2020 budget: Full statement

INTRODUCTION

 

1. Right Honourable Speaker, Honourable Members of Parliament, on the authority of His Excellency the President Nana Addo Dankwa Akufo-Addo, I beg to move that this august House approves the Financial Policy of the Government of Ghana for the year ending 31st December, 2020.

 

2. Mr. Speaker, on the authority of His Excellency the President, and in keeping with the requirement of Article 179 of the 1992 Constitution of the Republic of Ghana, and Section 21(3) of the PFM Act 2016 (ACT 921), may I respectfully present the Budget Statement and Economic Policies of Government for 2020 to this Honourable House.

 

3. I also submit before this august House, the 2019 Annual Report on the Petroleum Funds, in accordance with Section 48 of the Petroleum Revenue Management Act, 2011 (Act 815), as amended, and a Report on the African Union 0.2 percent Import Levy.

 

4. Mr. Speaker, this statement is an abridged version of the Budget Statement and Economic Policy of the Government of Ghana for the 2020 Financial Year. I would like to request the Hansard Department to capture the entire Budget Statement and Economic Policy.

 

 

5. Mr. Speaker, in substance, 2019 has been a very good year for Ghana. This is the year that one can confidently say that God’s blessing of the hard work is beginning to manifest, putting us on a positive trajectory for a proper lift. I say so because:
6. We have won some painful but necessary battles for God and country;
7. We have quietly but incontestably achieved significant structural changes for the economy;

iii.                We have stabilized greatly the macro-economic turbulence that was all too regular a feature in the management of the national economy;

1. We have delivered on our flagship programmes;
2. Mr. Speaker, the gains made so far are significant.

 

6. It is proper to put this budget into perspective to understand how far we have come. On Thursday, 2nd March 2017, I had the honour and privilege to present the first budget of President Akufo-Addo to this House. At that time, as you may recall, the economy was in a very bad shape, suffocating under a mixed weight of debts, arrears, very high cost of living, high youth unemployment and the worst growth rate since 1994. Moreover:-
7. Growth in agriculture was declining;
8. Industry growth was in the negative;

iii.                Interest rates were high;

1. The banking system was weak;
2. Unemployment was rising; and
3. Businesses and households were working mainly to pay off their utility bills.

 

7. Mr. Speaker, the poor state of public finances, weak policy implementation and lack of policy credibility resulted in Ghana requesting an IMF bailout in August 2014. The economic model being practised at the time was a simple, unexamined formula of tax, borrow and spend without a focus on production. The previous government resorted to some draconian fiscal measures; notably the increase in the tax burden on many items and activities, including condoms, cutlasses as well as ‘kayayie’.

 

8. Mr. Speaker, a freeze was imposed on the public sector from employing people. There were cuts to a number of areas of spending, most notably were cuts to research allowances for lecturers, nursing training, and teacher training allowances. Yet, the government then was awarding billions of cedis worth of contracts without knowing about how to pay for them. It was a case of living for today and leaving tomorrow to take care of itself.

 

9. President Akufo-Addo’s maiden State of the Nation Address captured the situation and his Government’s attitude towards it succinctly: “Too much time, energy and resources were spent in the past, in my view, without a deliberate, conscious assessment of their impact on jobs, and whether or not we were spending wisely to improve the lives of the people, communities and businesses. But, I was not elected by the overwhelming majority of the Ghanaian people to complain. I was elected to get things done. I was elected to fix what is broken and my government and I are determined to do just that.”

 

10. Mr. Speaker, that is exactly what we have done within the last three years. The President had set out his vision and programmes in clear language in his maiden address. He said this within the context of an economy that was seriously challenged; the full extent of which we were yet to discover.  And yet, by January 2017, the nation was hopeful because change had come. In the 2017 Budget, we illustrated the NPP Government’s expectations, aspirations and hope for Ghana’s future, using the miracle of Jesus when he fed 5,000 people with 5 loaves of bread and two fish. We also declared that the budget was going to “sow the seeds for growth and jobs”.

 

11. Quite apart from the fragile structural policy and worsening macro-fiscal situation passed on to us, this Government had to also address serious contractual commitments. The exorbitant energy bill from expensive, difficult-to-explain ‘take or pay’ of Power Purchase Agreements; a pile up of unpaid arrears and outstanding commitments, mostly accrued from contracts awarded without the slightest care for the public purse.

 

12. Mr. Speaker, if you add the cost of cleaning the financial sector challenges to the long list of legacy bills that the Akufo-Addo government had to settle, the cost to the Ghanaian tax payer is around GH?33 billion.

