlined among others, measures to address the major causes of the twin Budget and Current Account deficits

 

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy” 2 that occurred at the end of 2012. Moreover, after consolidating the policies and measures into the Home Grown Policy with inputs from Senchi, we presented them to the Board of the International Monetary Fund (IMF), as part of its consideration of the staff report on Ghana’s Article IV Consultations that took place in February this year.

  1. Mr. Speaker, I stand before this august House to report that we have made progress in resolving several of these challenges. The successes that the measures have achieved include the following:
  2. completion of the migration of almost all public sector workers on the central payroll to the Single Spine Salary Structure (SSSS)after many failed attempts in over two decades. This remarkable progress, will help address many unfair features of the payroll system;
  3. clearing of all outstanding SSSS-specific salary arrears of about GH¢3 billion that started to accumulate from the beginning of the programme in 2010. Moreover, the Scheme now moves into the productivity phase, as part of the on-going public sector-wide improvement or reform Programme;

iii. virtually eliminating the spectre of long queues for fuel as well as the huge budget overruns of about GH¢339 million in 2012 and GH¢135 million in 2013 that resulted from past failures to adjust prices through the “automatic adjustment” pricing formula; and

  1. an improvement in the revenue estimation process of the production and sale of crude oil, thus, eliminating another of the major causes of the budget overrun of about GH¢384 million that occurred at the end of 2012; and

 

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy” 3

  1. a demonstration of our ability to raise both domestic and external funds to complete several projects that were put on Government budget without adequate source of funds.
  2. Mr. Speaker, notwithstanding these successes, however, our resolve at rebalancing the Budget was severely tested again when the economy came under additional significant shocks in 2013. Many of these shocks continued into the 2014 fiscal year. The challenges we continue to face include major exogenous setbacks such as the following:
  3. the continued disruption in the supply of gas from the West African Gas Power Pool (WAGP) from August 2012 through August 2014, due to the damage caused to the pipeline. This has had significant adverse effects on power supply, national output, foreign exchange reserves, and tax revenues;
  4. the fall in gold and cocoa prices has had similar effects and, required sacrifices by our hardworking cocoa farmers as well as Government in the form of curtailed producer price and export duty respectively. Hence, we have reason to commend our farmers and return the favour with the producer price increase that we announced this year;

iii. the sluggish inflow of grants from some Development Partners for the third year in succession (it is about 75 percent below what was pledged to support the budget); and

  1. while the slump in petroleum prices during the third quarter of 2014 has benefitted our automatic adjustment policy, it is also a factor that becomes important in our quest to utilise the petroleum funds under the PRMA for savings, stabilisation and investment.

 

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy” 4

  1. Mr. Speaker, besides the continuing adverse impact on national output as well as losses in foreign exchange and tax revenues, these latter setbacks had a major impact on the value of the Cedi in early 2014. It took several additional bold efforts and the reversal of compliance measures announced by the Bank of Ghana (BOG) to reverse and stabilize the currency. Thankfully, the Ghana Cedi has started showing signs of recovery, an explicit enunciation of the recovery and bright near term prospects.
  2. Mr. Speaker, it was also at this critical juncture that the Government decided to request the IMF for Balance of Payments support that only vcomes from a funded IMF Programme. Indeed, the enhancements to the Home Grown Policies which would have expired in 2016/17 and outcome of the Senchi consultations have been used as vital input for the on-going Programme discussions with the IMF.
  3. Mr. Speaker, the discussions have been progressing well and at the appropriate time, when we expect the IMF Board to approve the Programme, we will return to this august House with an update.
  4. Mr. Speaker, while Ghanaians and the markets were taking the essence of Ghana’s announcement of an IMF Programme in its stride, we achieved another important and significant success in launching our third Sovereign Bond of US$1 billion in early September 2014. Similarly, on the same day as the Bond issue, the Ghana COCOBOD also signed an agreement for US$1.7 billion, which was the result of another successful bid to access the international capital markets.
  5. I mention these latter events in my update because the success of the Sovereign Bond and COCOBOD programmes was against the expectations of many people both at home and abroad. We do not gloat, rather they provide us with the occasion to put the management of our economy in a more balanced perspective. As with the 2014 Mid-Year Review, the market

 

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy” 5 activities were occasions to make a strong case for our positive and bright medium-term prospects.

  1. Mr. Speaker, while we are aware that some deliberately choose to ignore that narrative, permit me to restate some features of that promising outlook for our nation:
  2. the economy continued to grow at respectable rates, led by the Agriculture Sector, even during the period that it was undergoing serious setbacks and challenges;
  3. the completion of Ghana’s own gas pipelines and processing plant to utilise the free 200 billion cubic feet (bcf) of gas from the Jubilee field. Indeed, the tie-in of the pipelines with the Floating, Production, Storage and Offloading (FPSO) and the plant has been completed and the commissioning of gas flows from the oil fields to the plant has started;

iii. the future coming on stream of additional gas and crude oil production and supplies from the Sankofa and Tweneboa-Enyenra-Ntomme (TEN) fields; and

  1. the prospects for further boosts to the economy from the energy sector have become even more promising with the signing of the Millennium Challenge Corporation (MCC) Compact II Agreement with the United States of America (USA).
  2. Mr. Speaker, indeed, the 2015 Budget will be unique in one major respect. It will usher the country into the gas era and Phase II oil-gas production. Hence, just as with the prudent foresight it exhibited in taking the nation into the crude oil era, the NDC Government is poised to:

 

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy” 6

  1. propose amendments to enhance effective implementation of the Petroleum Revenue Management Act 2011, (Act 815) to harness our oil resources for savings, stabilisation and development;
  2. outline firm policies for the energy sector that include the following key elements:

iii. implementation of the over US$400 million US MCC Compact II under the Power Africa Program that is planned to attract significant private investment into the energy sector;

  1. a major overhaul of the pricing, tax and levy structure for energy utilities and petroleum products;
  2. a vigorous use of alternative financing instruments for energy and nonenergy investments, mainly the insurance and Partial Risk Guarantee (PRG) tools of the World Bank and the African Development Bank (AfDB) to boost private sector participation in the sector and the economy; and
  3. as part of the new debt management strategy approved by this august House, we will continue to enhance the use of oil and gas resources to leverage the Capital Markets for development of the energy sector.
  4. This last initiative will involve the issuing of energy bonds through plans that draw on synergies among the Balance Sheets of capable State-Owned Enterprises (SOEs) and the private sector. In this context, we will also consider the possibility of a second line of longer term Cocoa Bonds by COCOBOD to fund its long term capital and infrastructure needs.
  5. Mr. Speaker, this innovative financing plan is key for the energy sector, where recent negotiations involving gas pricing and GNPC’s aggregator.

 

 

 

 

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy” 7 arrangements clearly suggest the need for strong Balance Sheets. It is in this context that we must see the relevance of (a) the proposed energy levy in the new pricing structure; and (b) GNPC’s recent successful access to the capital markets to raise US$700 million to support infrastructure development.

  1. Mr. Speaker, I would like to emphasise that this loan is a GNPC loan and not a central government loan. The cost of borrowing at around 5 percent is highly competitive. The uses, as outlined by GNPC, are very clear and compelling, both commercially and strategically. The facility, together with

GNPC’s other resources, will be used to support such investment needs as

the pipeline and receiving facility in the Offshore Cape Three Points Project

(OCTP), which GNPC will finance with US$493 million out of the loan

proceeds, to provide a significant boost to monetizing Ghana’s natural gas.

It will result in a lower gas price. Similarly, the US$36 million to US$45

million investment to link the Tweneboa natural gas to the Jubilee FPSO will

enable cheaper processing of the gas by the Atuabo Plant. In addition,

GNPC plans to use between US$200 million and US$300 million as part of

measures to provide adequate financial security for the OCTP gas project.

  1. In short, the facility is expected to be as much a game changer as the

investment of about US$1.0 billion in our first gas infrastructure. These are

all critical to our long term national energy security.

  1. It is in this vein that Government has approved the takeover of the Ghana

National Gas Company Limited (GNGC) by GNPC to create a gas subsidiary

for the latter. The consolidation of GNPC and GNGC will make it possible to

enhance a more integrated management and continue financing of projects

in the oil and gas enclave immediately. It will make it possible to ease the

conditions that investors impose for the national gas aggregator and start

financing projects in the oil-and-gas enclave immediately. Government will

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy”

8

appoint a transaction advisor for these purposes and request them to advise

on a further consolidation involving TOR and BOST.

  1. Finally, we will consult with, and learn from, the experiences of Sovereign

Wealth Funds (SWFs) on the continent (e.g. Nigeria and Angola) and

elsewhere, as well as start exploratory talks on financing energy and nonenergy

infrastructure with the newly established Global Infrastructure Fund

of the World Bank and the Africa50 (Infrastructure) Fund of the African

Development Bank.

  1. Rt. Hon. Speaker, against this background, permit me to re-echo H.E.

President Mahama in stating that while we see a bright future encompassing

the services, agriculture and industrial (most notably, energy) sectors, we

are not yet out of the woods. Therefore, as we seek to enhance our ongoing

fiscal consolidation measures and policies under a prospective IMF

Programme, we are reminded that we will not be merely continuing our

stabilisation effort. In the near term, an IMF Programme will dovetail into

the promising environment we plan to create for inclusive growth, value

addition, and diversification. This outlook is embodied in the theme for

the 2015 Budget Statement and Economic Policy “Transformational

Agenda: Securing the Bright Medium Term Prospects of the

Economy”.

GLOBAL ECONOMIC PERFORMANCE AND OUTLOOK

  1. Mr Speaker, permit me to present a summary of the performance and

outlook for the global and domestic economies.

Growth

  1. Mr. Speaker, according to the IMF’s October 2014 World Economic Outlook

(WEO), the performance of global economies has been slower than

expected in the first half of 2014, reflecting a number of negative

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy”

9

unexpected developments, including weaker growth in the U.S., China and

Latin America, as well as stagnant euro area growth. This has led to a

downward revision of the projected growth rate for 2014, from 3.7 percent

as reported in the April 2014 edition of the World Economic Outlook, to 3.3

percent. The world economic growth is projected at 3.8 percent in 2015.

  1. Mr. Speaker, economic growth has remained robust in most economies of

sub-Saharan Africa, driven by strong growth in public and private

investment, supportive external demand, and strong private consumption.

