Full text: 2017 ‘Asempa’ budget presented by Finance Minister

Finance Minister Ken Ofori-Atta has presented the first budget of the governing New Patriotic Party (NPP) to Parliament, Tuesday at a time when there are high expectations.

Christening it the “Asempa budget,” the Minister itemised five programmes of President Nana Addo Dankwa Akufo-Addo that will be started in 2017.

Below is the full statement presented:

SECTION ONE: INTRODUCTION

1.           Rt. Hon.  Speaker,  Honourable  Members of Parliament,  on the  authority  of President Nana  Addo Dankwa  Akufo-Addo, I beg to move that  this Honourable House approves the Financial  Policy of the  Government of Ghana  for the  year  ending  31st December

2017.

2.           On the  authority  of the  President, and  in accordance with Article 179 of the 1992  Constitution, permit  me to present to this august House, the maiden Budget  of the President of the Republic of Ghana.

3.           This   presentation   is   an   abridged   version   of   the   2017

Budget   Statement  and   I   would   like  to   request  the   Hansard Department   to    capture   the    entire    Budget    Statement   and Economic policy

4.           I   also  submit  before  this  august  House  the   following reports:

·    The   2016   Annual   Report   on   the   Petroleum   Funds,   in

accordance   with   Section   48   of   the    Petroleum   Revenue

Management  Act, 2011 (Act 815), as amended;

·    The 2016  Annual  Debt  Report,  in accordance with Section

72  of  the  Public  Financial  Management  Act,  2016  (Act 921);

and

·    The 2016  Energy Sector Levies Report, in accordance with

Section 6 of the Energy Sector Levies Act, 2015 (Act 899).

5.           Mr.  Speaker,  let  me   first  thank   you  and   the   house  for approving my nomination as Finance Minister. My profound gratitude to  both  sides of  the  isle. Thanks for  the  dry run  of  3 hours 45 minutes; I pray that  I will be let off sooner this time.  Mr Speaker,  I  also  stand here  humbled  by the  President’s  courage and  confidence to elevate me to this very weighty  and  high office of  Finance Minister of  the  Republic  of  Ghana, a  nation   with  a manifest   destiny   for    greatness,   a    nation    with    very   high expectations  for  President  Akufo-Addo’s  government,  a  nation that  is 60 years old, remains a diamond in the rough and therefore needs more  than a shine.

6.           Mr. Speaker, it is at this providential point in our history that I  have   been    given   this  grave   but   exciting   responsibility  to participate in sending Ghana  beyond  aid and  to realise our  birth right  as the  Black Star  of Africa. I, Mr. Speaker,  accept this  role with all the solemnity and reverence that it deserves.

7.           Mr. Speaker, I would like to assure this house as I also did with the  Finance Committee that  I will work  with members with utmost  candour  and   respect. You  are   first  and   foremost  the legislative, the representatives of our people and I have been privileged  to witness the  sacrifices you have  gone  through to be here.  Ayekoo. Secondly, Mr. Speaker, I am  standing in the  rather large  size  shoes of a legacy  of family members such as Dr. JB

Danquah, Mr. William Ofori-Atta, Honourable Amoako-Atta, Dr. Jones Ofori-Atta (my father), President Nana  Addo Dankwa Akufo

-Addo  and  Honourable  Atta  Akyea.    I  have,  Mr. Speaker,  been brought up to respect this house and  I will also like to honour  my forbears. Finally Mr. Speaker, let me  freely admit, that  this battle ahead is  indeed  the  Lord’s  and  I  humbly  confess  before this august house and  the  nation, of my inability to  accomplish this enormous task without  the  help  and  the  leading  of the  Almighty; through Jesus   Christ  we   can   resolve  these  challenges  and establish a righteous and just Society for all.

8.           Mr. Speaker, nine (9) days ago, the President presented the State of the Nation  Address to this august House. His address, in addition  to  presenting  the  state of  the  economy,  also  broadly outlined   the  vision  and   policy  direction  of  his  Government.  A vision  of  hope,  of  jobs  and   wealth   creation,  and   of  a  robust economy that supports a thriving private sector. With this Budget, I  present  to  you  the   policies,  strategies  and   actions  we  will undertake to deliver the President’s vision.

9.           Mr. Speaker, let us acknowledge that  we  have  inherited a challenged economy in which we are all stakeholders  in:

·    considerable  debt  overhang and  rising  interest  payments caused by excessive borrowing;

·    expenditure  overruns and  accumulated  arrears caused  by

excessive sole sourcing, lax  fiscal policies and  weak commitment controls,

·    revenue underperformance caused by leakages, loopholes and tax exemptions;

·    slowdown    in    economic    growth     caused   by    energy challenges  and   a  lack  of  an  enabling  environment  for  the private sector;

·    limited  capital investment, among others, due  to  rigidities from   earmarking  of  revenues  that   severely  limit  the   fiscal space and undermines the prioritisation of government policies; and.

