The Budget Statement and Economic Policy of the Government of Ghana for the 2016 Financial year was presented to Parliament on Friday, 13th November, 2015 by Hon. Seth E. Terkper, Minister of Finance on the Authority of H. E. John Dramani Mahama, President of the Republic of Ghana.

Highlights from the Budget Speech

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, 2016.

Mr Speaker, in 2012, H. E John Dramani Mahama was elected for his first four-year mandate to lead our dear country. Under his able leadership, the Government has been working tirelessly to transform the economy. We are focused on improving the well-being of Ghanaians by honouring the pledges made to the good people of Ghana in the 2012 Manifesto of the National Democratic Congress.

Notwithstanding the major shocks to the economy in the last three years, the government remained steadfast in pursuing the economic vision of leading the country through a transformational agenda to consolidate our Middle Income Country (MIC) status. The shocks include disruption in gas supply for two-and-a-half years and the simultaneous fall in cocoa, gold and crude oil prices.

We have also remained resolute in our commitment to correcting the major budget overruns which occurred at the end of the 2012 fiscal year. We are implementing several programmes to secure the bright medium-term prospects for the economy, notably through substantial investments in the oil and gas sector, among others.

2016 is significant in many respects. The country will go through Presidential and Parliamentary elections. Let me assure this House that the Electoral Commission and other governance institutions will be adequately resourced to ensure the conduct of free, fair and transparent elections. Despite being an election year, let me also reiterate President Mahama’s assurance of sustaining fiscal discipline whilst investing prudently in infrastructure and social development. We will resist the temptation of election year overspending.

The Post-Ho Forum held in Takoradi was successful. For the first time in decades, the government and its social partners, notably Organised Labour/Association and the Ghana Employers Association, led by their Secretary-General and President, respectively, concluded in September, the national minimum wage and public sector wage negotiations for the 2016 fiscal year ahead of the Budget. The essence of this remarkable achievement is to avoid any compensation related slippages or overruns, that could compromise our fiscal consolidation programme. It is also to shift focus of the Single Spine Pay Policy to aspects of productivity, in the context of the Public Financial Management (PFM) reforms related to payroll and human resource management.

The vision and commitment of Government over the medium term is to build a sustainable, prosperous and equitable society, in line with our social democratic agenda. This vision is anchored on the thematic areas of the Ghana Shared Growth and Development Agenda (GSGDA) II, 2014-2017 and, particularly, on the Government’s priority of:

• Putting People First;

• Building a Strong and Resilient Economy;

• Expanding Infrastructure; and

• Ensuring Transparent and Accountable Governance.

In our determination to transform the economy, we draw lessons from past experiences of our country’s economic journey including some paradoxes:

• Despite numerous and unexpected setbacks the country has experienced positive growth over the last 30 years;

• The declaration of HIPC status generated intense debate and many believed it could have been avoided with bold measures. Yet it provided us with fiscal space to help our path to positive growth;

• Contrast with the HIPC experience, it is relieving for this Government to be leading the development agenda that has restored our pride of place among the “African rising‟ and renaissance nations.

• The recent setbacks from commodity price shocks did not make us reverse our course on consolidation even as it reminded us of our vulnerability in transitioning to a MIC status;

• We are returning to another growth path and our fiscal performance so far clearly shows that we can plan to manage and reverse periodic setbacks as and when they occur.

Therefore, our resolve is to manage the transition setbacks and paradoxes with perseverance and effective planning. Consequently, we now see brighter prospects ahead, mainly from the investments that we have been making in the energy and other sectors of the economy.

Mr Speaker, permit me to recount some of the macroeconomic successes chalked up since we began the programme of fiscal consolidation under our “Home-Grown” policies and the IMF programme. In so doing, however, not even the successful first and second reviews under an IMF programme will make us complacent:

• There is a clear sign that our fiscal consolidation efforts are yielding positive results, making the economy more efficient. Accordingly, the GSS estimates that GDP will grow at 4.1 per cent at the end of 2015 compared to the 3.5 per cent initially projected;

• As a result of good revenue performance (including GRA’s Compliance efforts), containment of overruns in the wage bill and other spending; as well as withdrawal of energy-related subsidies, our fiscal consolidation programme is on course with the deficit set to be on target at 7.3 per cent;

• For the first time in many years, the domestic primary balance in the first half of 2015 achieved a surplus equivalent to 2.8 per cent of GDP, whilst the budget deficit was down to 2.3 per cent of GDP, same as the level attained a decade ago;