Growth is projected to remain robust at 5.1 percent in 2014 (same as 2013)

and 5.8 percent in 2015, on account of strong domestic and net external

demand.

Inflation

  1. Mr. Speaker, price pressures have been largely contained, with Consumer

Price Index (CPI) inflation generally below targets in advanced economies.

In emerging market and developing economies, inflation is projected to

decline to 5.5 percent in 2014, down from 5.9 percent in 2013 and remain

broadly unchanged in 2015, largely on account of the softening of

commodity prices, particularly food commodities, which have a high weight

in the consumer price index baskets for these countries.

Commodity Prices

  1. Mr. Speaker, commodity prices have declined in recent months and are

expected to fall further in line with futures markets, owing mostly to

improved supply prospects and weak global demand. Crude oil prices have

experienced a declining trend in recent times, dipping to under US$90 a

barrel in July, from a January average of US$107 and, declining further to

under US$80 per barrel in November 2014.

  1. According to the October 2014 WEO, crude oil prices are expected to

average US$99.4 a barrel in 2015, falling further to around US$97.3 in

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy”

10

  1. However, recent market sentiments point to weaker crude oil prices

than those predicted by the WEO. Metal prices, which have experienced

declines in recent times, are projected to fall further by 7.5 percent in 2014

and by 1.8 percent in 2015, before rising by 0.6 percent in 2016. Food

prices are also expected to decline by 4.1 percent in 2014 and by 7.9

percent in 2015 and remain broadly unchanged in 2016, reflecting

favourable harvest conditions.

ECOWAS Activities and Protocols

  1. Mr. Speaker, Ghana continues to play an integral role in the integration

process of the Economic Community of West African States (ECOWAS). This

commitment is reaffirmed by the current status of His Excellency, President

John Dramani Mahama as the Chairman of the Authority of Heads of State

and Government of ECOWAS. In 2014, the Heads of Governments of

ECOWAS resolved, among others, to work at the abolition of the residence

permit and the introduction of the Biometric Identity Card for the

Community citizens; rationalization of the ECOWAS Convergence Criteria;

the streamlining of ECOWAS Institutions in line with the Vision 2020; and

approval of the revised roadmap for the second single monetary zone.

Implications of the Global Developments for Ghana’s Economy

  1. Mr. Speaker, our nations and region face ignorance, stigma, jokes and even

ostracization often from what ought to be informed sources the threat of

the Ebola virus in some West Africa countries; but which poses significant

risk to the region’s growth prospects, particularly its effects on the tourism

and the hospitality sub-sectors.

31.

  1. It is instructive to note that, His Excellency, President John Dramani

Mahama, in his capacity as the Chairman of Economic Community of West

African States (ECOWAS), has been at the forefront of the humanitarian

efforts to mobilise both financial and material resources to bring the

epidemic under control. Ghana has been designated as the UN centre for

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy”

11

coordinating global response to the Ebola crisis, thanks to the sterling

leadership of H.E. the President. Many global leaders have commended this

effort very openly. As we note later Government is implementing several

safety measures already to protect our citizens.

  1. Mr. Speaker, Ghana has had to endure the harsh economic impact of the

recent declines in commodity prices. In particular, the declining prices of

gold have had adverse effects on jobs and revenues in the mining sector.

Our mining towns are taking the full brunt of the negative effect. The

projected decline in oil prices would also impact negatively on the fiscal

through lower revenues from oil exports whilst at the same time dampening

the effect of foreign exchange pressures arising out of oil lower import bill.

However, the prospects are that the developments in gas can neutralise

some of the adverse effects of crude oil earnings.

  1. Mr. Speaker, Government will take necessary steps to mitigate their

potential impacts. To sustain our medium term growth prospects, measures

are being put in place to reduce our vulnerability to external shocks through

such means as strengthening our tools for risk management, diversifying

and adding value to our exports, and supporting local production of

imported goods which can be produced domestically. The fiscal frameworks

would also be strengthened to foster medium-term planning and preserve

debt sustainability, as well as deepen structural transformation of the

economy.

MACROECONOMIC PERFORMANCE IN 2014

Growth

  1. Mr. Speaker, provisional Gross Domestic Product (GDP) data released by the

Ghana Statistical Service (GSS) for 2014 estimates an expansion of 6.9

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy”

12

percent of the country’s economy, down from a revised target of 7.1

percent and the 2013 growth of 7.6 percent.

  1. In a reversal of trends in recent times, the Agriculture Sector recorded the

highest growth of 5.3 percent in 2014, followed closely by the Services and

Industry Sectors each by 4.6 percent.

  1. Mr. Speaker, in the medium term, real GDP is estimated to grow at an

average rate of 6.8 percent while non-oil GDP is projected to grow at an

average of 4.4 percent. The Industry Sector is projected to be the lead

sector over the medium term with an average growth of 11.4 percent,

followed by the Services Sector with 6 percent and the Agriculture Sector

with 3.6 percent.

  1. The growth in the Industry Sector will be fuelled mainly by increasing

growth in the petroleum industry due to expected gas production from the

Jubilee Field; and commencement of crude oil and gas production in the

Tweneboa-Enyenra-Ntomme (TEN) Field and the Sankofa-Gye Nyame (SGN)

Field in 2016 and 2017. The projection is also based on expected

improvement in manufacturing with the expected improvement in electricity

production.

  1. Projected growth in the Services Sector will be spurred on mainly by the

Financial Intermediation, Information and Communications and Transport

and Storage subsectors.

  1. Mr. Speaker, the growth in the Agriculture Sector is expected to result

mainly from planned Government interventions, including increasing the

number of Agricultural Mechanization Services Centres (AMSECs), as well as

enhancing the fertilizer and seed subsidy programme.

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy”

13

Inflation

  1. Mr. Speaker, inflation rose to 16.9 percent in October 2014, from 16.5

percent in September 2014 and 13.5 percent at end-December 2013. The

rise in inflation pressures in 2014 reflected the sharp depreciation of the

local currency as well as pass through effects of fuel and utility price

adjustments. Inflation during the first ten months of the year was reflected

more in the non-food inflation than in the food inflation.

Money supply

  1. Mr. Speaker, BOG’s monetary statistics showed an increase in growth of

monetary aggregates. General money supply, (Broad money or M2+),

including foreign currency deposits, indicated a year-on-year growth of 33.6

percent by end of September 2014, compared with a growth of 17.4 percent

at the end of September 2013.

Interest Rate

  1. Interest rates increased for the period January to September 2014. The

average interest rate on the 91-day Treasury bill rose to 23.5 percent in

September 2014, from 21.59 percent in September 2013. However, the

difference between borrowing and lending rates declined to 14.25 percent in

September 2014.

Exchange Rate

  1. Mr. Speaker, the cedi continued to weaken on the domestic market amid

demand pressures, largely for oil imports, in the context inadequate foreign

exchange supply on the market. In the Inter-Bank Market over the nine

month period of 2014, the cedi depreciated by 31.2 percent, 29.3 percent

and 23.6 percent against the US dollar, the pound sterling and the euro

respectively. This compares with a depreciation of 4.1 percent, 16.7 percent

and 20.1 percent against the US dollar, the pound sterling and the euro,

respectively at the end of 2013.

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy”

14

  1. With the boost from the inflow of the Sovereign Bond that was planned to

support capital investments and the COCOBOD syndicated loan to support

our farmers, the exchange rate has appreciated against the major

currencies and it is expected to remain stable for the rest of the year.

  1. Mr. Speaker, the main policy objective for over the medium term is to lower

inflationary expectations. Since the last quarter of 2013, the effects of fuel

adjustments, exchange rate depreciation and fiscal

pressures have steadily pushed up inflation from the medium term target of

about 9 percent. The Central Bank will continue to use its monetary policy

rate to signal and gradually ease inflation towards the medium term target

of about 9 percent.

Current Account Balance

  1. Mr. Speaker, the provisional trade balance for the period January to

September 2014, showed a narrower deficit of US$681.3 million, from

US$3.8 billion at the end of 2013. The improvement was on account of less

imports compared to exports, with imports reducing by 18.0 percent whilst

exports reduced by 2.8 percent.

Gross International Reserves

  1. The decline in the price of gold on the international market accounted for

the shortfall in export earnings. The decline in imports was attributed to

decline in non-oil imports which was affected by the depreciation of the cedi

against the major trading currencies.

  1. The country’s gross international reserves increased by US$46.9 million from

US$5.6 billion at the end of December 2013 to US$5.7 billion at the end of

September 2014. This was sufficient to provide 3.3 months of imports cover

compared to 2.9 and 3.1 months of imports cover as at end-September and

end-December 2013, respectively.

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy”

15

  1. Mr. Speaker, external sector policy will continue to aim at building up

foreign reserves to more comfortable levels beyond three months to four

months of import cover in the medium term.

Fiscal Policy

  1. Mr. Speaker, the 2015 Budget has been developed within the broad

framework of the Ghana Shared Growth and Development Agenda (GSGDA

II), 2014-2017. The medium term vision of Government in the GSGDA II is:

“A stable, united, inclusive and prosperous country with

opportunities for all”.

  1. Ghana’s successful structural transformation rests on three strategic

interventions namely:

  1. strengthening and deepening the essential elements and institutions of

good governance;

  1. promoting export-led growth through products that build up on

Ghana’s comparative strength in agricultural raw materials; and

iii. anchoring industrial development through prudent use of natural

resources based on locally processed value addition.

  1. The GSGDA II will be linked to Ministry of Finance’s database, the medium

term expenditure and budget through the GIFMIS structures.

  1. Mr. Speaker, the medium term fiscal policy of Government will focus on

managing volatilities for a smooth near-term. We will continue to pursue the

fundamental policies and measures we have been implementing for some

time now.

  1. Mr. Speaker, Government is committed to addressing the short term

vulnerabilities that the economy faces to safeguard the nation’s bright

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy”

16

medium term prospects for strong growth and job creation. Our goal for the

medium term is to progressively reduce the fiscal deficit to 3.5 percent of

GDP by 2017. This reduction will be driven mainly by improvements in tax

policy, revenue administration reforms, improved management of public

funds, expenditure rationalization, and the implementation of new debt

management strategies.

  1. Mr Speaker, in 2015, Government will implement the remaining VAT

measures for fee-based financial services and commercial real estate with a

change in the VAT on real estate to a flat 5 percent which the House has

already passed.