·    urgent  need  to collaborate with our work force  and  build a shared   partnership    to    enhance   training     and     improve productivity

10.         The  country’s debt  stock has reached a level of about 73 percent of GDP at end-December 2016, which  is in excess of the debt  sustainability threshold of 70  percent. This has resulted in high  debt  service costs with  interest payments alone  taking  up nearly    42    percent   of    tax    revenue.   This,    together   with Compensation  of  Employees  and  Statutory Payments,  is  more than  total  domestic revenue, leaving  no  fiscal space for growth enhancing policies/programmes/expenditures.

11.         Total  expenditures  at  end-December  2016  stood at  30.3 percent of GDP against a target of 26.4  percent of GDP, with an outstanding stock of  arrears of  nearly  GH¢7  billion.  This is at variance  with the  Performance Criteria  on  the  non-accumulation of  arrears  for  the   2016   fiscal  year   under   the   IMF-supported Extended Credit Facility (ECF) Programme.

12.         Mr. Speaker, the  large  fiscal slippages resulted in a fiscal deficit  of 8.7 percent of GDP on cash basis and  10.3  percent on commitment  basis.  This  is  a   sharp  deviation  from   the   IMF program fiscal target of 5.3 percent of GDP. We intend  to reverse this trend and restore fiscal discipline.

13.         Mr. Speaker, the rate  of economic growth  has slowed down in recent times, with 2016  growth  estimated at  3.6  percent, the lowest in over  two  decades. Of particular concern is the  erratic performance of the  Agriculture  Sector and  the  continuing energy challenges which  have  negatively affected the  industrial sector. The effect of this is a struggling private  sector and rising unemployment.

14.         Mr. Speaker, while inflation  and interest rates have  recently been  on the  decline, we still have  to fix the  underlying macroeconomic fundamentals to ensure that  this trend  is sustainable.

15.         Mr.  Speaker,  the   economic  challenges  we  face   require deliberate but  urgent, well  thought out  strategic steps and  the backing and  total  support of the Ghanaian people. I am confident that  we have  the human resource, especially in this House and  in our  Diaspora  Community,  the  experience,  and  most importantly the resounding mandate of the people to guide and inspire us.

16.   This budget presents a clear roadmap on how we will move this  economy from  its  current state into  a full-fledged  middle income economy – a Ghana beyond  Aid.

17.         Mr. Speaker, our goal is to build the most business-friendly and  people-centred  economy in Africa,  which  will translate  into job  creation and  prosperity for  all Ghanaians. We will strike the right balance between fiscal consolidation and growth, by making credible   policy   choices  that   will  create  the   fiscal  space  to implement growth  enhancing initiatives. Mr. Speaker, we intend  to build a partnership with labour  that  will result in a social contract to  mark  an  era  of peace in which  we  will mutually  enhance the productivity  of our labour force.

18.         This commitment however, is hampered by five constraints which we need  to overcome:

·    low revenue collection;

·    expenditure overruns and corruption;

·    high wage  bill;

·    rigidity of  fiscal  structure caused by heavy  earmarking  of tax revenue; and

·    high debt  service payments.

19.         This budget presents a  proposal to  address these issues permanently and  I hope  I can  secure the  support of this august House in that regard.

20.         Revenue   administration  remains  a  challenge.  To  boost revenue streams,  we  will strengthen tax  administration,  reduce tax exemptions, plug revenue loopholes and leakages and combat tax evasion especially at our ports. We will broaden the  tax base whilst  reducing  and   abolishing  some  taxes  and   levies.  The National  Identification Scheme, a priority project of this administration, which we intend  to re-launch this year, will support our efforts to rope  in the  economically active  but  undocumented citizens   and    the   informal    sector  of   the   economy  thereby broadening the tax base and accelerating financial  inclusion.

21.         Mr. Speaker, we will adhere to and maintain good  economic governance principles of fiscal discipline, accountability and transparency. To reiterate what  the President said, we will protect

the  public  purse by  guaranteeing value  for  money  in all public transactions, and  exercising prudence and  discipline in our fiscal management to deliver on the aspirations of the Ghanaian people. Inefficiencies and  waste in government spending will not  be tolerated and  there  will be strict enforcement of all relevant laws and  regulations, especially the new Public  Financial  Management Act, 2016 (Act 921).