• The current account deficit as a percentage of GDP has stabilised whilst the foreign reserve position has significantly improved;

• In line with the government’s Medium Term Debt Strategy and Debt Management policies, the pace at which we have been accumulating public debt as a percentage of GDP has slowed down in the first half of the year;

• In October this year, we issued our fourth sovereign bond which was over-subscribed by US$1 billion, the 15-year tenor of the bond is the first by any Sub-Saharan African country besides South Africa;

• In this instance, Ghana is also leading its contemporaries in using a guarantee instrument that the World Bank wants to use to create an asset class for market assets by middle income countries;

• After some initial implementation difficulties, we are now on course to making the proceeds from commercial and quasi commercial projects, pay fully or partially for the loans that finance them; this will stop the unsustainable habit of relying on the taxpayer to pay for all the nation’s debt service commitments; and

• Against this background, Ghana successfully went through the first performance review in August 2015 under the three-year Extended Credit Facility (ECF) with the IMF. All performance criteria under the programme for the second review were also successfully met and documentations are being prepared for the IMF Board to complete the review in December 2015. Hence, Ghana continues to win the confidence of the business community, Development Partners and the international financial markets with our efficient management of the economy.

Mr Speaker, the achievements so far, are not just macroeconomic. We have made far-reaching and significant investments in all sectors of the economy and these have led to considerable improvements in the lives of our people. These include:

• Water: Following the huge investments made in the sector, 77.5 million gallons of water per day was added to the generation capacity as at the end of July 2015. By end of 2016, this should increase to 109.7 million gallons per day and will result in a coverage of 76 percent for both urban and rural communities.

• Roads: We made significant progress in funding and completing many of the “Gang of six” roads and launched the GH¢3 billion Cocoa Road Improvement Project; we have constructed thousands of kilometres of roads across the country. These include the Suhum-Apedwa and Kyebi town roads. Recent additions include the Kwame Nkrumah Interchange, the Fufulso-Sawla road, the Kasoa interchange and the Eastern corridor road.

• Transport: We are investing in the modernisation and expansion of the aviation and maritime infrastructure. These include the expansion of the Kotoka and Tamale International airports, the aerodrome in Ho, the expansion of the Tema harbour and provision of 116 buses for public road transport. Permit me to note that in line with our new debt management policies, the airport and harbour project are designed on self-financing basis.

• Communications: We have successfully deployed 800 kilometres optic fibre infrastructure which runs through 126 communities along the eastern corridor from Ho to Bawku with a link from Yendi to Tamale. The fixed and mobile telephony and Internet subscriptions as at August 2015 stood at over 33 million and 17 million, respectively.

• Housing: Through a combination of direct government investments and public private partnerships, an aggressive housing programme has been rolled out to provide more Ghanaian families in the lower to middle-income brackets with decent homes. About 18,000 housing units are at different stages of completion; and

• Energy: We are bringing on stream 845 MW of power to add to the generation capacity by the close of the year and providing the necessary investments and guarantees to permanently address our perennial power generation shortfall.

These investments have not only provided critical social services to improve the lives of our people, they have resulted in the creation of tens of thousands of jobs for the youth.

Notwithstanding these successes, we are mindful of the fact that some risks to the budget and medium-term macroeconomic projections persist and new ones could emerge. The major global and domestic setbacks include:

• The tumbling of crude oil prices to a low of US$45.0 per barrel compared to a bench mark revenue projection of US$99.38 per barrel in the 2015 Budget. Mr Speaker, it will be recalled that this prompted the government to revise its revenue targets and related expenditures that were to be funded from the Annual Budget Funding Amount (ABFA);

• Gold spot price is yet to recover and even though cocoa prices are now recovering, prices and output keep fluctuating on the global markets. We have had to sacrifice government revenue in some years to fulfil our commitment to improve the welfare of farmers;

• The US economic recovery and appreciation of the dollar, coupled with pressures on our foreign exchange reserves from declining commodity prices, continue to weaken the Cedi, thus making imports more expensive; this is fuelling inflationary pressures and increasing the external debt service burden in Cedi terms;

• The global financial uncertainty that hit emerging and peripheral economies, including Ghana, pushed us into headwinds at the time of issuing the 2015 sovereign bond. We managed to navigate the turbulence, and in the process, added to our store of experience. As a middle-income Country, we will be in the capital and financial markets in both good and bad times;