  1. In addition, Mr. Speaker we propose the following tax measures for

implementation in 2015:

  1. Imposition of Special Petroleum Tax of 17.5 percent as part of a

rationalization of VAT regime and change in the petroleum pricing

structure – this policy comes with a mitigation account to manage

extremely low and high prices that result in sporadic price increases or

decreases under the automatic adjustment formula;

  1. Reversal of the excise tax on petroleum from ad valorem to specific;

iii. Extension of the National Fiscal Stabilization Levy of 5 percent and

special import levy of 1-2 percent to 2017; and

  1. Increase the withholding tax on Directors’ remuneration from 10

percent to 20 percent;

  1. Mr. Speaker, we will continue to implement the on-going expenditure

measures that we have been vigorously pursuing under our Home-Grown

Policy. These include:

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy”

17

  1. Government’s fiscal stance to negotiate public sector wages within

budgetary constraints to ensure the sustainability of the Single Spine

Pay Policy. Government is also mindful of the signal and pressure that

public sector base pay could have on the private sector’s application of

the minimum wage. In with another decision reached at the Ho forum,

we worked hard to complete negotiations on wage adjustments for

2015 before the Budget but could not achieve this goal.

  1. In a fiscal context, it is necessary that we continue to observe

budgetary constraints on the wage bill. Despite the benefits of the new

salary scheme, it is the cumulative overrun in the wage bill of over

GH¢1.9 billion in addition to over GH¢3 billion overrun in arrears for 3

years in a row that prevented government from paying all its

obligations on pensions, contractors and expenditures to run

government services smoothly. As noted, however, this was worsened

by factors such as the gas supply disruptions and fall in gold and cocoa

prices;

iii. Continuation of the policy of net freeze on employment into all sectors

of the public services (excluding education and health) and nonreplacement

of departing public sector employees in overstaffed areas;

and

  1. We will continue to implement the existing price adjustment

mechanisms for utility tariffs and fuel prices which as noted earlier, has

eliminated the spectre of long queues for fuel. As the gas supply

situation improves, we expect that consumers will also see the benefits

of the utility price adjustments.

Debt Management

  1. Mr. Speaker, Ghana’s public debt stock as a percentage of GDP has been

rising over the years. It increased from 36.3 percent in 2009 to 48.03

percent in 2012 and further to 55.53 percent in 2013. As at end September,

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy”

18

2014 the debt stock stood at 60.8 percent, largely on account of increase in

external net disbursements for infrastructure projects and net domestic

issuance, and the depreciation of the cedi.

  1. Mr. Speaker, the provisional public debt stock as at end September, 2014

stood at GH¢69,705.90 million (US$21,733.51 million). This was made up of

GH¢40,644.15 million (US$12,678.62 million) and GH¢29,041.75 million

(US$9,054.89 million) for external and domestic debt respectively.

  1. It is worth noting that some of the loans contracted were used to finance

major infrastructure projects such as the following:

  1. Ghana National Gas Processing Plant to help solve the energy crisis,
  2. Refurbishment and Expansion of the Ridge Hospital

iii. University of Ghana Teaching Hospital

  1. Expansion of the Kpong Water Pumping Station
  2. Kwame Nkrumah Interchange
  3. Sofoline Interchange in Kumasi

vii. Tetteh-Quarshie – Madina road project

viii. Achimota-Ofankor road project

  1. Construction of Affordable Housing Units by OAS Construction
  2. Kumasi Central Market
  3. Kasoa Interchange

xii. 200 Buses for the Metro Mass Transit, and an additional

xiii. 295 Scania Buses for the Rapid Transport System

xiv. Parliament House- Job 600 Offices and reconfiguration of Parliament

from long term domestic bond proceeds

Eurobond Issue

  1. Mr. Speaker, you may recall that members of this august House on 31

December, 2013, approved the issue of up to US$1.5 billion on the

Eurobond market in 2014 of which US$1 billion was for capital expenditure

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy”

19

in the 2014 budget and up to US$500 million for the refinancing of existing

debt. The prospectus is being distributed with this budget.

  1. Mr. Speaker, unlike earlier Eurobond transactions, the 2014 transaction

coincided with an announcement of a potential programme discussions with

the IMF. Despite this complication we were able to achieve an impressive

market result reflected in a competitive coupon rate of 8.125 percent and an

order book of US$2.9 billion of which Government accepted US$1billion.

Projected 2014 End Year Fiscal Outturn

  1. Mr. Speaker, the key objective of fiscal policy as outlined in the 2014

Budget, aimed at ensuring fiscal prudence and debt sustainability by

improving revenue mobilization and rationalization, enhancing efficiency of

public expenditures, as well as reviewing the financing methods and

implementation of new debt management reforms. In this regard, the 2014

Budget targeted a reduction in the fiscal deficit from 10.1 percent GDP in

2013 to 8.5 percent of GDP in 2014. However, due to both domestic and

global economic developments, the deficit target for 2014 was revised to

8.8 percent of GDP in mid-year review.

  1. Mr. Speaker, preliminary data for the first nine months of the year indicate

that, both revenue and expenditure were below their respective targets for

the period. However, the shortfall in revenue was lower than the shortfall in

expenditure, and this resulted in a fiscal deficit of 5.9 percent of GDP (cash

basis), against a target of 6.4 percent. As a result of projected shortfall in

revenue the 2014 end-year fiscal deficit is estimated 9.5 percent of GDP.

  1. Mr. Speaker, in the 2014 Budget Government announced that the President,

his Vice President, Ministers and Appointees have decided to take a

voluntary 10 percent pay cut for 2014 within the spirit of the Ho Forum on

the sustainability of the Single Spine Pay Policy. The realized amount is for

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy”

20

special purpose CHPS compounds focusing on maternal and neo natal

health.

  1. Mr. Speaker, I’m glad to announce that as at the end of October 2014 an

amount of GH¢734,530 has been deducted and used for the intended

purpose.

MACROECONOMIC TARGETS FOR THE MEDIUM-TERM AND 2015

  1. Mr. Speaker based on the macroeconomic framework, the specific

macroeconomic targets to be pursued for the medium term (2015- 2017)

include the following:

  1. An average real GDP (including oil) growth rate of at least 6.8 percent;
  2. An average non-oil real GDP growth rate of at least 4.4 percent;

iii. An inflation target of 8 percent with a band of ±2 percent;

  1. An overall Budget Deficit of 3.5 percent by 2017
  2. Gross International Reserves which will cover not less than 4 months of

imports of goods and services by 2017.

  1. Mr. Speaker, the specific macroeconomic targets for 2015 are as follows:
  2. Non-oil real GDP growth of 2.7 percent;
  3. Overall real GDP (including oil) growth of 3.9 percent;

iii. An end year inflation target of 11.5 percent;

  1. Overall budget deficit equivalent to 6.5 percent of GDP; and
  2. Gross international reserves of not less than 3 months of import cover

of goods and services.

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RESOURCE MOBILIZATION FOR 2015

  1. Mr. Speaker, total non-oil revenue and grants for the 2015 fiscal year is

estimated at GH¢26.1 billion, or 21.2 percent of non-oil GDP. This

represents 31.5 percent increase over the projected outturn for 2014.

  1. The total revenue from oil is estimated at GH¢4.2 billion, or 3.1 percent of

GDP.Therefore, total revenue and grants, including oil, for the 2015 is

estimated at GH¢33.0 billion, or 24.0 percent of GDP.

  1. Domestic revenue, made up of tax and non-tax revenue is estimated at

GH¢30.9 billion, 28.9 percent higher than the projected outturn for 2014.

  1. Mr. Speaker, total tax revenue is estimated at GH¢25.4 billion, representing

18.8 percent of GDP. This shows an increase of 31.0 percent over the

projected outturn for 2014. Of this amount, non-oil tax revenue is estimated

to grow by 25.0 percent to GH¢23.1 billion, equivalent to 18.8 percent of

non-oil GDP.

  1. Taxes on income and property are estimated to increase by 28.6 percent to

GH¢11.2 billion in 2015, accounting for 44.2 percent of total tax revenue. Of

this amount, royalties and corporate income tax from oil is estimated at

GH¢2.3 billion.

  1. Taxes on goods and services are estimated at GH¢9.4 billion, representing

46.7 percent increase over the projected outturn for 2014 and 37.3 percent

of the estimated total tax revenue for 2015. The strong growth in taxes on

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domestic goods is mainly as a result of the policy measures on VAT and

petroleum.

  1. The 2014 estimate for taxes on good and services is made up of GH¢5.7

billion for total VAT, while Excise taxes, National Health Insurance Levy and

Communication Service tax are expected to yield GH¢2.4 billion,

GH¢1billion and GH¢306.2 million, respectively.

  1. International Trade taxes, are estimated at GH¢4.7 billion, representing 3.5

percent of GDP and 18.5 percent of total tax revenue. The estimate reflects

a 11.8 percent increase over the projected outturn for 2014. The increase in

international trade taxes is expected to be largely driven by import duties,

estimated to be about 75.4 percent of the estimated international trade

taxes for 2015.

  1. Mr. Speaker, Non-tax revenue, comprising mainly fees and charges by

Ministries, Departments and Agencies (MDAs), dividend received from public

enterprises and other internally-generated funds (IGFs) is estimated at

GH¢5.3 billion, equivalent to 3.9 percent of GDP or 17.1 percent of domestic

revenue. An amount of GH¢2.8 billion is expected to be retained by MDAs

for the funding of their activities and the rest lodged into the Consolidated

Fund. A total amount of GH¢1.9 billion is estimated as non-tax oil revenue.

  1. Mr. Speaker, Grants and Loans from Development Partners are estimated at

GH¢1.6 billion, equivalent to 1.1 percent of GDP. The expected grant

constitutes 4.8 percent to the estimated total revenue and grants for 2015.

RESOURCE ALLOCATION FOR 2015

Expenditure

  1. Mr. Speaker, total expenditure, including provision for clearance of arrears

and commitments in 2015 is estimated at GH¢41.4 billion, or 30.5 percent

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of GDP. These represents 15.6 percent increase over the projected outturn

for 2014. Of this amount, GH¢1.6 billion, or 1.2 percent of GDP and 3.8

percent of total expenditure will be used for the clearance of arrears and

commitments.