 

13. Mr. Speaker exactly 2 years, 8 months and 12 days later, I stand before you to declare that indeed God has been gracious. His favour has shone on our nation and it is because, in my humble view, we, their new leaders, choose to serve His people rightly and sincerely.

 

14. Mr. Speaker, thankfully, we came in with a plan, stayed focused, kept our discipline, kept our promises and managed to strike a balance between maintaining fiscal discipline and supporting businesses and households with tax reliefs, yes, we dared to abolish all manner of nuisance taxes. Despite the limited resources at our disposal, we implemented our plan which included the introduction of stimulus packages for some viable but struggling businesses; increasing spending significantly on social services, and implemented our flagship programmes.

 

15. Prof K A Busia said, “The concept of poverty… should be seen not only in terms of cash or the scarcity or underdevelopment of material resources but also in human conditions, in disease, ignorance, lack of training, and education [and[… [t]he first essential requirement for progress is the development of the human being.” That is why, Mr. Speaker, President Akufo-Addo would never shy away from the responsibility of investing to prepare our children for their own future.

 

16. As a result of us introducing the necessary combination of focus, discipline, integrity, creativity, compassion and competence, in just 32 months in office, Mr. Speaker, the Lord has blessed our efforts. The economy has seen a miraculous turnaround, moving now in the right direction. I speak to the data, Mr. Speaker:
17. Economic growth rate has doubled under President Akufo-Addo, rebounding strongly from 3.4 percent in 2016 (the lowest GDP growth rate since 1994); averaging 7%;
18. Inflation rate has fallen from 15.4 percent in December 2016 to 7.6 percent (new series) in September 2019, registering the lowest rate in 27 years; which makes 2019 the year with the slowest ever rise in the prices of goods and service in Ghana in the entire history of the Fourth Republic–– Yes, Mr. Speaker, 2019 has been good for Ghana because when inflation slows down everybody benefits;

iii.         The banking sector is on the rise again, recording by mid-year, a year-on-year after tax profit of GH?1.67 billion, or 36 per cent, in 2019. This is good for Ghana because when the banks are strong the economy is strong;

14. The 91-day treasury bill rate fell steadily from nearly 17 percent in December 2016 and now stands at 14.7 percent. This is good for Ghana because when the cost of borrowing is low businesses expand, jobs are created and spending rises;
15. We have reduced the fiscal deficit, which on cash and commitment basis was below 5% this year, at 4.5 percent at the end of the third quarter of 2019;
16. On the external front, the trade deficit has improved from US$1.8 billion in 2016 to a surplus of US$2.6 billion in August 2019. This is good for Ghana as it helps to keep our currency stable and our economy strong;

 

17. Today, we can be proud of ourselves for the progress we have made together as Ghanaians. This competent Government came into office with a plan. And, we are delivering according to plan. In the President, the people of Ghana are clear on what they voted for: leadership. Strong, assured, decisive, intelligent, focused and compassionate leadership. Election after election, he has been consistent with his vision, focused on his priorities, and unwavering on the path to getting us there. Not even two defeats could shake him away from his convictions.
18. Mr. Speaker, I am proud to stand here and declare that the President has redeemed virtually all the pledges he made to the people of Ghana.
19. Mr. Speaker, the numbers, indeed, don’t lie and I have some numbers that make interesting reading:
20. 1.2 million Ghanaian students would have had access to secondary education by 2020, justifying the spending of Gh¢2.2billion. It is gratifying to note that the first cohort of students under the programme numbering about 362,000 are due to graduate in 2020.
21. 1.9 million people have directly benefited from the Planting for Food and Job programme;

iii.       97,373 graduates have been given an opportunity under NABCO to better position them for future jobs;

1. 83,000 Ghanaians have been recruited under the Forest Plantation Programme to help restore our environment;
2. A further 138,026 Ghanaians have been recruited under various programmes to support public sector delivery;
3. 55,000 nurses have been recruited to enhance healthcare delivery;

vii.       3.6 million Ghanaians have been registered under the national ID programmes;

viii.       1,000 sanitary facilities are under construction to address open defecation;

1. 49,000 trainee nurses have been paid Gh¢468 million in allowances;
2.  48,000 teacher trainees have also been paid Ghc532 million in allowances;
3. Mr. Speaker, to support Industry and Entrepreneurship;
4. 181 companies have benefited from support under the 1D1F programme;
5. 12,000 start-up businesses have received training support under the Government Entrepreneurship Programme;

iii.    80 business incubation hubs have been set up across the country to build the capacity of entrepreneurs;

1. 20,000 students have been trained under the Student Entrepreneurship Initiative;
2. 100 disabled women have been empowered to start businesses;
3. Dagbon is finally at peace!

