ghananlpcommunity/ghana-gov-speeches-sentences huggingface dataset:
Speaker as a result and in fulfilment of the President’s promise, Government has: abolished the 1 percent Special Import Levy which was imposed mainly on imported raw materials and machinery; abolished the 17.5 percent VAT/NHIL on financial services; abolished the 17.5 percent VAT/NHIL imposed on airline tickets; abolished the excise duty on petroleum to reduce the excess burden on final consumers; reduced the special petroleum tax rate from 17.5 percent to 15 percent to mitigate the excess burden on final consumers; abolished the 5 percent VAT flat rate on the sale of real estate; abolished import duty on spare parts; exempted from tax, the gains from realization of securities listed on the Ghana Stock Exchange; reviewed the ESLA to reduce the cost of power and reduced the National Electrification Scheme Levy from 5 percent to 3 percent; and the Public Lighting Levy from 5 percent to 2 percent; replaced the 17.5 percent standard rate with the 3 percent flat VAT/NHIL rate for supplies by retailers and wholesalers; and Capped earmarked funds to 25 percent of tax revenue.
Speaker, we will be coming back to Parliament this week to laythe Regulations to abolish the 17.5 percent VAT/NHIL on selected imported medicines, which are currently not produced locally.
Speaker, with this background and in accordance with the PFM Act, my presentation of this Mid-Year Fiscal Policy Review will focus on the following broad thematic areas: an overview of recent macroeconomic developments; an update of macroeconomic forecasts contained in the 2017 budget; an analysis of the total revenue, expenditure and financing performance; a presentation of a revised 2017 macro-fiscal frameworkand the implication of the revised budget outlook for the Medium-Term Fiscal and Expenditure Framework; and Key highlights of 2017 budget implementation.
SECTION TWO: OVERVIEW OF RECENT MACROECONOMIC DEVELOPMENTS Updates on Macroeconomic Developments in 2016 Mr.
Speaker, in the 2017 Budget, we provided information on macro-fiscal developments for the 2016 fiscal year.
We, however, now have updated information, which has resulted in the revision of some of the macro-fiscal variables for 2016.
With your permission, Mr.
Speaker, let me provide updates on these macroeconomic indicators.
GDP Growth Provisional data released by the Ghana Statistical Service in April, 2017 show that real GDP growth for 2016 was 3.5 percent, against the provisional estimate of 3.6 percent reported in the 2017 budget and lower than the 3.8 percent recorded for 2015, the lowest in over fifteen years.
The Services sector, which though was the best growth performer in 2016, recorded a growth of barely 5.7 percent, followed by the Agriculture sector, growing at 3.0 percent and the Industry Sector which contracted by 1.4 percent.
The economy we inherited Mr.
Speaker, was severely impaired.
Speaker, the slowdown in growth in 2016 was largely underpinned by a substantial contraction in the Cocoa sub-sector (-7.0%) and the Petroleum sub-sector (-16.9%).
The decline in the Petroleum sub-sector was largely because of the downtime that occurred because of damage to the turret bearing of the FPSO Kwame Nkrumah.
The Services sector increased its share of GDP from 54.6 percent in 2015 to 56.9 percent in 2016.
Over the same period, the share of Industry declined from 25.1 percent to 24.2 percent, while that of Agriculture also declined from 20.3 percent to 18.9 percent.
The revised 2016 GDP data is presented as AppendixTable 1 Fiscal Performance Mr.
Speaker, on the fiscal front, updated information shows that the end-2016 fiscal deficit was worse than previously estimated, at 9.3 percent of GDP compared to the provisionalfigure of 8.7 percent of GDP on cash basis at the time of presenting the 2017 Budget.The deficit on commitment basis is now at 10.9 percent of GDP up from the 10.3 percent previously reported.
This revision has been occasioned by the reversal of interest payment on a non-marketable instrument that fell due at end-2016 but recorded as part of 2017 flows, as well as the revision of the 2016 GDP by the Ghana Statistical Service (GSS) in April 2017.
Speaker, the interest payment reversed in 2016 amounted to GH¢758.5 million and the 2016 nominal GDP was revised from GH¢168.73 billion to Gh¢167.31 billion.
The revised 2016 fiscal table is presented in Appendix Table 2 Public Debt Mr.