  1. Mr. Speaker, Compensation of employees which comprises wages and

salaries, allowances, pensions, gratuities and social security contributions by

Government on behalf of its employees is estimated at GH¢12.3 billion,

representing 9.1 percent of GDP. Of this amount, GH¢10.3 billion (7.6

percent of GDP) is estimated for the payment of wages, salaries and

allowances, while GH¢750.9 million, GH¢216.0 million and GH¢1.1 billion is

estimated for pensions, gratuities and social security, respectively.

  1. Expenditure on goods and services is estimated at GH¢2.0 billion,

representing 1.5 percent of GDP.

  1. Total interest payment is estimated at GH¢9.6 billion, equivalent to 7.1

percent of GDP and 24.4 percent of total expenditure. Of this amount,

GH¢1.5 billion will be spent on external interest, while GH¢8.0 billion will be

for domestic interest payments.

An amount of GH¢50.0 million has been provided for the payment of

subsidies on petroleum products. Grants to other Government units,

comprising statutory payments into the National Health Insurance Fund,

Ghana Education Trust Fund, the Transfers to the DACF and GETFund are

estimated at GH¢7.4 billion.

  1. Transfers to the District Assemblies Common Fund and GETFund are

estimated at GH¢1.6 billion and 843.9 million, respectively.

  1. The Road Fund is expected to receive an amount of GH¢257.0 million, while

GH¢5.3 million will be transferred into the Petroleum-related Fund.

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  1. An amount of GH¢1.2 billion is estimated to be transferred into the National

Health Insurance Fund, while GH¢697.7 million from oil revenue, is

earmarked to be transferred to the Ghana National Petroleum Corporation

for its investments.

  1. Mr. Speaker, a total amount of GH¢7.0 billion is allocated for capital

expenditure representing a 27.1 percent increase over the projected outturn

for 2014 and 17.8 percent of the estimated total spending for 2015. About

36.8 percent of the total amount will be financed from domestic sources and

the remaining from foreign sources.

Overall Budget Balance and Financing for 2015

  1. Mr. Speaker, based on the revenue and expenditure estimates, the 2014

budget will result in an overall budget deficit of GH¢8.8 billion, equivalent to

6.5 percent of GDP.

  1. Financing of the deficit will be from both domestic and foreign sources. Net

Domestic Financing is estimated at GH¢7.6 billion, equivalent to 5.6 percent

of GDP, and financing from foreign sources are estimated at GH¢1.3 billion,

equivalent to 0.9 percent of GDP.

SECTORAL PERFORMANCE AND OUTLOOK

Over the past few years’ government has significantly increased spending on social

services by expanding facilities and implemented measures to increase access to and

quality of health and education services. In 2015 this trend will continue with an

allocation of over 7.6 billion to the Education Sector (including GetFund) and

4.2billion to the Health Sector.

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HEALTH

  1. Mr Speaker, Government continues to deliver on the healthcare needs of

our people from an expanded NHIL and allocations from the central budget.

We continue to make significant investment in the infrastructure, equipment

and personnel needs of our health sector. We have vigorously embarked on

the infrastructure to expand access to health care in all parts of the

country. These include:

  1. The 600-bed University of Ghana Teaching Hospital;
  2. The 420-bed Ridge Hospital Expansion Project;

iii. The 500-bed Military Hospital Project in Kumasi;

  1. The Second phase of the Tamale Teaching Hospital after the

completion of the 400-bed first phase of the project;

  1. The Police Hospital Project;
  2. The Ashanti Regional Hospital at Sewua-Kumasi; and
  3. The Upper West Regional Hospital
  4. Among others, we have also completed the following projects in our quest

to expand access to health care:

  1. Nineteen out of the twenty-one Health Centres at Locations that

include the following;

Amasaman, Doffor, Pokukrom, New Jejeti, Paakro, Gwollu, Funsi,

Sang, Buipe, Manso Nkwanta, Abuakwa, Mase, Sosokpe, Kedzi,

Adamso, Kayoro, Timonde, Bonsu Nkwanta and Dadieso

  1. Three District Hospitals under the same project have also been

completed at Edjumako, Essam, Zabzugu District Hospitals.

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iii. Construction of eye care centre at Komfo Anokye Teaching Hospital.

  1. Mr Speaker, under the National Hospital Equipment Replacement

Programme, government is providing modern hospital equipment to

enhance healthcare delivery. This initiative has ensured the construction

and equipping of New MRI and CT Scan Centres in the Komfo Anokye and

Tamale Teaching Hospitals.

  1. The Korle Bu Teaching Hospital alone benefited from a $57 Million project to

replace and rehabilitate obsolete equipment and theatres. Twelve operating

theatres for Pediatric and General Surgery (which had been closed for

nearly eight years), the Neo-natal Intensive care Unit and the Baby unit

were refurbished.

  1. Korle Bu also took delivery of Mammography, MRI, CT Scan, X-ray machines

and Oxygen plants.Under the same scheme, procurement and installation of

new X-Ray Equipment in 40 selected District Hospitals took place

nationwide; these include,

  1. Mr Speaker, the Community Health Planning and Services (CHPS) concept

remains the Ministry’s main strategy of bring basic helath services to the

community level. In this regard, a total of 724 CHPS zones were made

functional.

  1. Mr Speaker, family planning coverage increased from 13.9 per cent in 2013

to 16.6 per cent as at September 2014 whilst we increased our ambulance

stations to 126 by establishing new ambulance stations at Kasoa, Atomic

Junction in Accra, Tarkwa and Axim. A total of 14,322 cases were recorded,

comprising 8,232 inter-hospital transfers and 6,090 emergencies.

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  1. An evaluation conducted by the WHO this year and their findings indicate

that Ghana has successfully eradicated Guinea Worm disease, pending

certification.

EDUCATION

  1. Mr. Speaker, President John Mahama’s agenda for quality, accessible,

equitable and affordable education remains on course. At the second cycle

level, the pledge of the President during the 2014 State of the Nation

Address to this august house to implement progressively free Secondary

Education beginning 2015 is ready to take off. The agreed roadmap

beginning with day students has been adequately catered for in this budget.

  1. Mr. Speaker, President Mahama’s pledge to construct additional 200 Senior

High Schools by 2016 is very much on course. So far the first 50 are at

various stages of completion. This budget has also made provision for the

next 50. Under the World Bank supported Secondary Education

Improvement Project (SEIP), an additional 23 new Senior High Schools are

being constructed. Therefore This means therefore that so far funding has

been secured for 123 out of the promised 200 Senior High Schools. We

remain confident of meeting our target by 2016 in line with our prudent

fiscal policy that all major capital projects must be fully funded before they

are started.

  1. Mr. Speaker, still under the SEIP, 125 existing Senior High Schools are

receiving facilities upgrade, 125 Heads are receiving Leadership and

Management training, an additional 6,500 Science, Mathematics and ICT

Teachers are receiving capacity building whiles scholarships are being

provided for 10,000 students for their entire 3 year Senior High School

duration for which 60% are girls.

  1. Mr. Speaker, Cabinet has approved the draft bill for the public university to

be sited in the Eastern Region in line with our pledge to establish at least

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one public university in each of our 10 regions. It is gladdening to note that

this particular session of Parliament will be considering the Eastern

University Bill. I am happy in this light to report tremendous progress in the

new public universities in the Brong Ahafo and Volta Regions which this

august House assisted us to establish.

  1. Mr. Speaker, work is ongoing on the conversion of our Polytechnics into

Technical Universities. A roadmap has been agreed by cabinet and this

house will soon consider amendments to the Acts establishing the

Polytechnics.

  1. Mr. Speaker, in line with efforts to rebrand technical and vocational

education to make it more attractive to the youth and also to support

President Mahama’s Made in Ghana Initiative, the Skills Development Fund

(SDF) intervention under the Council for Technical and Vocational Education

and Training (COTVET) has so far disbursed GHs 136.5 million to 510

grantees.

  1. Mr. Speaker, at the basic level, as we approach the 2015 target year for the

Millennium Development Goals, we can all be pleased that Ghana has

achieved MDG 2 on universal basic education. In order to avoid

complacency and in line with our own FCUBE programme, Government will

continue to implement interventions aimed at retaining our children in

school such as eliminating schools under trees, free uniforms, free text

books, capitation grant, expanded school feeding programme, BECE

subsidies and redeployment of teachers. We will continue to carry out

effective redeployment of teachers and train more teachers in line with our

new reforms in the sector that led to an increase of teacher trainees in the

Colleges of Education by an unprecedented 63%. Teacher absenteeism

which has been brought down from 27% to 11% will be brought down

further by the new management practices we have embarked upon.

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CHILD RIGHTS PROMOTION, PROTECTION AND DEVELOPMENT

PROGRAMME

  1. Mr Speaker, in our effort to ensure that the weak and vulnerable are

provided for, government, provided shelter and care for 800 orphans and

trained 1,406 caregivers in all 10 regions, assisted in reuniting 983 children

in orphanages with their families and closed down 22 orphanages that did

not meet the requirements. The Ministry also placed moratorium on child

adoption in Ghana to address current challenges and protect adopted

children and their foster parents.

Social Development Programme

  1. As part of efforts to tackle extreme poverty and achieve the United Nations

Millennium Development Goal, the Ministry provided cash grants to a total of

77,000 households in 100 Districts in all 10 Regions under the Livelihood

Empowerment Against Poverty (LEAP) Programme. Out of the total

payment, 7,616 beneficiary households in 9 districts and 7 regions received

electronic payments of the LEAP Grants in 3 piloted ecological zones for the

purposes of ensuring timely and efficient transfer of cash to beneficiaries.

  1. The Ministry also developed M&E Framework and Manuals for the LEAP to

track progress, identify gaps and design timely interventions for

implementation.

  1. The Ministry will also expand the implementation of the LEAP to cover over

200,000 households’ beneficiaries to improve their socio-economic status

and ensure the survival and development of children as well as to promote

the welfare of the vulnerable and excluded in society.

FOOD SECURITY AND AGRICULTURE DEVELOPMENT

  1. Mr. Speaker, the objective of Government under the food security and

emergency preparedness programme is to reduce food and nutrition

insecurity through modernized agriculture, management of national

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strategic stocks for emergencies and the establishment of effective early

warning systems.