• Concessional terms of some facilities from Bilateral and Multilateral Partners including the WB and AfDB have hardened. The WB, AfDB and other lenders also changed the repayment period of facilities to Ghana whilst interest payments and financial costs have increased (e.g. the repayment period has reduced from 40 to 25 years). The basis for calculating loan concessionality to include commitments and risks of floating exchange rates has also changed;

• The disruption in gas supply and the low level of water in the Bui, Akosombo and Kpong dams due to climate change continues to pose power supply challenges, reduction in generation capacity and recurring power outages. However, it is now clear that investments in the sector is rapidly changing the situation; and

• Finally, the recommended overall budget deficit target of 5.3 per cent of GDP, under the IMF Extended Credit Facility (ECF) programme , provides a tighter fiscal space than anticipated in the original programme. It is against this background that we must even be more prudent in 2016 and avoid the consequential cycle of huge election year budget overruns and deficit. And in this regard, we call on all social partners especially, organised labour, to support the Government.

We will focus on these risks and adopt appropriate measures to minimise their likely adverse impacts on the economy. Our approach is not to bemoan our challenges, offer excuses or fail to act decisively. Instead, over the years we have come to this august House with several structural initiatives and strategies to change the way we manage the economy.

In particular, the national debt and consequent burden of debt service will continue to rise only if we do not emulate the success with which many Middle Income and Advanced countries finance infrastructural, economic and social development on a sustainable basis. To this end, the Government will continue to implement the debt management measures that were approved by this House. As noted earlier, as a result of these measures, the public debt is now increasing at a slower pace.

Secondly, we have always bemoaned our narrow export base and the resultant depreciation of the Cedi when we lose reserves from falling commodity prices. As part of our transformational agenda to achieve an export-led economy, the Ghana Export and Import Bank (EXIM) Bill has been laid before Parliament. The primary purpose is to finance export (notably high industrial and agricultural products); guarantee loans; provide export insurance, support SMEs and other businesses, and strengthen economic cooperation. The operations of the Bank will support the nurturing and growth of the private sector in Ghana to address the longstanding problem of access to credit for expanded exports.

Rt. Hon. Speaker, the 2016 Budget will build on the foundation laid to restructure and transform the economy towards sustained and inclusive growth; minimise our exposure to volatilities; and position Ghana to consolidate its status as a Middle Income Country.

Thirdly, it is our expectation that the investments by the public and private sectors including the emergency power; World Bank PRG for Sankofa field; commissioning of FPSO J.E.A Mills for the TEN fields; and onset of Jubilee Gas will contribute to the positive outlook embodied in the theme for the 2016 Budget Statement and Economic Policy: “Consolidating Progress towards a Brighter Medium Term”.

GLOBAL ECONOMIC DEVELOPMENTS

Growth

According to the IMF’s October 2015 World Economic Outlook (WEO), global growth in the first half of 2015 was 2.9 per cent, 0.3 percentage point lower than projected in April of this year. This reflects lower than expected recovery in advanced countries and further slowdown in emerging market economies for the fifth consecutive year. The declines suggest that medium-term and long-term challenges including low productivity growth since the previous financial crisis; and the current financial sector weakness, low investment, growth realignment in China and the downturn in commodity prices still exist.

Global growth is projected at 3.1 per cent for 2015, which is 0.3 of a percentage point lower than the outturn in 2014 and 0.3 percentage point below the April 2015 forecast. In 2016, global growth is expected to strengthen at 3.6 percent reflecting a rebound in economic activity in a number of distressed economies. Advanced economies are expected to grow at 2.2 per cent while developing and emerging economies are projected to grow at 4.5 per cent.

Sub-Saharan Africa experienced a robust economic growth of 5.0 per cent in 2014 driven by strong investment in mining and infrastructure as well as strong private consumption, especially in low-income countries. Economic growth is, however, expected to decelerate in 2015 to 3.8 per cent according to the 2015 October WEO, compared to the 4.5 per cent forecasted in July 2015. The slowdown mainly reflects the impact of declining oil prices on the economies of oil exporting countries, as well as lower demand from China (the largest single trade partner of sub-Saharan Africa), and the impact of Ebola on affected countries. Growth is expected to pick up in 2016 to 4.3 per cent.

Commodity prices

Oil prices have declined significantly, after experiencing large swings in the second quarter of 2015. The decline is on account of strong supply from members of the Organization of the Petroleum Exporting Countries (OPEC) and the Islamic Republic of Iran’s nuclear deal. Global excess supply of oil has continued to increase in 2015, in spite of the fall in investment in the oil sector.