Speaker, in recent years the country has unfortunately accumulated a large amount of debt, which resulted in the country beingat a high risk of debt distress and putting our economic development in jeopardy.
From a debt stock of GH¢9.5 billion at the end of 2008, it increased to GH¢122.3 billion at the end of 2016 (an increase of debt stock by 1,154%).
The debt servicing payments arising from this legacy of debt accumulation amounts to some 45 percent of total domestic revenue.
Unfortunately, our economy would have to live with this burden for some time as we make efforts to repair the damage.The revised 2016 nominal GDP of GH¢167.3billion, puts the public debt-to-GDP ratio at 73.1 percent of GDP against the 72.5 percent reported in the 2017 Budget presented to this House earlier in March this year.
Speaker, we inherited a weak economy characterized by: high fiscal deficit (9.3% of GDP on a cash basis against a target of 5% on cash basis); a primary deficit of 1.4 percent of GDP against a target surplus of 1.2 percent high debt-to-GDP ratio (73.1% of GDP); high inflation (15.4%); low credit to the private sector; high interest rate (91-TB rate: 16.4%); weak domestic revenue mobilization; low external Reserves of 2.8 months of Import Cover; policy reversals including some unconstrained expenditures (Gh¢7bn of outstanding commitments and undischarged obligations); and weak economic growth (3.5%, lowest in fifteen years) Recent Macroeconomic Developments in 2017 Mr.
Speaker, consistent with Section 28(2)(c) of Act 921, we will now present macro-fiscal developments up to the first half of 2017.
In cases where January-June 2017 data are not available, we will provide the latest available data.
Speaker, to put the performance of the economy in the first half of 2017 into perspective, it will be useful to remind ourselves of the macroeconomic targets we set for ourselves for the 2017 fiscal year based on the overall macroeconomic objectives of Government.
Consistent with our medium-term development priorities, the macroeconomic framework for 2017 aims at ensuring macroeconomic stability, shifting the focus of economic management from taxation to production, protecting the preferential option for the poor and making the machinery of government work to deliver the benefits of progress for all Ghanaians.
Anchored on the medium term macroeconomic framework, the specific macroeconomic targets set for 2017 were as follows: overall GDP growth rate of 6.3 percent; non-oil GDP growth rate of 4.6 percent; end-year inflation rate of 11.2 percent; average inflation rate 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.
Speaker, we promised to stabilize the economy in a sustainable manner, while accelerating growth and creating prosperity and jobs for all.
The macro-fiscal performance we have achieved in the first six months of President Akufo-Addo’s administration is showing remarkable progress.The major macroeconomic indicators are now trending in the right direction indicating that the economy is on track.
Speaker, developments from January up to June 2017, indicate that the President’s policies and programmes are yielding the expected results, and,in some case exceeding expectations.
: The GDP for first quarter of 2017 grew by 6.6 percent against 4.4 percent for the same period in 2016; Inflation reduced to 12.1 percent at the end of June 2017, from 15.4 percent at end December 2016; Interest rates are on the decline.
For example, the 91-day treasury bill rates have reduced from 16.4 percent at end 2016 to 12.08 percent at end June 2017; The fiscal deficit as a percentage of GDP for the period January-June 2017 was 2.7 percent compared with a deficit of 4.0 percent over the same period in 2016; The primary surplus for January-June 2017 was 0.6 percent of GDP compared to a deficit of 1.3 percent over the same period in 2016; and The Gross International Reserves at the end of June 2017 was US$5.9 billion, the equivalent of 3.4 months of import cover, up from US$4.9 billion at the end of December 2016 (equivalent to 2.8 months of import cover).
Speaker, these indicators clearly show that the economy is on the path of recovery and investor confidence has been restored.
Additionally, the business and consumer confidence surveys by the Bank of Ghana conducted in June 2017 broadly reflects positive sentiments in the direction of the economy as noted in the July edition of the Bank of Ghana’s MPC press release.
Mr.Speaker, based on the significant progress that has been made in macroeconomic stability and improvements in real GDP growth, the Fitch Rating Agency, on 12 th May 2017, revised its outlook on Ghana’s long term foreign and local currency Issuer Default Ratings (IDR) from Negative to Stable and affirmed the country’s IDR at B. We are optimistic that we will sustain the gains made in macroeconomic stability and instil more confidence in the economy for both domestic and international investors.