 

21. Mr. Speaker, in fulfilment of our promise, IPEP has delivered the following:
22. 307 Ambulances have been procured for distribution to each constituency and all regional and teaching hospitals to enhance healthcare;
23. 200 dams have been completed, and an additional 360 are dams under construction;

iii.        50 prefabricated grain warehouses have been constructed to reduce post-harvest losses; and

1. 50 rural markets are under construction to enhance trade within our local assemblies.

 

22. Mr. Speaker, I wish to take this opportunity to express my sincere gratitude to you and Honourable Members, for the wise counsel, support, activism, opposition and cooperation that you have given to the Executive since 2017. Dare I say, our friends on the other side of this House have proven to be very vocal Opposition.
23. Mr. Speaker, our macroeconomic achievements have not gone unnoticed. Our discipline and determination to stay focused has been recognized by our global partners namely the UN, World bank and IMF to mention a few.
24. Mr. Speaker, this is manifested by:
25. the President selected as the co-Chair of the SDG Advcoates;
26. Ghana represented by the Minister of Finance as the Chairperson of the Development Committee of the World Bank; and

iii.        Ghana represented by the Governor of the Bank of Ghana appointed as the incoming Chair of the Board of Governors of the Bretton Woods Institutions

 

25. Mr. Speaker, the budget I will be presenting today is critical in various respects:
26. First, it is an election year budget and we know the history of such budgets;
27. Second, it is the first, since 2015, to be done without an IMF programme because of our successful completion of the derailed IMF programme last April; and

iii.        Third, it is the first election year budget to be prepared under the Fiscal Responsibility Act (2018), which places a 5 per cent cap on fiscal deficit in any given year;

 

26. Mr. Speaker, in 2020, Government will make a strong push on the under-listed priorities in order to consolidate the gains achieved within the last three years and to drive our economic transformation forward in line with the President’s Consolidated Programme and the Ghana Beyond Aid vision:
27. Domestic Revenue Mobilization: We will take radical policy and institutional reforms towards raising our tax-to-GDP ratio over the medium term from under 13 percent currently to around 20 percent. The focus will be on efficiency and base-broadening rather than imposing new taxes on our people and businesses. This way, we can raise our domestic contribution to our ambitious transformation agenda, in line with the Ghana Beyond Aid vision;
28. Business Regulatory Reforms: A 3-year reform initiative, coordinated by the Ministry of Trade and Industry, will be implemented to make Ghana one of the most transparently and efficiently regulated business environments in Africa. This will empower our local businesses and also help us realise our ambition of making Ghana the Gateway to Business in West Africa;

iii.        Intensified Drive for FDI: We need higher amounts of external private capital to complement Government resources in driving our transformation. So, we will aggressively go after Foreign Direct Investment (FDI). To this end, GIPC will be better resourced with human and financial capital. In addition, Government has establish an Inter-Ministerial Committee to provide coordinated policy guidance and support to the FDI drive;

1. Enhanced Financial Support to Local Enterprises: Government will deploy early in 2020 a number of intiative to enhance the access of our business to finance, including medium and long-term capital. These include the new National Development Bank, the Ghana Incentives-based Risk Sharing System for Agricultural Lending (GIRSAL), the Ghana Commodity Exchange, and a strengthened Venture Capital Trust Fund;
2. International Financial Services Centre. Work is progressing steadily on preparations to realise Government vision of establishing Ghana as a regional financial services centre in West Africa. The Concept Note has been approved by Government and work is ongoing to draft an International Financial Services (IFS) Bill for broader stakeholder consultations;
3. Digitization: We aim to use digitization to transform our development path in line with the global realities of the 4th Industrial Revolution. We will continue the impressive achievements made over the last three years in using digitization to improve government services and make it more accessible to Ghanaians. We will also intensify efforts to support the development of Fintech  and the knowledge economy in Ghana;

vii.        Accelerated Infrastructure Development: We will accelerate financing for infrastructure by actively leveraging innovative sources of finance. To this end, we are strengthening the capacity the Ghana Infrastructure Investment Fund (GIIF) to tap into global financial markets, including blended finance and sovereign wealth funds. Supporting private sector development;

viii.        Science and Technology: The foundation for industrialization is science and technology. Government has therefore resolved to complement our advances in human capital in the education sector with a focused push to develop our national technological capability. To this end, Government, through the Ministry of Science, Environment, Technology and Innovation (MESTI) will establish the Ghana Design and Manufacturing Centre (GDMC). A center of excellence in design, manufacturing and technology commercialization, GDMC will facilitate the incubation of new technological industries and serve as a resource for national research institutions and private industry.