22.         Government  will  pursue  an   effective  debt   management strategy to  ensure debt  sustainability. We will also adopt global standards of  risk  and  treasury management  to  ensure accountability in the  use of state resources. In addition, we  will work  to  reduce the  amount of  government  borrowing  and  the resulting crowding out  of the  private  sector. Mr. Speaker, as an example,  In  the  2016  budget statement,  the  entire  allocation  for the  Ministries of Roads and  Highways, Trade  and  Industry, Food and  Agriculture, Water Resources, Works and  Housing, Youth and Sports and  Ministry of Transport amounted to a total  of GHC2.2 billion.  Interest  payments  in  2016   (GHC10.8  billion)  would  be nearly   5  times  what   was  allocated  to  the   six  key  ministries combined. This is how pernicious our debt  stranglehold is.

23.   Mr. Speaker,  the  Budget  will set the  pace for job creation and  accelerated growth  by empowering the  private  sector. To accomplish    this,    we    will   shift    the    focus   of   economic

management from  taxation to production. This will reduce the cost of  doing  business  and  create a  conducive  climate  for investment and  job creation.  In this regard, a number of taxes that    impede   growth    will  be   reviewed,   and   if   necessary, abolished. Government will reverse the recent low growth  trend by boosting agriculture and industrial productivity.

24.   Mr.  Speaker,  the   2017   Budget   will  set  in  motion   the following key policy priorities and flagship projects:

·    establishment of the  Infrastructure for Poverty  Eradication Project (IPEP). Under  this project, every  constituency will be allocated the cedi equivalent of US$1 million to combat poverty and  improve  the  lives of  rural  dwellers and  deprived communities;

· implementation    of    the    “One    District    One    Factory”

programme;

· establishment of the  Zongo  Development Fund  to support the provision of critical infrastructure and services;

· roll-out  of  the  National  Identification  Scheme to  facilitate the  efficient  delivery of public  and  private  services and  help formalise the economy;

· roll-out  free  SHS to  ensure equal  opportunities  for all and enhancement of human capital for the country;

· roll-out  of a national  digital  addressing  system  to  provide

unique  addresses for all properties in Ghana; and

· restoration of teachers and nurses training allowances.

25.         Mr. Speaker, despite significantly missing the  2016  the  set targets,  I  want   to  assure my  fellow  Ghanaians,  investors  and external stakeholders that  we are committed to continue with the Extended Credit  Facility (ECF) Programme with the  IMF. We will, however, review some of the targets and structural reform benchmarks  to  accommodate  our  priorities  of  tax  reliefs  and other  positive measures to boost the private sector.

26.         Mr. Speaker, Government will implement measures that  will unleash   the    creative   abilities   of   Ghanaians,   and    facilitate increased economic activity which will lead to the improvement in people’s lives.

27.         Mr. Speaker, there  are  exciting  times ahead and  there  is every  good  reason to  be  optimistic that  our  country  is ready  to work  again.  Our government looks forward  to  a  partnership of progress with our honourable colleagues across the aisle

28.   Mr. Speaker we must as a nation  come together to confront our  reality.  The  President did  mention nine  days ago  that  he was in a hurry… Mr. Speaker, we must all be in a hurry, we must trigger  a national sense of urgency  to deal  with our deficit.  It’s

continual presence curtails our capacity to leverage our many opportunities and  resources that  we have  as a nation.  Let me stress, Mr. Speaker, we  cannot borrow  our  way  out  of  these challenges. This  will be  tantamount to  creating and  sharing poverty, which only leads to a loss of our fiscal sovereignty; so like the  President,  we  must all be  in a hurry to  grow  our  way into Prosperity. This budget, Mr. Speaker, seeks to do this.

29.   Mr. Speaker, my presentation today will follow this outline:

 

· I  will present a  short brief  on  how  the  Global  economy performed  in   2016,   the   medium-term   outlook    and   the expected impact on the Ghanaian economy;

· This  will be  followed  by the  Macroeconomic  Performance for 2016 against the target sets;

· I will then  present the  President’s Macroeconomic Targets for 2017 and the Medium-Term Targets;

· In   addition,   I   will  briefly   talk   about  some  key   sector deliverables for 2017;

· And then provide you with the key policy initiatives for 2017;

and

· I will finally conclude with highlights of the key messages in the Budget.

GLOBAL ECONOMIC PERFORMANCE  AND

OUTLOOK

Global Output

30.     Mr. Speaker, the  global  economy is expected to  witness some improvement  in growth  in 2017  and  the  medium  term after   a  lackluster  performance in  2016.     The  January  2017

Update  of the IMF’s World Economic Outlook (WEO) projects a global   growth   of  3.1  percent  in  2016.   This  is  expected to improve  marginally  to 3.4 percent in 2017  and  further  to 3.6 in

2018.

31.     For emerging  markets and  developing  economies  growth is expected to remain  unchanged at 4.1 percent in 2016, and is projected to recover to 4.5  percent in 2017  and  further  to 4.8 percent according to the WEO.