  1. To this end, 40 hectares of primary materials of cassava and 5 hectares of

yam mini-set technology of newly released varieties were established out of

a target of 160 hectares. Even though the area cultivated fell below the

target, it led to a marginal increase in yield from 16.78mt/ha to 16.83mt/ha

and 18.27mt/ha to 19.13mt/ha for yam and cassava respectively. The

remaining 115 hectares of cassava and yam planting materials will be

established in 2015 and expected to increase yield as well as enhance farm

level productivity from 19.13mt/ha to 20.01mt/ha for cassava and

16.83mt/ha to 17.21mt/ha for yam.

  1. Mr. Speaker, to reduce post-harvest losses, government is collaborating with

the private sector increased the national food buffer stock centres from

seven (7) to ten (10) in 2014. The Ministry facilitated the establishment of

2 new warehouses with a capacity of 100,000mt each. The National Food

Buffer Stock Company (NAFCO) purchased and stored a total of 3,317.40mt

of locally-milled rice which was supplied to the school Feeding Programme.

  1. To improve access to mechanised agriculture services, a total of 89 AMSECs

which consist of tractors and implements, maize shellers and water pumps

have been established in 62 Metropolitan, Municipal and District Assemblies

(MMDAs). This has enabled 267,500 small holder farmers access

mechanised services on time which has resulted in the cultivation of about

107,000ha of maize, rice and soya beans this year.

  1. In 2015 additional 41 AMSECs is targeted to be established bringing the

total to 130. The Ministry will also carry out training programmes to improve

technical skills and competence of managers and machine operators to

avert premature and frequent break down of these equipment.

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  1. Mr. Speaker, the Ministry produced and exported 1.84 million and 700,000

doses of ND1-2 to Niger and Gambia respectively. Furthermore, a

Memorandum of Understanding (MoU) has been signed with Niger to supply

2 million doses of the same vaccine by the end of the year. Due to the

increased demand for the ND1-2 vaccines in the sub-region, the Ministry

plans to produce 32 million doses for both domestic and international

markets in 2015.

FISHERIES

  1. Mr. Speaker, to enforce Fisheries Laws and Regulations on Illegal,

Unreported and Unregulated (IUU) fishing, 79 fishing vessels were fitted

with Vessel Monitoring Systems (VMS). Since July this year, the VMS aided

the arrest of 14 vessels that were prosecuted for their involvement in IUU

fishing activities. In addition, over 1000 illegal fishing nets and 300

generators and accessories were confiscated by the Fisheries Enforcement

Unit. The Ministry will continue to undertake these monitoring activities to

reduce the incidence of illegal fishing activities on our waters. (Revision of

fisheries law)

TRADE AND INDUSTRY – Increasing trade

  1. Mr. Speaker, the Export Development and Agricultural Investment Fund

(EDAIF) Act has been reviewed to increase its resource envelop to support

manufacturing, particularly agro-processing and start-ups. An amount of

GHS154.7 million was approved to support fifty-five (55) projects, of which

GHS69.5 million was allocated to eighteen (18) companies under the Export

Credit and Projects Facility for manufacturing of export products including

pharmaceuticals, wood processing, food processing, domestic plastic wares,

alcoholic beverages and pineapples.

  1. A total of GHS32.8 million was approved under the Agriculture, Agro-

Processing Development and Credit Facility for fifteen (15) companies to

boost the production and or processing of various agriculture products for

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both local and export markets, and the remaining GHS52.3 million was

approved for twenty-two (22) projects of MMDAs, trade associations and

farmer based organizations under the Export Development and Promotion

Facility. In 2015, EDAIF will establish its presence in all the 10 regions to

ensure that it supports businesses in all parts of the country.

  1. Mr. Speaker, the Ministry in collaboration with the Ghana Export Promotion

Authority (GEPA) and other trade-related institutions carried out the

inception phase activities including, sensitization of focal persons of the

implementing agencies, establishment of Project Management and

Coordinating Unit (PCMU), preparation of work-plans, and a monitoring and

evaluation matrix towards full implementation of the National Export

Strategy (NES). The Ministry will in 2015 commence full implementation of

the strategy towards the realization of the USD 3.70 billion target from

NTEs. The pre-inspection conformity assessment program announced by the

Ghana Standards Authority will be put on hold pending further consultations

with stakeholders.

ENERGY

  1. Mr. Speaker, I started this presentation with a strong focus on power in the

context of the hopeful prospects for the economy. We recognise that

adequate supply of energy remains a major challenge for us. This year, the

cost of doing business in Ghana has gone up because of disruptions in

electricity supply. Government recognizes that energy remains an absolutely

critical requirement for sustainable economic growth and development.

Consumers in general have had to live with the discomfort of the power

outages and its attendant effect on the prices of goods and services.

  1. We take a serious view of this and Government therefore is strengthened in

its resolve to address the energy challenges holistically and provide relief to

both businesses and consumers. In this regard, Government is continuing

with the medium term objective of increasing power generation capacity.

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  1. Work on Tico expansion (110MW) is 90 percent complete and also expected

to commence operations by early next year. Feasibility studies and

Environmental and Social Impact Assessment are completed on the 12 MW

Solar plant in the Upper West Region.

INFRASTRUCTURE SECTOR

THE WATER SUB-SECTOR

  1. To achieve government’s target of delivering 76 percent of urban water

coverage by 2015, government has put in place a number of projects.

  1. Currently, the national urban water demand stands at 257 MGD. However,

the demand in Greater Accra Metropolitan Area (GAMA) alone is 150 MGD

which is about 60% of the national water demand.

  1. The major water treatment plants serving GAMA are Kpong and Weija which

have a total production capacity of 93 MGD. Currently, Weija produces 53

MGD while Kpong generates 40 MGD leaving a gap or deficit of 57 MGD.

  1. To address the deficit, various interventions are being made to add a total

of 65.3MGD into the GAMA water supply system. This will give us excess of

8.3 MGD.

  1. The interventions are as follows:
  2. The 3.3 MGD water treatment plant at Kpong (Siemens) is completed

and has been producing water since July, 2014. Dodowa, Ningo,

Prampram and the Akuapem Ridge area;

  1. Completion of the 9 MGD ATMA Rural Water Supply Project by

December, 2014;

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iii. Completion of the 40 MGD water treatment plant at Kpong by the end

of December, 2014; and

  1. Completion of the 13MGD sea water desalination plant at Teshie-

Nungua by the end of December, 2014.

  1. By the completion of these interventions 65.3 MGD will be added to the

water supply to GAMA which will bridge the supply-demand gap.

  1. In view of the ever increasing population in GAMA, additional projects have

been planned to ensure the reliability and sustainability of the water supply

to from 2015 to the year 2030. These include: Kpong Water Supply

Expansion Phase 2, Weija Water Supply Expansion and Asutsuare Water

Supply Projects.

  1. Here are details of the interventions to address the gap:
  2. Kpong Water Supply Expansion Project

The Kpong Water Supply Expansion Project is being carried out at an

estimated cost of US$273 million with funding from the Government of

Ghana and China Exim Bank. The project is envisaged to increase

water supply to GAMA by 40 MGD. Water will be supplied from Kpong

through Dodowa to the existing Terminal Reservoir at Okponglo and

newly constructed ones at Madina and Boi.

This is to improve water supply to areas including Adenta, Madina,

Kwabenya, Ashongmang, North, East and West Legon, Ashaley Botwe,

Haatso, Boi, Asofaa, Dome and many others. The project which is

94% complete is ahead of schedule and is expected to be completed

by the end of December, 2014 instead of the contractual completion

date of June, 2015.

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  1. Kpong Intake Rehabilitation Project

The Kpong Intake expansion project carried out to improve efficiency

by replacing all the existing pumps is complete.

As part of the project, a 3.3 MGD treatment plant was built to increase

water supply to Accra-Tema Metropolitan Area (ATMA Rural).

Communities to benefit from the project include; Dodowa, Ningo,

Prampram and the Akuapem Ridge. The project which is at the cost of

€16.5 million commenced production of water in July this year.

iii. Accra – Tema Metropolitan Area (ATMA Rural) Water Supply

Project

The major components of this project are:

? A new water treatment plant to produce an additional 9 MGD

? 4 new reservoirs at Adukrom, Dodowa, Atimpoku and Akorley.

? 92km of transmission pipelines.

This will improve water supply to the following areas: Michel Camp,

Afienya, Kpone, Prampram, Old Ningo, New Ningo, Ayitepa, Kponguno,

Omankope, Kodiabe, Doyumu, Agomeda, Adumanya, Menyum,

Dodowa, Odese, Nganompian, Bawalashie, Oyibi, Amanfro, Latehman,

Ashiyie, Fafraha, Abominya, Amanfro, Ayikuma, Abokobi, Pantang and

Ayi Mensah (all in the Greater Accra Region) and Akorley, Abonse,

Aperede, Adukrom, Awukugua, Dawu, Abiriw, Akropong, Mamfe,

Amanokrom, Tutu, Obosomase, Ahwerase, Aburi, Gyankama, Peduase,

Kitase, Berekuso, Frankadua, Apeguso, Aboasa, Kwanyako, Juapong,

Ogoli, Akwamufie, Mangoasi, Atimpoku, New Senchi, Akrade, Senchi,

Domeabra, Lolonyo, Agomanya, Manya Kpowonu, Odumasi, Menekpo,

Sra, Sawe and Ogome (in the Eastern Region).

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The project which costs €56.5 million is 98% complete and will serve

250,000 inhabitants.

  1. Teshie-Nungua Desalination Water Project

The Teshie-Nungua Desalination Water Project is a 13 MGD treatment

plant planned to serve about 500,000 people in the project area. It is

being implemented through a Build, Operate, Own and Transfer

(BOOT) mechanism. The project involves the desalination of sea water

and aims at improving water delivery to the following areas; Teshie,

Nungua, the Teshie Military barracks, Batsoona, Sakumono and parts

of La-Dadekotopon. The project is 92 percent complete and is

expected to be completed in November, 2014.

ROADS AND HIGHWAYS

  1. Routine maintenance was undertaken on 13,459km of the trunk road

network; 7,269km on the feeder road network; and 3,096km on the urban

road network representing 108, 32 and 85 percent respectively of the

approved programme. Periodic maintenance activities, comprising regravelling,

spot improvement and resealing works has been carried out on

76km, 776km and 645km on the trunk, feeder and urban road networks

respectively.