1. Private Sector: Mr. Speaker, the private sector remains the key to jobs and transformation of our economy. We have had meaningful discussions, and MoTI has established the Public Private   Dialogue series, to ensure a coordinated strategy for transformation.
2. Mr. Speaker, 2020 is an election year. I would like to take this opportunity to inform this august House on behalf of the President that all the needed resources required shall be marshalled for the Electoral Commission to ensure that we have credible, free and fair elections. Ghana remains one of the most stable and peaceful countries in the world and we intend to maintain it that way.

 

28. In spite of the year being an election year, Mr. Speaker, let me repeat that President Akufo-Addo and his Government will ensure that the perennial excessive spending during such periods, will not happen in 2020. We shall work within the 2020 appropriated resource envelop and adhere to the Fiscal Responsibility Act to maintain fiscal discipline. We will do so, not because we are complacent of our chances. No. We will do so because the nation needs it and we are not prepared to throw away all the sacrifices and gains the people and their Government have made in the last three years. We shall consolidate our macroeconomic gains and offer businesses and households the predictability and stability that they need to manage their lives.

 

29. Mr. Speaker, Ghana has developed an integrated institutional framework for the implementation of the SDGs, from the national to the sub-national levels. The SDGs have been embedded in the President’s Coordinated Programme for Economic and Social Development Policies, national policies and objectives of the Government’s flagship programmes.

 

30. Mr. Speaker, this systematic approach has made it possible for Ghana to be the first country in the world to incorporate the SDGs into our national Chart of Accounts, allowing us to track spending towards the SDGs targets.

 

 

THE MACROECONOMY

31. Mr. Speaker, for the last two years (2018 and 2019), Ghana has been amongst the fastest growing economies in the world! Ghana’s recent growth has not been primarily driven by oil, it has been more broad-based. In fact, Non-oil GDP has increased from 4.6% in 2016 to 6.5% in 2018 and is projected to reach 6.0% in 2019 and 6.7% in 2020, respectively, reflecting the impact of our flagship programmes.
32. Mr. Speaker, the increased economic growth has been the result of increased agricultural and industrial output. As a result of the successful Planting for Food and Jobs Program, agricultural GDP growth has increased from 2.9 percent in 2016 to 4.8 percent in 2018 and projected to reach 6.4 percent in 2019. It is heartening to note that unlike in the past, Ghana has not had to import maize for food consumption in the last two years. Industry has also seen a recovery with industry growth increasing from 4.3 percent in 2016 to 10.6 percent in 2018, and projected to grow by 8.8 percent in 2019. This is real change.
33. Mr. Speaker, the restoration and sustainability of macroeconomic stability has been a cornerstone of the economic policy of President Akufo-Addo’s government. Without macroeconomic stability, all the goals that we have set for ourselves as a country will not be achieved. As a demonstration of our commitment to macroeconomic stability, we have pursued a policy of fiscal discipline which we have supported with the passage of the Fiscal Responsibility Act, 2018 (Act 982) (that limits the fiscal deficit in any year to 5% of GDP) and the establishment of a Fiscal Council.

 

34. Mr. Speaker, the fiscal deficit (on cash basis) has significantly fallen from 6.5% of GDP in 2016 to 4.5% of GDP in September 2019. For the first time in a decade, Ghana recorded primary surpluses (that is our tax revenues exceeded all government spending—excluding debt service payments) for two years in a row. That is real change!

 

35. Economic management under the Fourth Republic, with the exception of 2004, has tended to follow a pattern of political business cycle where election years have been characterised by fiscal indiscipline. We have witnessed various governments spending excessively to finance off-budget expenditures that led to major fiscal slippages, as in the case of 2016, when the then Government recorded a fiscal deficit of 6.5 percent against its own target of 3.9 percent. Therefore, the decision of the President to impose on himself, a binding legislative constraint, with accompanying sanctions for me as the Finance Minister, I believe this a clear manifestation of our commitment to fiscal discipline. We pledge to Ghanaians that we will not derail this economy that we have worked so hard to fix. This is real change!