32.   The downside risks to the global outlook, according to WEO, include,  increased  restrictions  on  global  trade   and  migration and   its  negative  impact  on   productivity.  In  addition,  high corporate debt, declining  profitability, weak  bank  balances, and thin policy buffers in emerging market economies may lead  to capital flow reversals and depreciation of the local currency.

Commodity Prices

33.     Mr.  Speaker,  oil  prices  have  picked   up  in  recent weeks resulting mainly  from  an  agreement among major  producing countries  to  reduce supply.  Crude  oil prices  are  expected to

average $55 per barrel  in 2017, about 28 percent increase over the 2016 levels.

34.     Gold  prices are  expected to  decline   from  an  average of US$1,249  per  fine  ounce in  2016   to  US$1,219  in  2017   due largely   to   an   expected   strengthening   of   the    US   dollar. According   to  the  Commodity  Markets Outlook  by  the  World Bank, Cocoa  price  is projected to average about US$2,940 per tonne in 2017 up from US$2,850 in 2016.

Implementation of ECOWAS Common External Tariff (CET

35.     Mr.  Speaker,  Ghana   joined  nine  other   member state  to implement   the    ECOWAS  Common   External    Tariff   (CET) effective 1st February, 2016.  The ECOWAS CET is considered a major  platform for  the  establishment of  Customs Union that will facilitate free  trade  and  advance greater economic integration  within  the  region.   The  tariff  is  expected to  help address  problems   such  as   cross-border   smuggling   and dumping in the sub-region. Government is currently  monitoring and evaluating the impact of the new regime  on various sectors of the economy.

Implications of Global Developments for Ghana’s Economy

36.     Mr.  Speaker,  we  address  the   risk  of  commodity  price volatility, Government will work towards diversifying the economy. We  will add   significant  value  to  our  exports and support local  manufacturing of imported goods, which  can  be produced locally in partnership with the private sector.

MACROECONOMIC PERFORMANCE FOR 2016

Growth

37.     Mr. Speaker, growth  has remained subdued over the period. The  2016  GDP, based on  the  provisional outturn for  the  first three  quarters of the year, is estimated at 3.6 percent, with the non-oil  real  GDP estimated  at  4.6  percent,  same as target. At the  sectoral level, the  Industry Sector, specifically, mining  and quarrying   underperformed due  to  a  contraction  in  upstream petroleum output, which constitutes the bulk of the Mining and Quarrying   Subsector.  All the   subsectors  in  the   Agriculture Sector, however, recorded positive growth  rates. The Services Sector continues to dominate the  sectors with a share of 54.3 percent in 2016.

Inflation

38.     Mr. Speaker,  inflation,  which  remained  elevated  for  most

part  of 2016, began to slow-down towards the end  of the year. Inflation began the year at 19.0 percent, peaked at 19.2 percent in March and ended the year at 15.4 percent.

Monetary and Credit Developments

39.     Mr. Speaker, the key monetary aggregates and credit to the private  sector recorded slower growth  in 2016, in line with the tight  monetary policy stance. The broad  money  supply (M2+), at  the  end  of  December  2016,  recorded an  annual  growth  of

22.0 percent compared with 26.1 percent in the same period  of

2015.  This was mainly  driven  by a  moderate growth  of  19.5 percent  in  Net  Domestic  Assets  (NDA) and   a  Net  Foreign Assets (NFA) growth  of 29.8 percent in December 2016

40.     Growth in total  outstanding credit  to the public and  private institutions  moderated further  in December  2016,  a reflection of  a  higher  incidence of  non-performing loans and  the  tight monetary  policy  stance.  The  annual  growth   in  total   credit slowed to 17.6 percent at the end of December 2016  from 24.9 percent recorded in 2015.

Stock Market Developments

41.   Mr. Speaker, annual changes in the Ghana  Stock  Exchange

Composite  Index  (GSE-CI)  remained negative,  generally reflecting investor preference for higher  yielding money  market instruments.  The  GSE  Composite  Index  (GSE-CI)  lost  15.3 percent  (305.82  points)  year-on-year  in  December  2016   to close  at  1,689.09  points  from  1,994.91  points  in  December

2015.    Total   market  capitalization   stood  at   GH¢52,690.99 million at  the  end  of December 2016, showing a year-on-year decline  of 7.8 percent.

Interest Rate

42. Mr. Speaker, interest rates in 2016  exhibited mixed performance. The  Bank  of Ghana  Policy  Rate  was kept  at  26 percent until  October 2016   as risks  to  inflation  and  growth were   assessed as balanced.  The  policy  rate,  however,  was reduced to  25.5  percent,  as inflation  pressures eased while domestic growth  conditions continued to deteriorate. Yields on short-term Government securities decreased, while those of medium to long-term GOG bonds increased in line with Government’s  policy   to   properly   align   the   yield  curve   and extend the maturity  profile.