  1. In 2015, the Ministry will undertake routine maintenance on 11,199km,

22,500km and 8,200km of trunk, feeder and urban road networks

respectively. In addition, periodic maintenance activities including Spot

Improvement, Re-gravelling, Resealing, Asphaltic Overlay, Partial

Reconstruction, Maintenance of Bridges will be undertaken on 6,675km,

1,000km, 940km of trunk, feeder and urban roads respectively. Minor

rehabilitation and improvement works will also be undertaken on 900km of

trunk, 350km of feeder and 150km of urban roads.

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  1. The Ministry has procured three (3) number 50-Seater High Speed

Passenger Ferries, to improve passenger and cargo services along the Volta

Lake. One has been delivered to Akosombo and the other two are yet to be

cleared at the Tema port. In addition, one Modular Passenger/Freight Vessel

will be delivered by December.

  1. Procurement of 200 new buses to increase the number of existing fleet will

commence in 2015. This will help to increase the bus schedules on the

existing 324 routes and re-align operations on Intra-City as well as Rural-

Urban services and improve mass transport in the country.

  1. Mr. Speaker, Ghana ranked 67th out of a total of 189 countries in the 2014

Global ease-of-doing business report. It is our goal to improve upon this

especially in relation to port management. In this regard, Cabinet has

decided to set up a panel comprising the Ministries of Finance, Trade and

Industry and Transport to work out a synergy for a one-stop window to

ease clearing of goods at the Ports and minimize delays in import and

export. As part of the measures the Customs Division of GRA will from

January 2015 work 24 hours, 7 days a week on a shift basis to reduce time

and cost of clearing goods.

  1. With regards to railways, government will undertake front end engineering

design (FEED) of the railway network, particularly, the Western and eastern

rail lines.

  1. The telecommunications sector continued to register impressive growth rate

in subscription with a total subscription for both cellular and fixed lines

registering 29,101,767 and 27,803,710, representing 4.7 percent and 50.85

percent respectively.

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ENSURING PUBLIC SAFETY

Improving Law and Order

  1. Mr. Speaker, the Ghana Police Service expanded the Police Visibility and

Accessibility Programme to all regional capitals and selected urban areas

leading to a reduction in major crimes.

  1. In 2015, the Service in collaboration with other security agencies will

expand the intelligence-led policing through the informant system,

apprehend and prosecute offenders and will expand the capacity of the

Police Hospital to provide quality health service. The GPS will intensify the

visibility project and day and night patrols across the country.

Improving good governance through institutional Strengthening

  1. One of the significant issues discussed in Senchi was the recognition that

the country has experienced a weakening of its regulatory institutions which

has led to a sense of helplessness in certain key sectors of our economy. At

Senchi, the consensus was that, these regulatory institutions should be

strengthened to deliver their core mandate of enforcing standards in service

delivery.

  1. In 2015, regulatory institutions like the factory inspectorate, town and

country planning, birth and death registry, tourism authority, standard

authority, food and drugs authority and health inspectorate departments of

district assemblies will embark on a review of their existing standards and

rules, publish them and undertake monitoring visits to ensure compliance by

service providers. They will be supported to strengthen their capacity to

undertake these activities. We believe that Ghanaians should be treated

with respect and receive the quality of services that they deserve and pay

for.

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SANITATION AND WASTE MANAGEMENT

  1. Mr. Speaker, development and operation of compost and recycling plants

present an efficient and effective way of managing waste for the future.

Compost and recycling plants offer MMDAs a feasible and cost effective

alternative to landfilling. Solid waste helps meet the growing demand for

organic fertilizer and contribute to saving the environment by an efficient

method of disposing municipal solid waste. Compost and recycling plants

also package and process recyclable products like plastic, pellets and scrap

metal for industries. Over the medium term, government will encourage

MMDAs to partner the private sector to deliver compost and recycling plants

in some selected regions of the country.

REDUCING WASTE AND IMPROVING EFFICIENCY IN PUBLIC FINANCIAL

MANAGEMENT

Good Governance, Transparency and Anti- Corruption

  1. In 2015, the Government will implement initiatives to enforce the

recommendations of the Auditor-General’s Report. This will involve

sanctioning and possible prosecution of persons indicted by the report.

  1. Government in conjunction with the Commission on Human Rights and

Administrative Justice (CHRAJ) and other anti-corruption agencies will begin

implementation of the national Anti-corruption Action Plan (NACAP).

  1. In addition, government will strictly enforce the sanctions regime on payroll

fraud and all other financial misconduct and indiscipline as outlined in

Section 8 in the Financial Administration Regulation.

PUBLIC FINANCIAL MANAGEMENT (PFM) REFORMS

  1. Mr. Speaker, a pillar of our effort to build and enhance the capacity of our

institutions and processes, is the ongoing reforms in Public Financial

Management (PFM). To facilitate a holistic approach to the implementation

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of our PFM reforms, a draft PFM strategy has been developed. This will be

completed and implemented in 2015. In the meantime our current flagship

programme, the Ghana Integrated Financial Management System, (GIFMIS)

is ongoing. To sustain its implementation we have started to negotiate

GIFMIS II financing with the World Bank and other DPs.

  1. The key components and goals under the (GIFMIS) and Ghana Revenue

Authority (GRA) reform projects include increasing efficiency in processing

budget and financial accounting transactions; improvements in payroll

management; establishment of a Human Resource Information

Management system (HRMIS); improved domestic revenue mobilization

under the GRA reforms; and a comprehensive review of all the revenue and

expenditure laws.

  1. GIFMIS Budget Systems – the first phase of the project started in January

this year and I am pleased to inform the House that it was completed on

time and on budget. Indeed it was used to prepare the detailed 2015

Estimates that we will present to the various Committees of the House.

When fully deployed and integrated with the financial accounting system,

the nation will benefit from better controls such as enforcing budget and

cash ceilings as well as analysing variances between estimates and actual

revenues and expenditures.

  1. Programme-Based Budgeting (PBB): the 2014 Budget marked the first time

that we shifted the basis for allocating funds, and the preparation of MDA

budgets and estimates from “activities” (e.g., travel and per diem) to

“programs” (e.g., win the African Cup of Nations). The benefit is obvious: it

will enable heads of institutions and units within an organization to set

targets that relate to more measurable objectives and goals. As Honourable

Members will notice, this approach has reflected in a more compact and

concise Budget Document due to the focus on programmes and not

activities and Cost-Centres.

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  1. I am pleased to note that as part of the sensitization program, MOF staff

had the privilege of making a presentation on the PBB to this august House

and specifically to some of the select committees.

  1. Mr Speaker we will undertake a comprehensive review in 2015 to simplify

budget execution process and ensure effective budget and commitment

controls. In the meantime new expenditure management rules will be

developed and the following measures implemented,

  1. Contracts and Public Investment Management: The contracts database

we have been establishing since 2011 will now have an electronic link

to budget allocations whilst the cash management and fixed asset

modules within GIFMIS (Financial Accounting) System will be deployed.

  1. Under the Financial Administration Act (FAA), all institutions on

government budget are required to apply the GIFMIS system by

interface or integration. We will pursue this goal vigorously under

GIFMIS Phase II for all MDAs, MMDAs and subvented organizations—as

bases for improving budget outcomes and preparing the Public

Accounts that are eventually submitted to the House.

iii. Upgrade of the Payroll: In 2013, the Payroll upgrade under GIFMIS

was fast-tracked to help resolve many issues that were impeding the

smooth implementation of the Single-Spine Salary Scheme (SSSS). This

will be complemented with the HRMIS system and explore a continuing

active role for the private sector. It is our expectation that this will

improve effective payroll administration, including recruitment,

transfers, promotion, and termination of staff from the civil and public

services. It will also facilitate audits and the application of sanctions

against malfeasance.

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  1. On payroll management, we will ensure Full implementation of the

Electronic Salary Payment Voucher (ESPV) System and conduct

frequent payroll audits; and

  1. Use of Electronic Warrants: At the moment, the majority of MDAs have

replaced the manual warrants with electronic application of

expenditures. During 2015, the use of electronic warrants will be

extended to all recurrent and capital expenditures. The second

measure will include the use of warrants for all internally-generated

funds (IGFs) to ensure proper accounting and application of funds. In

connection with that, there will be no central processing and bulk

release of funds to all MDAs

  1. This is a major step that will complement the use of electronic

warrants to process IGF expenses. Furthermore, the CAGD has been

directed to collaborate with all banks secure electronic access to the

accounts of ALL government agencies, under the GIFMIS and BOG

systems Treasury Single Account initiative. This latter initiative will be

tied with the analysis that CAGD and the Debt Management Unit uses

to conduct their treasury market activities.

  1. Coding and classification: Mr. Speaker, in the 2011 Budget, we launched a

very important element of our PFM reforms, to make MDAs and MMDAs

adopt a uniform way of classifying the GSDA, revenues, expenditures,

functions and institutions in Budget, Estimates, and Public Accounts. The

coding and classification systems that we are adopting will be consistent

with international standards under the IMF

  1. The main benefit is that the Controller and Accountant-General’s

Department (CAGD) and all public sector bodies that are not classified as

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SOEs or government business entities (GBEs) will use the same basis or

classification to present their financial accounting records to Parliament.

  1. Accounting Standards: Mr. Speaker, Section 186 of the FAR requires that

CAGD and all public sector institutions prepare their accounting records on

accrual basis. It has been difficult to comply with this requirement and,

therefore, the ritual qualification of the accounts presented to PAC by the

Attorney-General.

  1. Two events will result in a gradual shift towards achieving this goal of

shifting the basis for public sector budgeting and accounts to an Accrual or

Commitment Basis. First, we are gradually incorporating modules such as

the contract database, accounts payable, accounts receivable and fixed

asset management in the GIFMIS reforms. Secondly, I had the privilege to

launch the adoption of the International IPSAS and modified Accrual

Accounting

  1. The implementation of the GIFMIS will be deepened through the completion

of the financial accounting and budget modules to improve efficiency and

effectiveness in expenditure management and commitment control.

Specifically The budget preparation module will be expanded to introduce

systems to improve the budget estimation process, reduce waste and check

fraud. The implementation of the Human Resource Management

Information System will be rolled out to all MDAs by 2017 to help with the

management of public sector workers.

  1. Payroll management measures such as payroll audits, electronic salary

payment voucher (e-SPV) and e-Pay slips will be intensified to reduce the

incidence of ‘’Ghost” workers on government payroll.