Crude oil prices reached US$59.82 a barrel in June 2015 and fell further to US$42.46 a barrel in September 2015 compared to Ghana’s annual benchmark revenue projection of US$99.38 a barrel for 2015 which was later revised to US$57 per barrel. However, the IMF’s October 2015 WEO projects an average crude oil price of US$51.62 a barrel in 2015, US$50.36 in 2016, and US$55.42 in 2017.

Cocoa prices rose in the second quarter of 2015 as a result of weather-related supply shortfalls in Ghana, but demand remains strong. According to the Business Monitor International report of October 2015, cocoa prices are expected to peak in 2015 before lowering in the beginning of 2016 to the end of the forecast period in 2019. The market is projected to register a small surplus in the 2015/16 season, on account of: (1) a rebound of production in Ghana, due to greater use of inputs and expectations for better weather and (2) weak growth in global demand in 2016, as grinding margins remain poor.

According to the ICBC Standard Bank estimates, gold prices are generally expected to trend downwards peaking around $1,160 per ounce in 2016 as the Federal Open Market Committee (FOMC) normalises US monetary policy.

ECOWAS Trade Liberalization Scheme (ETLS)

The ECOWAS Trade Liberalisation Scheme (ETLS) seeks to provide impetus to the process of economic integration and development in the West African sub-region. It is expected to provide easier access to markets in other ECOWAS countries and thereby encourage local manufacturing outfits to compete favourably with cheap imported products. The scheme is also expected to encourage entrepreneurial development through the provision of preferential treatment in specific areas among member states.

Ghana’s export to the sub-region, under the ETLS, has seen a steady increase over the years. The ETLS has offered Ghanaian export manufacturers the opportunity to expand their market share in the Community. For example, the number of ECOWAS certificates of origin issued increased from a little over 3,000 in 2012 to 4,286 in 2013 and 5,951 in 2014. Trade between Ghana and Nigeria has improved over the period. Export to Nigeria stood at GH¢365.6 million as at June 2015 compared to an estimate of GH¢210.7 million as at June 2014. The scheme has also introduced competition among community industries leading to reasonable product price to the consumer.

However, in spite of the regional backing and benefits that accrue to member countries, its objectives to a large extent have not been achieved. Both tariff and non-tariff barriers to trade between member states still persist. While some progress has been made in reducing tariffs, they have not been fully eliminated. Progress towards removing non-tariff barriers, such as seasonal import and export bans, has been slower. The failure to implement the instruments on the ECOWAS Trade Liberalization Scheme (ETLS) is affecting economic growth in the sub-region. There is the urgent need for the removal of bottlenecks impeding the implementation of ECOWAS protocols.

The screening and updating of the current database of Ghanaian companies with ETLS status is ongoing and is expected to be completed by June 30, 2016. Since the beginning of 2015, about 18 Ghanaian industrial companies have been given approval to benefit from the scheme. Ghana will continue to vigorously pursue the implementation of the ETLS.

Revised Road map for the Second Single Monetary Zone

The Authority of Heads of State and Government in June 2007 directed the Commission to re-examine the monetary integration process and expedite the process of creating a common currency for ECOWAS. The implementation of this directive led to the development of the roadmap for the ECOWAS Single Currency Programme by the ECOWAS Convergence Council on 25th May 2009. The roadmap had two major milestones: West African Monetary Zone (WAMZ) in 2015, and a Common Currency in 2020 for the ECOWAS single currency.

However, a one-track approach has been adopted for the achievement of a single currency by 2020 and a related costed roadmap has been developed. One key component of the roadmap is the establishment of an ECOWAS Monetary Institute (EMI) by January 2018.

MACROECONOMIC PERFORMANCE FOR 2015: REAL SECTOR

Provisional data from the Ghana Statistical Service (GSS) show real GDP is expected to grow by 4.1 per cent in 2015, representing a slight increase from the revised figure of 4.0 per cent recorded in 2014 and the revised 2015 Mid-Year GDP growth target of 3.5 per cent.

The GSS data pegs Industry Sector growth at 9.1 percent, followed by the Services Sector (4.7%) and Agriculture Sector (0.04%).

Agriculture Sector

All subsectors in the Agriculture Sector, apart from the Crops subsector, are expected to record positive growth rates in 2015, led by the Livestock and Fishing subsectors. Agriculture, however, is expected to register a growth of 0.04 per cent, a decline from the revised target of 3.6 per cent recorded. The Crops subsector, in spite of being the only subsector that is expected to record a negative growth, will be the source of this decline on account of the subsector’s large weight.