Exchange Rate

43.   Mr.  Speaker,  the   Ghana   cedi   remained  relatively   stable against  the   major   currencies  in  the   currency  market,  on account  of   tighter   monetary  policy   and   improved  foreign exchange inflows. However, this trend  was reversed in the run- up to the  December elections, as demand pressures mounted. The  Ghana   cedi   recorded  a  cumulative  depreciation  of  9.6 percent and  5.3  percent against the  US dollar  and  the  euro, respectively, but appreciated by 10.0 percent against the pound sterling in the interbank market in 2016.

External Sector

44.   Mr. Speaker, the balance of payments (BOP) turned  surplus for the  first time  since 2011  due  to improved current account balance.  Accordingly,  there   was a  build-up  in  gross foreign assets, which  supported the  relative  stability in the  exchange rate.   The  BOP  surplus  was US$247  million,  compared  to  a deficit  of US$129  million in 2015.  The trade  balance improved from  a deficit  of US$3.1bn  in 2015  to a deficit  of US$1.7bn  in

2016  due  to  increased exports receipts by 7.2  percent and  a decline  in imports by 5.3 percent.

45.   The  gross foreign   assets at  the  end  of  December  was estimated at US$6,161.80 million, from  US$5,884.70 million at the    end    of   December   2015,   representing   a   build-up   of US$277.07 million. This was sufficient to provide  cover  for 3.5 months  of   imports   of   goods  and   services,   same  as  in December 2015.

Fiscal Developments

46.   Mr.   Speaker,   the   main   objective   of   fiscal   policy,   as envisioned  in  the  2016  Budget,  was to  consolidate Government’s finances by reducing the  fiscal deficit  from  6.3 percent of GDP in 2015 to 5.0 percent of GDP in 2016.

47. Provisional data for 2016, however, indicates that  the envisioned fiscal consolidation was not  achieved. As a result, total  domestic  revenue and  grants was 11.1  percent below target (an  actual of GH¢33.7  billion, against a target GH¢37.9 billion),  while  total  Expenditure  (including  outstanding expenditure  claims)  exceeded  the   target  by  16.2   percent. These slippages  resulted  in  a  fiscal  deficit  on  commitment basis of 10.3  percent of GDP. On cash basis, the  fiscal deficit was 8.7 percent of GDP against a target of 5.0 percent of GDP. The  primary  balance for  the  period, recorded a  deficit  of  1.4 percent of  GDP, against a  targeted surplus of  1.2  percent of GDP.

48.   Mr. Speaker, the  shortfall in total  Revenue  and  Grants was broadly attributed to the impact of energy  challenges on households and  firms, lower than  anticipated receipts from  oil due  to both  lower-than-programmed benchmark crude  oil price and  production, and  non-realisation of proceeds from  both  tax and   non-tax   categories.   In   addition,   tax   compliance   was relatively weak.

49. Mr.  Speaker,  total   expenditures  (incl.  outstanding obligations)  amounted  to  GH¢51.1   billion  at  end-December

2016.  Outstanding obligations of GH¢5 billion, comprise MDA obligations with MoF, which  had  not  yet been  captured on the GIFMIS as well  as oustanding  payments  to  Statutory Funds. The outstanding obligations relate  mostly to Compensation of Employees, Goods and Services, and domestically financed Capital Expenditure..

Petroleum Receipts in 2016

50.   Mr Speaker, in 2016, GNPC lifted  six parcels of  crude  oil (consisting of the 31st to 35th  Jubilee and  1st TEN liftings) on behalf  of the  State,  and  exported a total  of 21,580  MMscf of gas to Ghana  National  Gas Company (GNGC). Total crude  lifted was 5,856,921  barrels  of  oil (4,860,462  barrels  of  Jubilee  oil and 996,459 barrels of TEN oil). Receipts from crude  oil liftings for 2016  included revenues from  the  sale of 4,824,417 barrels of  oil from  the  30th  (lifted  in December 2015)  and  the  34th Jubilee liftings, which amounted to US$207.79 million (GHȻ811.68  million). The proceeds from  the  35th  Jubilee and

1st TEN liftings in December 2016  were  received in the  first quarter of  2017.   Mr.  Speaker,  actual  petroleum  receipts  for

2016  fell short of the 2015  performance by 29.1 percent due to the continuous decline  in crude  oil prices, the decline  in Jubilee production and lower TEN production.