  1. The GRA revenue modernization programme will be deepened to improve

efficiency and enhance revenue collection through measures such as:

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  1. Adoption of self-assessment for all tax payers to enhance compliance

in tax payment;

  1. Implementation of the TRIPS (Total revenue Integrated Processing

System) tax administration software to automate the domestic tax

revenue division, integrate with the customs system and provide

management information for decision making; and

iii. Continuing integration of VAT and income tax in all domestic tax offices

as well as segmentation those offices as large, medium and small

offices..

  1. Ports will be allowed to operate on 24/7 hour basis to boost economic

activity and revenue mobilization.

  1. These will be accompanied with their respective regulations and will

harmonize all the financial laws in the country including related to SOEs,

JVCs and MMDAs as the first step towards general government budgeting,

accounting and reporting. It will also provide guidelines on contract,

procurements and commitments of government.

Improving Efficiency in the Management of Vehicles and Fuel by

Public Institutions

  1. Mr. Speaker, inefficiencies in the procurement and use of vehicles and fuel

by public institutions has been identified as one of the causes of waste and

abuse in the use of national resources.

  1. In 2014, Government started a process to re-register government vehicles

in an effort to improve their management in the delivery of government

programmes.

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  1. In 2015, electronic solutions will be used to rationalize the procurement and

use of fuel for public institutions. This solution will ensure among others

that fuel procured by government is used only in designated vehicles. Full

accounting for all fuel purchases will also be ensured. This will be done in

conjunction with the on-going vehicle re-registration exercise.

POLICY INITIATIVES

  1. Mr. Speaker, a number of policy initiatives will be pursued in 2015 to

broadly address the prospects for the near term to enable government

deliver on its transformational agenda. These include existing and new

initiatives. Specifically, the areas to be covered will include initiatives in the

following Strategic areas, Energy, Tax Policy, Structural Measures, New

Debt Management, Export-Led Development, and Community Day SHS that

leads progressively to Free SHS.

COMPLETION OF WESTERN CORRIDOR GAS INFRASTRUCTURE

PROJECT

  1. Mr. Speaker, I am pleased to announce that the Western Corridor Gas

Infrastructure Project has now been successfully tied-in to the the FPSO

Kwame Nkrumah.

  1. Technical activities to facilitate the phased introduction of raw natural gas

commenced on November 10, 2014. Over the next few weeks, the full

commissioning of the gas processing facilities using the base stock gas will

allow for the production and full supply of up to 150 million standard cubic

feet of lean gas per day to the Volta River Authority at its Aboadze thermal

power energy needs.

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  1. We also expect to produce various natural gas liquids including over 500

metric tons of liquefied petroleum gas LPG per day to meet some of our

energy needs.

  1. Mr. Speaker, this milestone of bringing gas on-stream will provide better

power generation flexibility for our country. Indeed, the new Gas

infrastructure will position the nation to make significant savings over crude

oil imports for power generation.

  1. We also look forward to the future expansion of the facilities to receive gas

from the upcoming Tweneboa-Enyemra-Ntome (TEN) and Sankofa fields.

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TAX POLICY INITIATIVES

Sliding Scale Excise Duty

Mr. Speaker, in November 2012, government introduced a sliding scale

excise duty on beer and malt. This was to provide an incentive for brewery

companies which use local raw materials as substitutes for their imported

raw materials. The object of this local content policy is to increase

employment opportunities, reduce our import bill, as well as increase capital

investment and acquisition of new technology. Subsequently, a four tier

excise regime was introduced. In 2015, government will review the policy to

ensure greater efficiency and compliance by the beneficiaries. In the

process, GRA will introduce appropriate guidelines and make

recommendations for improvement.

Excise Duty on Tobacco

  1. Mr. Speaker, Ghana’s excise tax as a percentage of cigarette prices is one of

the lowest in the region. It has been estimated that the excise tax as a

percentage of retail price is 14 percent while the average for Africa is 33

percent. It has also been established that in order to reduce the

consumption of tobacco and its related health hazards, excise tax should be

70 percent of the retail price. In pursuance of these goals the excise duty

rate will be increased from 150 percent to 175 percent.

Tax Identification Number (TIN)

  1. Mr. Speaker, in 2014, the GRA made it a must for all taxpayers to acquire

TIN before transacting business at the various ports. Tax payers are also

required to declare what tax office number they pay their taxes to customs

authorities. In conjunction with the National Identification Authority (NIA),

the requirement of the TIN will be extended to other sectors to facilitate the

identification of eligible taxpayers. Again, to ensure that the status of

persons on the Taxpayer Register is accurate, they will be required to

validate their data every two years.

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Amendment of National Health Insurance (NHIS) Act

  1. Mr. Speaker, after ten years of implementing of the National Health

Insurance Scheme, with the passage of the VAT Act 2013, (Act 870) to

include fee based financial services and real estates in taxable activities, the

National Health Insurance Act will be amended to conform to the new

provisions. This will generate additional resources for the scheme.

Support to Local Industries

  1. Mr. Speaker, as part of its policy to support local industries, Government, in

the 2014 Budget removed import duties and VAT on raw materials used for

locally produced exercise and text books under the supervision of Ministry of

Education and HIV/AIDS drugs under the supervision of the Ministry of

Health. In addition to these measures, Government in 2015 proposes to

remove VAT on specified locally produced pharmaceuticals and some of the

raw materials used for the production of these pharmaceuticals. The

exemption policy will be based on VAT on a select list of special essential

medicines not manufactured in Ghana and approved by the Minister of

Health. This will ensure neutrality and reduce the cost of pharmaceuticals

sold in Ghana and make them more affordable to Ghanaians.

  1. Government will also remove import duty and VAT on inputs for the

production of machetes and also the production of exercise books and

textbooks. This will benefit both our farmers and the printing industry.

  1. Mobile phone penetration is high in Ghana. However smartphones form only

15% of this penetration. Communication is shifting from voice to data and

mobile data is projected to grow 6.3 times between 2013 and 2018. It is

being proposed that in order to increase smart phone penetration, and in

line with Government’s policy of bridging the digital divide within the

country, import duties on smartphones will be removed. It is expected that

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the increase in smartphone penetration will increase revenue from

Communication Service Tax, VAT and corporate taxes.

Review of Exemptions

  1. Mr. Speaker, government recognizes the role that tax incentives play in

creating an enabling investment climate. Ghana still needs investments in

critical areas of the economy. However it is necessary to reduce abuses and

the granting of excessive exemptions.

  1. The Free Zones Act will be reviewed in 2015 to enhance the relevance of

activities in the sector so that greater emphasis is placed on manufacturing

and value addition. Additionally, the corporate tax rate of companies after

the enjoyment of the ten years tax holiday will be increased from 8 percent

to 15 percent.

  1. In 2015, government will abolish the use of the VAT Relief Purchase Order

(VRPO) in granting of relief. The Refund system will be beefed up to pay

refunds when the request are duly vetted and certified. Tax exemptions

granted in loan agreements will also be reviewed to reduce the scope of

exemption granted and the use of special permit will be drastically reduced.

The terms of draft Agreements must refer to the application of tax treaties,

where necessary.

  1. A more efficient refund system will be put in place to cover duty drawback,

VAT refund and corporate tax overpayments. The current VAT Refund

Account, into which 5 percent of VAT revenue is paid, will be replaced with

a General Refund Account into which up to 5 percent of GRA collection will

be paid for tax and duty refunds. The General Refund Account will be

audited annually and any balance standing in the account at the close of the

financial year, will be transferred into the Consolidated Fund.

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  1. Mr. Speaker, the upfront exemptions will be replaced by Tax Credit System

for entities benefiting from exemptions. Under Tax Credit System, exempted

entities will pay all import duties and taxes in full and apply for a Tax Credit

Note which will be used to offset future tax liabilities.

Compliance

  1. In 2014, the GRA initiated a taxpayer compliance monitoring measure which

involved the use of tax payer and third-party data to match taxpayers’

declaration in order to ascertain their compliance levels. This measure is

designed to improve Tax Payer Compliance using information reported to

the GRA by tax payers and a range of third parties. The exercise started first

with the use of data on importation from the GCMS and was subsequently

extended to GIFMIS data covering payments made to government’s

suppliers.

  1. Against the backdrop of the modest gains made, the GRA will scale up the

project in 2015, with a view to making it a permanent and a routine

compliance monitoring tool. In this regard, Customs procedures for the

clearance of goods at the Ports are being reviewed to include the

requirement for importers to indicate their TIN numbers and which domestic

tax offices they pay taxes.

  1. Also, the GRA will interface directly with the GIFMIS infrastructure so as to

acquire data in real time for the exercise. GIFMIS infrastructure can

subsequently be used to validate Taxpayer Identification Numbers (TIN).

STRUCTURAL MEASURES

Fiscal Rules

  1. Mr. Speaker, government has been reviewing all the tax and financial laws

and regulations currently in operation in the country to ensure that they

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boost revenue, enhance fiscal performance, and enforce sanctions for noncompliance.

  1. In this respect, the Ministry of Finance worked with Parliament to pass the

VAT and Excise Bills. Currently, the Customs Bill is before this august House

and the Income Tax and Revenue Administration Bills would be tabled soon.

The Ministry will, in the medium term, submit to Cabinet and subsequently

to Parliament, a new Loans Bill and a Financial Responsibility Bill which will

contain comprehensive provisions on budgeting and integrate the Financial

Administration Act and Financial Administration Regulation.

Enhancing Flexibility in the Budget

  1. Mr. Speaker, the national budget is increasingly becoming inflexible to

manage as well as to accommodate shocks and changes in government

priorities. These are mainly due to the earmarking of a huge component of

the budgetary resources as statutory transfers in addition to existing

statutory liabilities, such as wages and salaries, amortisation, and interest

payments.

  1. Most of the expenditures for which these transfers are made invariably have

to be funded from the Consolidated Fund, causing duplication of efforts.

Furthermore, as a result of these inflexibilities, during downturns almost all

the discretionary expenditures which are predominantly in the MDAs budget

are funded by loans from domestic and foreign sources.

  1. Mr. Speaker, in the medium term, government will propose measures to

realign expenditures under the Statutory Funds hitherto being catered for

under the Consolidated Fund. Starting with the 2015 Budget and as a

transitional arrangement, government will enhance the administrative

process for aligning statutory fund expenditures to national policies and

priorities.