Industry Sector

Growth in the Industry Sector is expected to be driven by strong growth performances in the Construction and Water and Sewerage sub-sectors. These sub-sectors are expected to record growth rates of 30.6 per cent and 15.6 per cent, respectively. This is in stark contrast to their performances in 2014 when Construction stagnated, and Water and Sewerage contracted. Manufacturing and Mining and Quarrying, are both expected to record negative growth rates. However, petroleum, which is a part of the latter, is expected to record a growth of 2.0 percent.

Services Sector

Mr Speaker, the provisional data indicate that seven out of 10 service sub-sectors are expected to record positive growth rates. The Public Administration & Defence, Social Security sub-sector is expected to record a growth rate of 20.3 per cent, the highest among all the sub-sectors. The next highest growth performers will be Financial Intermediation and Information and Communication subsectors. Transport and Storage is expected to record the highest contraction of -6.3 per cent, in contrast to the modest positive growth of 0.3 per cent it recorded in 2014.

Structure of the Economy

The Services sector is expected to increase its share of GDP from 51.9 per cent in 2014, to 54.1 per cent in 2015, according to the provisional data. Industry will have a share of 26.9 percent, which represents a slight increase from the 26.6 per cent recorded in 2014. The expansion in the shares of Services and Industry will be at the expense of Agriculture, which is expected to record a share of 19.0 per cent in 2015, as compared with the 21.5 per cent it recorded in 2014.

MONETARY SECTOR DEVELOPMENTS

External Sector

The provisional trade balance showed a deficit of US$2.3 billion at the end of September 2015, compared to a deficit of US$710.7 million recorded for the same period in 2014, due to worsening commodity prices, lower production volumes and the declines in exports.

The country’s Gross Foreign Assets (GFA) stood at US$4.5 billion at the end of September 2015, sufficient to cover 2.89 months of import. It is projected to rise to US$6.5 billion at the end of 2015, sufficient to cover 4.0 months of imports of goods and services.

The key lessons from our macroeconomic performance and fiscal consolidation to date include:

• the need to continue building buffers such as the Stabilisation Fund and its derivative Contingency and Sinking Funds;

• the need for budget discipline, notably keeping expenditures within budget allotments;

• continuing to evolve a debt management strategy that will make our investments in infrastructure sustainable;

• protecting social intervention programmes in our quest to anchor our development on inclusive growth; and

• the need to continue to realign expenditures to ensure a judicious balance among compensation, goods and services, debt service, transfers and capital.

MACROECONOMIC TARGETS FOR THE MEDIUM-TERM AND 2016

The macroeconomic targets for 2016 are as follows:

• overall real GDP (including oil) growth of 5.4 percent;

• non-oil real GDP growth of 5.2 percent;

• an end year inflation target of 10.1 percent;

• overall budget deficit equivalent to 5.3 percent of GDP; and

• gross international reserves of not less than 3 months of import cover of goods and services.

In addition to the fiscal measures we have been implementing since 2013, the following revenue enhancing and expenditure rationalization measures, among others, will be reinforced over the short to medium term to ensure the achievement of the nation’s fiscal objectives:

• the implementation of the ECOWAS Common External Tariff (CET);

• the implementation of the Income Tax Act, 2015 (Act 896);

• continuing the realignment of Statutory Funds to address the increasing rigidities in the budget;

• alignment of a minimum of 15 percent of IGFs for use by respective sector Ministries and/or umbrella organisations to fund programmed activities; and

• weaning-off of at least four subvented agencies from government subvention.

Resource Mobilization for 2016

Using the seven-year moving average formula for projecting the benchmark crude oil price for oil revenue estimation as stipulated in the PRMA, 2011 (Act 815), the 2016 benchmark crude oil price is estimated at US$86.04 per barrel. This is completely above recent crude oil price projections by reputable sources such as ICE/Bloomberg and the IMF. Therefore, consistent with Section 17 of the PRMA (amendment) Act, 2015 (Act 893), we propose an alternative crude oil benchmark price of US$53.05 per barrel, in line with the IMF WEO crude oil price forecast for 2016.

Total revenue and grants including petroleum for the 2016 fiscal year is estimated at GH¢38.0 billion (24.0 percent of GDP), indicating an 18.2 percent increase over the projected outturn for 2015.