Public Debt Development

51.   Mr. Speaker, total public debt  stock as at end 2016 stood at almost 73 percent of GDP up from 71.63  percent in 2015.  This was due to the larger than  expected fiscal deficit and financing requirement in 2016.  Domestic and external debt  stood at 31.7 percent  of  GDP  and   40.8   percent,  respectively.  In  nominal terms, the public debt  stock as at end 2016  stood at GH₵122.3 billion (US$29.2 billion), with domestic and external debt  of GH₵53.4 billion (US$12.8  billion) and  GH₵68.9 billion (US$16.5 billion), respectively.

52.

Energy Sector Levies

53.   Mr. Speaker, the  Energy Sector Levies Act, 2015  (Act 899) was enacted to  “consolidate existing energy  sector levies to ensure  efficient   utilisation  of  proceeds  generated  from   the levies,  impose  a  price   stabilisation  and   recoveries  levy  to facilitate  sustainable  long   term   investments  in  the   energy sector, and to provide for other  related matters”.

54.   Mr. Speaker, the  law requires the  utilisation of the  energy sector levies mainly for the  clearance of legacy  debts of SOEs operating  in the  energy  sector,  to  support power  generation and  power  sector infrastructure,  subsidy  for  premix  fuel,  and

the stabilisation of petroleum prices.

55.   A total  amount of  GH¢3.2  billion was programmed to  be collected as total  Energy Sector Levies (ESL) for the year 2016. Actual collections at the  end  of the  year was GH¢3.3 billion. A breakdown of  the  utilization  of  the  levies is provided  in this Budget  Statement.

56.   Mr. Speaker,  a  few  challenges  have  been  encountered in the utilization  of the proceeds and we will have  to come to this august House for an amendment of the Act.

MACROECONOMIC TARGETS FOR 2017 AND THE MEDIUM

TERM

57.   Mr.   Speaker,   Government’s   policy   objectives   for   the medium term among others will be to:

· build    the     most   business-friendly    and     industrialized economy in Africa, capable of creating decent jobs and prosperity for all Ghanaians;

· modernize    agriculture,    improve    production    efficiency, achieve food  security, and  profitability  for our  farmers with special emphasis on value-addition;

· develop        leadership        skills,        quality        education,

entrepreneurship, job skills and creative skills; and

· ensure  a   functioning   social   protection   system   which addresses the  needs of  the  weak, marginalized, vulnerable and socially excluded; among others.

58.   Mr.   Speaker,   to    achieve   our    broad    macroeconomic objectives, our policy direction will be to:

· restore and sustain macroeconomic stability;

· shift the  focus of economic management from  taxation to production;

· manage the economy competently; and

· make   the  machinery  of  government  work  to  deliver  the benefits of progress for all Ghanaians.

59.   Mr. Speaker, prudent monetary and  external sector policies will also be pursued by the  Bank of Ghana  to complement the fiscal policy stance to ensure price and exchange rate stability.

60.   Mr. Speaker, we  are  confident that  the  above  highlighted policies which  are  discussed in detail  in the  Budget  Statement will  contribute  to  the   achievement  of  the   following macroeconomic targets for 2017:

· overall real GDP growth  of 6.3 percent;

· non-oil real GDP growth  of 4.6 percent;

· end-year inflation of 11.2 percent;

· average inflation of 12.4 percent;

· overall fiscal deficit of 6.5 percent of GDP;

· primary surplus of 0.4 percent of GDP; and

· Gross Foreign Assets to cover at least 3 months of imports of goods and services

61.   Mr.  Speaker,  we  believe   strongly  that   our  medium-term policies, anchored on  fiscal discipline, a  broadened tax  base, elimination  of   wasteful  expenditures,  prudent  debt management strategies, complementary monetary policy, and sustainable external balance will ensure even  better macroeconomic outcomes in the  medium-term. Consequently, the  macroeconomic targets for the  medium-term (2017-2019) include  the following:

· overall real GDP growth  to average 7.4 percent;

· non-oil real GDP growth  to average 5.6 percent;

· inflation  to be within the  target band  of 8±2 percent in the

2018-2019 period;

· overall  fiscal  deficit  to  reduce to  3 percent by the  end  of

2019;

· current account deficit  projected  to decline  to 4.8  percent of GDP in 2018  and  further  to  2.7  percent of GDP in 2019; and

· Gross Foreign  Assets to cover  not less than  3.5 months of import of goods and services in the medium-term.

62.   Mr. Speaker,  consistent  with  Section  16  of  the  PFM  Act,

2016   (Act  921),  we  have   also  set the  following  targets  on primary  and  secondary fiscal indicators to  monitor  the  fiscal health  of the  economy towards the  achievement of our  fiscal policy objectives in 2017:

· non-oil primary deficit of 0.8 percent of GDP;

· public  debt  stock equivalent to towards trend  70.9  percent of GDP;

· capital spending of 12.6 percent of total expenditures; and

· (domestic) revenue-to-GDP ratio of 21.4 percent

Resource Mobilization  for 2017

63. Mr.  Speaker,  total   Revenue   and  Grants,  including programmed receipts from  petroleum for the  2017  fiscal year, is   estimated   at   GH¢44.9   billion   (22.1    percent  of   GDP), indicating a 33.5  percent increase over the  provisional outturn in 2016.  Total non-petroleum Revenue  and  Grants is estimated at  GH¢42.6  billion (21.4  percent of non-oil  GDP) representing

29.2 percent increase over the provisional outturn in 2016.