Speaker, permit me to delve into the details of the macro-fiscal performance for the period under review.
GDP Growth Mr.
Speaker, provisional data from the Ghana Statistical Service (GSS)show that the overall real GDP growth (year-on-year) for the first quarter of 2017 was 6.6 percent, an increase from 4.4 percent registered for the same quarter of 2016.
The Industry sector recorded the highest and impressive growth of 11.5 percent, up from 1.8 percent in the same quarter of 2016.
The Agriculture sector recorded a growth of 7.6 percent, compared with 5.0 percent recorded over the same period in 2016.The Services Sectorrecorded a modestgrowth of 3.7 percent, compared with 6.6 percent in the same period of 2016, as shown in Appendix Table3 Mr.
Speaker, the performance in the Industry Sector was largely driven by the Mining and Quarrying (which includes Petroleum) sub-sector, which had contracted over the corresponding period in 2016.
Underpinning the year-on-year improvement in Agriculture was a strong growth performance in Crops and Cocoa, and a substantially improved performance in the Fisheries sub-sector.
The year-on-year slowdown in growth of the Services sector reflects a corresponding slowdown in growth of the key subsectors of Information and Communication, and Finance and Insurance.
In nominal terms, the first quarter 2017 GDP at current prices was GH¢44.7billion, compared with GH¢36.5billion for the corresponding period in 2016.
In real terms, these translate into GH¢8.6billion and GH¢8.0 billion for first quarter 2017 and 2016 respectively.
[EA1] Inflation Mr.
Speaker, headline inflation consistently declined from 15.4 percent in December 2016 to 12.1 percent in June 2017.
The consecutive decline in inflation during the period was broad-based with food and non-food inflation declining.
Food inflation went downfrom 9.7 percent in December 2016 to 6.2 percent in June 2017, while non-food inflation declined from 18.2 percent to 15.1 percent over the same period.
The observed disinflation process was influenced largely by monetary policy tightness, fiscal discipline and stability in the exchange rate.
Monetary, Credit, and Financial Markets Mr.
Speaker, broad money supply (M2+) expanded by 23.7 percent in May 2017, in comparison with 16.8 percent a year ago.
All the components of M2+ grew at higher pace in May 2017 compared with May 2016.
Total outstanding credit stood at GH¢365 billion at the end of May 2017, of which the private sector accounted for 86.5 percent.
Outstanding credit to the private sector recorded an annual growth of 16.2 percent in May 2017 against 10.1 percent a year earlier.
Speaker,interest rates have responded to government’s economic policies and are now trending downwards.The Bank of Ghana reduced its Monetary Policy Rate (MPR) by 450 basis points from January to July 2017: 200 basis points (bps) from 25.5 percent to 23.5 percent in March 2017, by 100 basis points in May to 22.5 percent, and further by 150 basis points to 21 percent in July 2017.The trend of lower interest rates we are seeing is in direct response to the equally consistent declines in headline inflation and inflation expectations, and the general improvements in the macroeconomic fundamentals.
In response, the average interest rates on the 91-day bill has declined since December 2016 from 16.81 percentto 12.10 percent in June 2017 while the rates on the 182-day Treasury-bill rate fell from 18.5 percent in December 2016 to 13.28 percent in June 2017.
Speaker, the period under review witnessed a turn-around on the Stock Exchange, reflecting growing investor confidence in the economy.
The Ghana Stock Exchange Composite Index (GSE-CI) closed at 1,964.6 points in June 2017, from 1,689.1 points in December 2016, gaining 16.3 percent on a year-to-date basis.
Total market capitalization increased to GH¢59.5 billion in June 2017 from GH¢52.7 billion in December 2016, representing a year-to-date growth of 12.9 percent.
The increase was due to higher trade volumes and share prices.
Sectors that recorded market capitalisation gains were Oil, Food and Beverages, Agriculture, Finance, Distribution, Information Technology, and Manufacturing sub-sectors.
Trade Balance Mr.
Speaker, global developments continue to impact on the country’s external sector performance.