Total non-petroleum revenue and grants for the 2016 fiscal year is estimated at GH¢36.0 billion, equivalent to 24.1 percent of non-oil GDP representing 17.6 percent increase over the projected outturn for 2015.

For the 2016 fiscal year, total receipts from petroleum is estimated at GH¢2.0 billion (1.3 percent of GDP), representing a 15.9 percent increase over the projected outturn for 2015.

Domestic revenue, made up of tax and non-tax revenue is estimated at GH¢37.1 billion, 23.8 percent higher than the projected outturn for 2015.

Total tax revenue is estimated at GH¢29.9 billion, representing 18.9 percent of GDP. This shows an increase of 22.2 percent over the projected outturn for 2015. Of this amount, non-petroleum tax revenue is estimated to grow by 22.4 percent to GH¢29,311.4 million, equivalent to 19.6 percent of non-oil GDP.

Taxes on goods and services are estimated at GH¢11.3 billion, representing 18.7 percent increase over the projected outturn for 2015 and 37.9 percent of the estimated total tax revenue for 2016.

The taxes on goods and services is made up of GH¢7.0 billion for total VAT, while Excise taxes, National Health Insurance Levy and Communication Service tax are expected to yield GH¢2.9 billion, GH¢1.1 billion and GH¢313.6 million, respectively.

International Trade taxes, are estimated at GH¢6.5 billion or 4.1 percent of GDP and 21.7 percent of total tax revenue. The estimate reflects a 19.5 percent increase over the projected outturn for 2015. The increase is expected to be largely driven by the growth in import duties of 33.7 percent due partly from the impact of the implementation of the ECOWAS Common External Tariff.

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¢6.9 billion, equivalent to 4.3 percent of GDP and representing 18.5 percent of domestic revenue. An amount of GH¢3.2 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 non-tax revenue, an amount of GH¢1.5 billion is estimated as non-tax petroleum revenue.

Grants from Development Partners are estimated at GH¢1.6 billion, equivalent to 1.0 percent of GDP. The expected grants constitutes 4.2 percent to the estimated total revenue and grants for 2016.

Overall Budget Balance and Financing for 2016

Based on the revenue and expenditure estimates, the 2016 budget will result in an overall budget deficit of GH¢8.4 billion, equivalent to 5.3 percent of GDP.

We propose to finance the deficit from both domestic and foreign sources. Net Domestic Financing is estimated at GH¢5.5 billion, equivalent to 3.5 percent of GDP, and financing from foreign sources are estimated at GH¢3.3 billion, equivalent to 2.1 percent of GDP. An amount of GH¢434.4 million, equivalent to 0.3 percent of GDP is estimated to be saved in the Ghana Petroleum Funds, the Sinking Fund and the Contingency Fund. 

SECTORAL PERFORMANCE AND OUTLOOK: TRADE AND INDUSTRY

Under the trade development programme, a strategy document was developed to enable Ghana maximize benefits from the implementation of the Economic Partnership Agreement (EPA).

Government also signed an MOU to expand bilateral trade and investment cooperation under the new US Trade Africa Initiative. The purpose is to strengthen anti-dumping measures to deal with unfair trade practices in line with WTO rules. Government also engaged in bilateral trade agreements with strategic countries including United Kingdom, Kenya, Belgium, Togo, Vietnam, Chile and the Czech Republic to take advantage of business opportunities as well as encourage foreign direct trade investments.

In 2016, under the bilateral cooperation arrangements with UK, Kenya, Belgium and other countries, the Ministry will build capacity to support Ghanaian exporters meet Sanitary and Phyto-Sanitary (SPS) requirements and deal effectively with Technical Barriers to Trade (TBT) in key trading partner markets.

A Made-in-Ghana Logo to serve as a seal of quality and excellence was launched as part of the Made-in-Ghana promotion. The scope of the programme was expanded to include sugar, rice and poultry.

Under the industrial development programme, government identified shea nut, soya beans, cassava, cotton and groundnut for large scale commercial cultivation to promote the development of adequate agricultural raw material base for local manufacturing activities.

The construction of the Komenda Sugar factory is about 70 percent complete and will become fully operational in 2016. The Ministry through PPP arrangements will establish another sugar factory with irrigation facility in Savelugu in the Northern Region.

POLICY INITIATIVES

Government is committed to promoting fiscal discipline through prudent public expenditure management, improved debt management and the implementation of reforms in key areas of the economy.