64.   Mr. Speaker, total  receipts from  petroleum is estimated at

1.2 percent of GDP and amounts to GH¢2.4 billion, representing a 231.2  percent increase over the outturn in 2016.

65.   Domestic revenue is estimated at  GH¢43.4  billion or 21.4 percent of GDP and  is expected to be 33.5 percent higher  than the provisional outturn in 2016.

66.   Mr.  Speaker,  total   tax  revenue  is  estimated  at  GH¢34.4 billion, representing 6.9  percent of GDP. Of this amount, non- petroleum  tax  revenue is  estimated  to  grow  by 32.4  percent and  this amounts to GH¢33.8 billion equivalent to 16.9 percent of non-oil GDP.

67.   Taxes on Income and  Property is estimated to increase by

47.7  percent to  GH¢13.4  billion in 2017, accounting for  39.1 percent of  total  tax  revenue. Of this amount, Royalties from petroleum is estimated at GH¢616.8 million.

68.   Taxes on  Goods and  Services are  estimated at  GH¢13.9 billion, representing 13.3  percent increase over the  provisional outturn in 2016  and  40.3  percent of  the  estimated total  tax revenue for 2017.

69.         International Trade  taxes, are  estimated at  GH¢7.1  billion, representing 3.5  percent of  GDP and  20.6  percent of  total  tax revenue. This  estimate  represents a  61.1  percent increase  over the provisional outturn for 2016.

70.         Mr.   Speaker,   the   significant   growth    of   this   tax   type emanates mainly from  additional GH¢1.0 billion in tax  measures that  will be realised as savings from  the  reduction in the  amount of import exemptions that will be granted in the 2017 fiscal year.

71.         Mr.  Speaker,  Non-tax  revenue,  is  estimated  at   GH¢6.7 billion   (3.3   percent  of   GDP),   representing   15.3   percent   of domestic revenue. An amount of GH¢3.4 billion is expected to be retained by MDAs for the  funding  of their  activities and  the  rest lodged  into the Consolidated Fund. Of the total amount estimated for Non-tax revenue, an amount of GH¢1.7 billion is estimated as non-tax petroleum revenue.

72.         Mr.   Speaker,   grants   from    Development   Partners   is estimated at GH¢1.5 billion, equivalent to 0.8 percent of GDP.

Resource Allocation for 2017

73.         Mr. Speaker, total expenditure, including  provision made for the clearance of arrears and outstanding commitments in 2017  is

estimated at  GH¢58.1  billion, equivalent to 28.6  percent of GDP. The estimated expenditure for the year represents a 13.7 percent increase over  the  provisional outturn for  2016.  Of this amount, GH¢3.7 billion, equivalent to 1.8 percent of GDP and  6.4 percent of total  expenditure will be used for the  clearance of arrears and outstanding commitments.

74.         Mr. Speaker, provision has been  made for the  clearance of up to  20  percent of the  outstanding claims from  previous years whiles we await  the  outcome of a special forensic audit  of these outstanding claims.

75.         Mr. Speaker, Compensation of Employees is estimated at GH¢16.0  billion (7.9  percent of  GDP). Of this amount, GH¢14.0 billion, equivalent to 6.9 percent of GDP

76.         Expenditure on Goods and Services is estimated at GH¢3.5 billion, representing 1.7 percent of GDP.

77.         Total   Interest   Payment  estimated   at   GH¢13.9   billion, represents 23.9  percent of total  expenditure and  is equivalent to

6.9  percent of GDP. Of this amount, domestic interest payment constitutes   80.5   percent  of   the   total   Interest   Payment  and

amounts to GH¢11.2 billion.

78.         Mr. Speaker, the  existing legislation that  have  underpinned the estimation of Grants to other  Government units over the years is being  reviewed  to  break  the  cycle  of  rigidities in the  Budget. Consequently, Grants to other  Government units, comprising statutory  payments  into   the   National   Health   Insurance  Fund, Ghana  Education Trust Fund, the  District Assemblies Common Fund, Road  Fund, Energy  Fund, transfer to  the  Ghana  National Petroleum  Company,  retention  of  internally-generated funds  by MDAs  and  other   earmarked Funds has  been   constrained  to  a ceiling  of  25  percent of  tax  revenues. The  total  allocation  for grants to Other Government Units is  GH¢9.7 billion.