Fiscal Performance for 2019

36. Mr. Speaker, Government remains committed to safeguarding the macro-fiscal gains that we have achieved over the last three years in the management of the nation’s public finances. The implementation of the Fiscal Responsibility Act, the establishment and operationalisation of the Fiscal Responsibility Advisory and Financial Stability Councils, have complemented several other institutional and structural reforms to strengthen fiscal discipline and ensure irreversibility of policies.

 

37. Mr. Speaker, over the first nine months of the 2019 fiscal year, provisional fiscal data indicates that the fiscal deficit arising from Government’s fiscal operations was 4.5 percent of GDP on cash basis. This compares to a deficit target of 4.1 percent of GDP for the period. The higher-than-programmed fiscal deficit resulted mainly from revenue underperformance. Although expenditures were also below target, the expenditure execution rate was higher than revenue execution rate.

 

38. Mr. Speaker, Total Revenue and Grants for the period, amounted to GH¢36.3 billion (10.5% of GDP). The outturn represents a per annum growth of 9.2 percent despite a 13.6 percent shortfall relative to the target of GH¢42.0 billion (12.1 percent of GDP).
39. Mr. Speaker, the general underperformance of tax revenue mainly stems from shortfalls in International Trade taxes and on Income and Property taxes. The shortfall in international trade taxes, which consist of Import Duty and Levies, External VAT, and Customs National Health and GETFund levies, resulted from lower import volumes, high admittance of imported goods into the zero-rated and/or tax-exempt import brackets and the lower tariff bands, up to the 10 percent tariff levels.

 

40. Total Expenditure including arrears clearance amounted to GH¢51.9 billion (15.1% of GDP) compared to the target of GH¢56.1 billion (16.2 percent of GDP). Except for Interest Payments, all expenditure line items were contained within their respective targets.
41. Mr. Speaker, following Government’s fiscal operations, the overall fiscal balance on cash basis resulted in a deficit of GH¢15.7 billion (equivalent to 4.5 percent of GDP) against the target of GH¢14.2 billion (or 4.1 percent of GDP). The higher-than-programmed financing (especially from domestic sources) stems mainly from the frontloading of financing requirements to meet Government expenditures and other debt service obligations, including for the settlement of uncovered Government auctions following substantial revenue shortfalls.
42. Mr. Speaker, the Primary Balance for the period was a deficit of GH¢916 million (0.3% of GDP) against the targeted Primary Surplus of GH¢201.7 million (0.1% of GDP).

 

Outlook for End-year 2019

43. Mr. Speaker, based on the provisional fiscal outturn for the first nine months of the year, revised projection for the year resulted in Total Revenue and Grants of GH¢54.6 billion (15.8% of GDP). This projection represents a 7.4 percent shortfall relative to the 2019 revised annual budget target of GH¢58.9 billion (17.0% of GDP).

 

44. Although available data supports the fact that revenue mobilisation is most robust in the last quarter of every year, it is prudent to remain conservative with the revenue projections in order to avoid excess spending in the last quarter.

 

45. Mr. Speaker, consequently, discretionary expenditures will be adjusted accordingly to ensure that the fiscal deficit target is not compromised and remains within the Fiscal Responsibility Rule target of not more than 5 percent of GDP. Specifically, the fiscal deficit is projected to reach about 4.7 percent of GDP with a Primary Surplus of about 0.9 percent of GDP.

 

46. Mr. Speaker, total public debt has increased from GHC122.3 billion in 2016 to GHC208.6 billion (including the cost of the banking sector clean-up) at the end of September 2019. However, the strong fiscal adjustment and better debt management has meant that the rate of debt accumulation (excluding the banking sector clean-up) of 14.3 percent, is the second lowest in the last decade. The debt to GDP ratio increased from 56.9 percent in 2016 to 57.5 percent at the end of September 2019, excluding the financial sector bailout. Including the financial sector bailout and energy payments, the debt to GDP ratio was 60.55 as at end September 2019.

 

47. Mr. Speaker, we promised to move the economic policy away from one focused on taxation to one focused on production and we have done just that over the last three year. I would like to note that:
48. Import duties were reduced by 50% from April 2019;
49. The 1% Special import levy was abolished;

iii.        Excise duty on petroleum was abolished;

17. 17.5% VAT on financial services was abolished;
18. 17.5% VAT on selected important medicines was abolished;
19. 17.5% VAT on Real Estate Sales was abolished;

vii.        17.5% VAT on domestic airline tickets was abolished;

viii.        Abolished import duty on the importation of spare parts;

1. Abolished taxation of gains from the realisation of securities listed on the Ghana Stock Exchange and publicly held securities approved by the SEC;

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