Our middle income status requires the country to rely increasingly on domestic resource mobilization and effective debt strategies to meet its development needs. The pursuit of this agenda takes account of persistent budget deficits; the dwindling access to concessional financing; and domestic resource mobilisation requirements under the Financing for Development (FfD) component of the Sustainable Development Goals (SDGs).

Over the past three years, we have pursued a number of policy initiatives, including:

• address the macroeconomic and budget imbalances that crystalized at the end of 2012;

• deal with the new challenges of financing our development through a sustainable debt management strategy;

• consolidate our transition to middle income country (MIC) status through deep institutional and structural reforms; and

• enable government deliver on its transformational agenda

I would like to present an update of some key initiatives and outline a few new ones for 2016.

Tax Policy and Administration

Improvements in the tax revenue effort have been constrained by the fall in commodity prices and power supply challenges that led to a slowdown in the growth of business activity in the economy. Additionally, Ghana has high tax exemptions regime, collection leakages, low compliance, inadequate taxpayer information and weak linkages among public agencies.

To enhance resource mobilization to close the funding gap, government introduced a number of tax policy and administration initiatives. The overarching goal was to create additional fiscal space for sustainable budget expenditures in ways that are more efficient, fairer and better promote good governance. Most of the policies were also to enhance efficiency in tax administration, compliance and increase tax revenue.

Common External Tariff

Ghana continues to work towards the implementation of the ECOWAS Common External Tariff (CET) which is a major platform for the region’s Customs Union that will facilitate free trade and ensure greater economic integration within the region. Ghana has completed several activities to ensure the smooth implementation of the new regional tariff early next year. The CET Bill is currently before this august House for consideration.

The passage of the Bill will enable Ghana join the other eight countries already implementing the CET. The CET when implemented would also help address the problem of cross-border smuggling, combat dumping and also bring economic benefits to the people of the sub-region.

For 2016 and the medium term, the following additional general tax administration measures will be implemented to ensure compliance with the Law and assistance to taxpayers:

• Continue to move all processes to an electronic platform and accelerating the shift to a functional form of administration in all tax offices;

• reviewing the current thresholds for classification of persons as large, medium or small to reflect current trends;

• establishing joint audit/investigation teams with membership drawn from both Domestic Tax Revenue Division (DTRD) and Customs Division to conduct audits and investigations;

• intensifying the monitoring of Free Zones Enterprises by rolling out the Integrated Free Zones Unit in line with the 2nd GRA Strategic Plan 2015-2017;

• fully rolling out the excise tax stamp project and implementing the Electronic Point of Sale device project for taxable supplies of goods and services;

• scaling up the use of third party information/data, particularly those from the Ghana Customs Management System (GCMS), TRIPS customs system; and

• GIFMIS data to follow up on importers and Government suppliers to ensure full accountability in respect of domestic taxes; and Implementing measures to address revenue leakages resulting from illicit financial flows.

Other policy measures being proposed include:

National Single Window

In September 2015, Government introduced the National Single Window Project to;

• reduce the time and cost of Customs clearance and in general that of doing business in the country;

• put all customs operations, notably classification, valuation and inspection, under the GRA; and

• improve government revenue through the harmonization and simplification of international trade processes and procedures.

The first phase of the Project has been completed. This includes the takeover of the core functions and allied services of valuation, inspection, classification and risk management from the Destination Inspection Companies by the Customs Division of the GRA. The completion of this phase also places Customs practice within the World Customs Organization’s recommendation of separating core customs operations from support services. The full deployment of the Customs Pre-Arrival Assessment Report System has been successfully executed and we commend all stakeholders for their cooperation.

Government will impose sanctions on Agents and Declarants who feed the Customs Classification and Valuation Report system with fictitious information in an attempt to defraud the state.

The second phase focuses on the full integration or interface of all services related to customs clearance with the National Single Window. A blue print will be developed for the implementation of the National Single Window.

Financial Sector

Infrastructure Development Initiatives

Government recognises infrastructure development as a key ingredient in the country’s transition and development agenda. Having attained a MIC status in 2010, conscious efforts are being made to expand, upgrade and modernize our social and economic infrastructure, with the aim of closing the wide infrastructure gap, estimated at about US$1.5 billion per annum.

Over the past three years the following initiatives have been implemented.