79.         Mr. Speaker,  in  addition to  the  significant  tax  incentives granted in this year’s Budget, an amount of GH¢241.2  million has been  budgeted in Social  Benefits to assist lifeline consumers of electricity  and transfers for social protection.

80.         A total  amount of  GH¢7.1  billion  has been   allocated for capital expenditure. Of this amount, 38.9  percent will be financed from domestic sources and the remaining from foreign sources.

Overall Budget  Balance and Financing for 2017

81.         Mr.   Speaker,   based  on   the   revenue  and   expenditure estimates, the  2017  budget will result in an overall budget deficit of GH¢13.2billion, equivalent to 6.5 percent of GDP.

82.         Financing  of  the  deficit  will be  from  both  domestic  and foreign  sources. Net Domestic Financing is estimated at GH¢14.6 billion, equivalent to  7.1  percent of GDP, and  includes financing from divestiture proceeds of GH¢1.8 billion. Net foreign  financing is estimated to constitute a net repayment of GH¢1.3 billion, equivalent to 0.6 percent of GDP. An amount of GH¢300.7  million, equivalent to 0.1 percent of GDP is estimated to be saved in the Ghana  Petroleum and  Contingency Funds while the  Sinking Fund is expected to be drawn-down by GH¢716.1 million.

Projection of 2017 Petroleum Receipts and allocation

83.         Mr. Speaker, the  estimated Benchmark Revenue  (BR) price for crude  oil is US$56.142 per  barrel  for 2017  with a benchmark output  of  43,875,920  barrels  (120,208  bopd)   and   32,512,497

MMBtu for oil and gas, respectively.

84.         The petroleum revenue for 2017  is estimated at US$515.64 million, with BR projected at US$242.08 million.

85.         Mr Speaker, the  second 3-year cycle  for the  review  of the petroleum revenue distribution formula, as stipulated in the PRMA, has elapsed.  We  would  like  to  request  this  august  House to maintain the existing distribution formula  as follows:

·    30 percent of the net Carried and Participating Interest to GNPC;

·    70 percent of net receipts (after  GNPC’s) to the ABFA;

·    30 percent of net receipts (after  GNPC’s) to the Ghana

Petroleum Funds;

·    30  percent  of  the   amount  allocated  to  the   Ghana

Petroleum Funds to the Ghana Heritage Fund; and

·    70  percent  of  the   amount  allocated  to  the   Ghana

Petroleum Funds to the Ghana Stabilisation Fund.

86.         We  would  also  like  the  House to  approve the  following priority areas for the  spending of the  ABFA for 2017-2019, in line with the PRMA:

·

Agriculture;

 

·

Physical    Infrastructure

and

Service

Delivery

in

Education;

·    Physical Infrastructure and  Service  Delivery in Health;

and

·    Road and Rail Infrastructure Development.

         The Medium Term Debt Strategy and Debt Sustainability Analysis

87.         Mr. Speaker, the  debt  strategy for the  medium term  would be  to manage the  public  debt  at  the  lowest cost and  at  prudent levels of risk to bring our debt  to GDP ratio to 65 percent over the medium term.

88.         Consequently, in accordance with  the  requirement of  the Public Financial  Management Act, 2016 (Act 921), my Ministry will conduct and  publish  a  Debt  Sustainability  Analysis  (DSA) and update the MTDS to guide the borrowing plan and operations. The reports will inform policy decisions, leading  to the reduction in the debt  burden and insulation against other  fiscal vulnerabilities.

              SECTORAL PERFORMANCE AND OUTLOOK

89.   Mr. Speaker,  the  sectoral policies  are  designed to achieve our broad  objectives of jobs and wealth  creation and macroeconomic stability while  ensuring compliance with  the PFM  Act.  Permit   me   to  update  this  august  House on  the performance of  some key  sectors of  the  economy and  the

outlook  for  2017  and  the  medium  term.  I  will begin  with  this

August House;

            PARLIAMENT OF GHANA

90.   Mr.   Speaker,   Parliament   continued   to    discharge   its mandate through the consideration of 181 Papers including  25

Bills, four Legislative Instruments (L.Is), eight Constitutional Instruments (C.Is), 19 Loan Agreements and 39 Committee Reports. Out of the 25 Bills laid, 18 were passed into law.

91.   Parliament   also   facilitated   the    establishment   of   the Scrutiny  Office  to  provide  expert  analysis of  policy  measures on Bills, the budget, loan agreements and international financial transactions brought before the  House for approval.   In 2017, the  Office will be strengthened to undertake pre-legislative scrutiny of bills through research and  information pursuant to the PFM Act.

92.   Mr.  Speake

Comments