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Ghana Infrastructure Investment Fund (GIIF)

  1. Mr. Speaker, thanks to this august House, the GIIF was established by the

Ghana Infrastructure Investment Fund Act, Act 877 of 2014. The Fund is to

mobilise, manage, coordinate and provide financial resources for investment

in the diversified portfolio of infrastructure projects for national

development. The GIIF is to begin effective operations in 2015 after the

announcement Board and Advisory Council Members. An executive search is

underway for the Chief Executive. The World Bank and the AfDB have

pledged their support in setting up the GIIF.

  1. Mr. Speaker, in the interim government will transfer key projects on

government balance sheet that meet the GIIF primary commercial loans

criteria to the Fund to manage. These complimentary escrow and on-lending

project loans including Bui Dam, Gas processing Plant and Pipelines.

Furthermore, funding requirements for self-financing projects being

undertaken with government guaranteed loans will be passed to GIIF. In

addition, counterpart funding for some selected commercial projects will be

provided from the Fund. Projects and loans associated with Special Purpose

Vehicle (SPVs), Joint Ventures and PPP projects will also qualify for funding

under GIIF. As the list shows, most of the projects to be covered by GIIF

will be in the energy, road and transport sectors.

Introduction of Pre-Budget Statement

  1. Mr. Speaker, to facilitate better engagement with the Legislature and

improve participation of the Citizenry in fiscal policy management,

Government will enhance the use of Budget guidelines for MDAs by piloting

a Pre-Budget Statement in 2015. The pre-budget statement will provide the

broad framework as well as parameters which will be the basis of the

budget to be presented to Parliament. It will also signal government policy.

The Ministry of Finance will engage Parliament to work out modalities with

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the view to introducing the Pre-Budget Statement as part of the budget

process.

Debt Management Strategy

  1. Mr. Speaker, Government debt management strategy will continue to focus

on providing a more cost-effective access to the international and domestic

capital markets. It will also support multilateral as well as improvements of

the domestic capital market to meet national development needs.

  1. As you may recall, in 2014, Government tapped the Eurobond market to

obtain long-term funds for debt restructuring, counterpart funding and

financing of capital expenditure. This is in line with the objective of

diversifying sources of funding, extending the tenor of public debt and

reducing the overall cost of borrowing.

  1. In 2015 government will consolidate its policy of using short-term

borrowings primarily for liquidity management purposes and long term

borrowings for capital expenditure. In this regard, government will continue

to work towards extending the yield curve to 10 years.

  1. Key initiatives to consolidate sustainability and efficiency in debt

management are indicated as follows:

Sinking Fund

  1. Mr. Speaker, government will operationalize the Sinking Fund to manage

the orderly redemption of Sovereign Bonds and other debt instruments in

2015 in accordance with sections 88-93 of the Financial Administration

Regulations (2004) L.I. 1802. Under the Sinking fund, Government will set

aside funds to liquidate debt maturing debt.

  1. The experiment we conducted with the cap of the Stabilisation Fund that

Parliament approved, clearly shows that the Sinking Fund can be financed

from the excess over the cap set aside for debt servicing. In this regard we

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are proposing the concept of a moving cap and percentage allocation to

address all the goals of the stabilization Fund-growing the Fund,

contingency and debt service.

On-lending and escrow arrangements

  1. Mr. Speaker, in 2014, Government introduced an on-lending and escrow

account initiative to minimize the impact of loans on the public debt

portfolio with debt service accounts opened at the Bank of Ghana. In this

regard, a number of on-lending agreements have been signed with some

SOEs and MMDAs, to facilitate the recovery of these loans. Government will

continue with the on-lending and escrow arrangements in 2015, as a

permanent feature of our debt strategy. We will tie the policy firmly to

counter-guarantees and standing orders from reputable banks. We propose

to extend the recovery to prices that MDA charge for use of debt financed

projects. The use of these fees as IGFs without setting aside funds for

maintenance and replacement is anomaly that must stop.

Capital Market Development

  1. Mr. Speaker, a well-developed domestic capital market is critical to

Government’s ability to mobilize the necessary funds to support

infrastructure projects. In addition, such markets are necessary for

enhanced financial stability, better integration into the global financial

system, and provide a platform for private sector firms to diversify their

sources of capital by tapping into the domestic capital market.

  1. Mr. Speaker, Government is widening the scope of financing opportunities

through measures such as the issuance of the 7-year domestic bond and

the regular publication of an issuance calendar among others. We will

initiate steps with Bank of Ghana and SEC to float the Government 3-year,

5-year and 7-year bonds on the stock exchange. We shall use the book

building approach in allocating the issue similar to the method we used for

the Eurobond on the international and domestic capital markets.

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Ghana EXIM Bank

  1. Mr. Speaker, the transformation agenda, which has been articulated by His

Excellency the President clearly indicates the need to transform our

economy into an export oriented economy. It is necessary to adopt policies

that tilt our economy predominantly towards exports. To achieve the

desired transformation, Cabinet has approved the creation of a Ghana

Export-Import Bank to lead in the strategic positioning of Ghana as an

export-led economy.

  1. The establishment of the EXIM, will also enable us to take advantage of

international trade initiatives such as African Growth and Opportunity Act

(AGOA) and Economic Partnership Agreement (EPA). The Cabinet approval

includes the use of 50percent of EDAIF funds to set up the bank. Ghana

Exim will be a vehicle for the consolidation of the current export finance

activities of the EDAIF, Eximguaranty Company and Export finance

company.

  1. In this regard, Cabinet also approved the setting up of a Presidential

Committee to implement the scheme.

Export-led Development Strategy

  1. Mr. Speaker, over the years, Ghana has been relying on a few primary

products, especially gold and cocoa and in recent times oil as the main

export commodities. As part of the strategies to boost foreign exchange

earnings, in 2015 and the medium term we will focus on expanding nontraditional

exports from about US$2.3 billion to US$5 billion. The strategy

will be to take advantage of the purchasing power of consumers in the

ECOWAS, BRICS and global market.

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  1. Mr. Speaker, as part of the expanded export-led development strategy,

government will intensify the campaign to promote made-in-Ghana goods

and services.

ENHANCING DOMESTIC PRODUCTION TO REDUCE IMPORTS

  1. Mr. Speaker, in 2013, import of rice, fish, poultry and tomato products was

almost $1 billion. Government will continue with its policy to enhance the

local production of these commodities as follows:

  1. Revamping of the Broiler Programme

Mr. Speaker, this programme is aimed at reducing the importation of

chicken by 40 percent by the end of 2016. This is being implemented

by the Ministry of Food and Agriculture in collaboration with the

Ministry of Trade and Industry and the Ghana National Poultry Farmers

Association. Under this programme, 20 million broilers will be produced

and this will result in 60,000mt of Poultry meat. It is expected that

Ghana will save about US$132 million and reduce poultry import by

38.9 percent.

Mr. Speaker, during the year, government initiated the process of

modernising the mode of grains and tuber trading as announced in the

2014 Budget. Two new markets for the trading of agriculture

commodities were started. A taskforce was set up and the services of a

consultant procured to provide technical advice for the implementation.

  1. Fish Production

Mr. Speaker, government will rationalise the fisheries regulations and

EU issues to enable the country accrue over 500 million dollars in

export earnings in 2015 and beyond. The tuna industry will also be

revamped to increase foreign exchange earnings for Ghana. The export

of other fishery products including smoked fish, tilapia and ornamental

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy”

57

fish will earn over US$100 million US dollars as additional export

revenue for the country.

COMMUNITY DAY AND PROGRESSIVELY FREE SHS

  1. Mr. Speaker, in fulfilment of our promise to construct more Community Day

Senior High Schools, Government began the construction of the first 73

Senior High Schools in as many selected districts across the country. In

2015, the second phase of the construction of the Community Day Senior

High School Project will commence with an additional 50 Schools.

  1. Mr. Speaker, Government is committed to making secondary education

progressively free starting from 2015/2016 academic year. In this regard, in

2015, Government will absorb GES-approved examination, library,

entertainment, SRC, science development, sports, culture, and internet fees

charged to secondary level students. This is expected to benefit about

367,565 day students in the 2015/2016 academic year.

CONCLUSION

  1. Mr. Speaker, I wish to conclude by giving a firm assurance on behalf of

H.E., President Mahama, to this August House and to all Ghanaians, that the

medium term prospects for this country’s economy is bright, and that the

transformational agenda of the NDC government is on course.

  1. In the near term, we will have access to additional oil and gas revenue,

employ risk management tools, smoothen forex flows and increase value

addition through diversification and effective tariff classification and

variation. In addition, government will put in place measures to boost

Ghana’s foreign exchange resources so as to improve its foreign exchange

reserves and maintain exchange rate stability even after the IMF

programme.

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy”

58

  1. We believe that the measures we have outlined in this budget to address

the structural and fiscal weaknesses, will lead to an improved fiscal

situation, strengthened rules for PFM, and create an enabling environment

for increased local production and an expansion of the economy.

  1. Mr. Seaker, I wish to renew government commitment to the people of

Ghana that with this budget,

  1. We will stabilise the economy through measures that are beginning to

bear fruits;

  1. We will introduce new rules and deploy systems to strengthen

expenditure management notably in pay roll management which will

reduce waste and corrupt practices as well as facilitate the application

of sanctions;

iii. We will strengthen state institutions and improve the governance of

this country;

  1. we will build the 50 secondary schools and begin the progressively free

education programme we promised;

  1. We will expand health facilities and complete the over 100 CHPS

compound including those that Ministers are committed to building ;

  1. We will complete a number of roads and water systems we started ;

vii. We will increase the generation capacity of energy to reduce power

outages and complete various ongoing infrastructure projects;

viii. We will provide cash grant to over 150,000 households and over

400,000 individual beneficiaries so that the extremely poor will not go

to bed hungry; and

  1. We will ensure that we increase opportunities for Ghanaians to have a

better life.

THEME: “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy”

59

  1. Mr. Speaker, we are strengthened in our resolve to implement this budget.

However to do this we will need help, help and support from this August

house and the entire people of Ghana. We have not wavered in our

commitment to provide a better Ghana for our people, a commitment that is

bold and pragmatic to acknowledge challenges and plan to resolve them.

Above all, we believe that this budget offers another opportunity for us to

work together to achieve the goals of promising medium term opportunities.

Mr. Speaker, we wish the Black Stars well in today’s match, an “activity”

that will boost the objectives of a “programme” to qualify for the African

Cup of Nations.

  1. Rt. Hon. Speaker, I beg to move.

 

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