• National Infrastructure Plan: A draft National Infrastructure Plan has been developed by the National Development Planning Commission (NDPC) in collaboration with the Ministry of Finance. The plan will link naturally to the Public Investment Management System (PIMS) that the MoF is launching as part of the GIFMIS-Budget system. Public Private Partnerships

• Government has also adopted the PPP approach to financing infrastructure development, following Cabinet’s approval of the Policy, a PPP Bill is being finalised to be laid before Parliament. The feasibility studies have been conducted on at least 18 PPP projects whilst a number of them are at various stages of completion.

• Ghana Infrastructure Investment Fund (GIIF): The GIIF, was set up as a quasi-fiscal body to deal with the huge infrastructure deficit and to focus on strategic infrastructure that will stimulate the growth of the economy and lead to job creation following the passage of the Ghana Infrastructure Investment Fund Act, 2014 (Act 877).

The Board and the Advisory Council of the GIIF as well as management are in place. In addition, a GIIF Debt Service Account has been opened at the BoG for designated domestic and sovereign debt.

The Ministry of Finance is in the process of transferring projects that are commercially viable to the GIIF for management. Proposals have also been submitted to the GIIF Board to finance a number of fuel tanks as part of the strategic steps in the decentralisation of petroleum prices.

Under the proposal approved by Cabinet, for construction of the Airport City (Phase II), the land rights will be vested in GIIF which will then enter into appropriate commercial arrangements with the developers.

CONCLUSION

The interventions outlined in this Budget will no doubt contribute significantly to the realisation of our brighter medium term prospects.

Indeed, we have produced tangible results in the following broad areas:

• strategically encouraged investment in agriculture in order to reduce the importation of rice and poultry in particular to save our currency from dipping further and also implemented other measures to stabilize the Cedi;

• improved upon our road, rail and aviation networks; expanded access to potable water throughout the country; expanded and upgraded our ports to improve service delivery and handle more cargo; improved upon our ICT infrastructure; and provided quality affordable housing; provided decent office accommodation for Honourable members by completing the refurbishment and inaugurating the Job 600;

• we have expanded emergency services; and improved upon regulation of the sector; we have and will continue to improve health service delivery by constructing, expanding and upgrading of teaching, regional and district hospitals as well as polyclinics, CHPS compounds; · in our resolve to eradicate schools under trees and improve access to education, we have replaced 1,714 out of 2,578 schools under trees with decent accommodation and facilities; started the implementation of the progressively free SHS; procured and distributed free school uniforms and other educational materials; and expanded the school feeding programme which will continue in 2016;

• we are expanding and upgrading the power generation system, transmission and distribution networks to completely address the perennial supply challenges we face as a country as well as exploiting renewable energy sources;

• we have expanded the LEAP programme to cover over 190,000 households and the cash grant per head increased from GH¢36.00 to GH¢44.00. The programme will be expanded in 2016 to cover 250,000 households;

• we continued to invest in human capital and increased access to vocational training for the old and young alike; developed a Human Resource Policy Framework and Manual to improve human resource management and development in the public service; improved the Performance Management System; and introduced a comprehensive Human Resource Management Information System to improve performance and productivity in the Public Service;

• we have strengthened public protection of our citizens and improved upon general security in the country. We will ensure that human lives and property are protected before, during and after the 2016 general elections;

• as part of the wide ranging structural reforms hinged on our “Home Grown Policies” and consolidated by the IMF programme, we have commenced the process for the preparation of the new PFM Bill to strengthen our Public Financial Management reforms and system;

• we are taking steps at bolstering our infrastructure by setting up the GIIF to take on huge but economically viable capital infrastructure that cannot be sustained on the budget.

The 2016 budget is about following through the transformational agenda of the Government with strategic action. Having assessed the global and domestic challenges facing our economy, we have explored the opportunities and taken bold steps at bracing the storm.

We cannot sustain these developments and move confidently to a MIC status in a business as usual way. We are being creative and innovative. 231. We have taken our vision of “Changing Lives and Transforming Ghana” from the drawing board to the real world, where each strategy is being applied, appraised, adjusted and advanced to ensure that our actions produce the desired results. We have laid foundations to move forward as a country to succeed on many fronts.

We are clearly on track to achieving our goals and the evidence justifies our bold new approach. The results are crystal clear and we are committed to consolidating the gains towards a brighter future as embodied in the theme for the Budget “Consolidating Progress towards a Brighter Medium Term”.

In 2016, we will be seeking another mandate to continue leading the on-going development process of our beloved country. We will stand proudly before our people with confidence in our choices and results achieved so far, and we will ask once again for their mandate and cooperation as we move forward to complete the job we started together.