Provisional estimates show that the trade account recorded a surplus of US$1,429 million for the first half of 2017 due to a significant increase in export earnings combined with lower imports.
This compares to an almost equivalent deficit of US$1,403.7 million over the same period in 2016.
Merchandise exports increased by 39.7 percent from a deficit of US$727.7 million same period last year to US$7.2billion for the Jan-June 2017 period reflecting higher gold and crude oil export earnings.
On the other hand, merchandise imports reduced by 14.2 percent to US$5.7billion, mainly on account of decreases in both oil and non-oil imports.
Exchange rates Mr.
Speaker, the Ghana cedi remains relatively stable on the back of Ghana’s improved external payments position, improved market sentiments, the positive impact of fiscal consolidation, and increased foreign exchange inflows since mid-March 2017.
Since March 2017, the exchange rate has been fairly stable on the back of government’s economic policies.
This has been supported by improved liquidity, the emerging trade surplus and increased reserves.In the Inter-Bank Market, the Ghana cedi depreciated on cumulative basis by 3.7 percent, 8.3 percent and 10.8 percent against the US dollar, the pound sterling and the euro respectively by end-June 2017.. International Reserves Mr.
Speaker, the country’s Gross International Reserves improved markedly from a stock position of US$4.9billion at the end of December 2016, which could cover 2.8 months of imports, to US$5.9billion in June 2017, sufficient cover for 3.4 months of imports.
SECTION THREE: PROVISIONAL FISCAL PERFORMANCE FOR JANUARY-JUNE 2017 Mr.
Speaker, fiscal policy in the 2017 Budget was designed to restore confidence in the economy, ensure fiscal and debt sustainability and promote overall macroeconomic stability.
Preliminary fiscal data for the period indicates that: the overall fiscal deficit was 2.7 percent of GDP against a target of 3.5 percent; the primary balance for the period was a surplus of 0.6 percent of GDP against a targeted deficit of 0.01 percent; the lower than programmed deficit resulted from both revenues and expenditures falling below their respective targets; Total Revenue and Grants fell below target by 14.9 percent; and Total expenditure (incl.
the clearance of arrears) was consequently aligned to match revenue inflows and thuswas below target by 16.7 percent.
Revenue Performance Mr.
Speaker, Total Revenue and Grants for the period amounted to GH¢17.5 billion (8.6 percent of GDP) against a target of GH¢20.5 billion (10.1 percent of GDP).
In nominal terms, the provisional outturn was 6.5 percent higher than the outturn during the same period in 2016, as shown in Appendix Table 4 Mr.
Speaker, total Domestic Revenue, comprising all categories of tax and non-tax revenues amounted to GH¢16.9 billion.
Of this amount, total tax revenue (including upstream petroleum receipts) was GH¢13.7 billion, against a target of GH¢15.7 billion.
The provisional outturn was 13.1 percent lower than the target of GH¢15.7 billion.
Upstream petroleum receipts amounted to GH¢342.9 million, against a target of GH¢319.3 million; of which, GH¢115.65 million was from Corporate Income Taxes.
Speaker, revenue performance after the passage of the Budget at the end of March 2017 has seen much improvement compared to the first quarter.
Tax revenue performance is expected to improve in the coming months as economic agents assimilate the new tax policy measures and the tax compliance measures to stop leakages,yield results.
Speaker, taxes on Income and Property and International Trade accounted for about 47 percent and 33 percent of the total shortfall in tax revenue respectively.
The remaining 20 percent was accounted for by the shortfall in taxes on Domestic Goods and Services.
Speaker, a slower level of economic activity in the services sectors of the economy impacted Income taxes while lower import volumes led to lower revenues from International Trade taxes.
Grant disbursements from development partners amounted to GH¢808.4 million and was 20.6 percent lower than the budget target of GH¢1.0 billion.
In nominal terms, the outturn was 27.9 percent higher than the outturn during the same period in 2016.
Total Expenditure and Arrears Clearance Mr.
Speaker, Total Expenditure, including payments for the clearance of arrears amounted to GH¢23.0 billion (11.3 percent of GDP), against a target of GH¢27.6 billion (13.6 percent of GDP).
Budget allotments for the period, were reviewed to match the revenue inflows to ensure that our fiscal objectives and targets were not derailed.
Wages and salaries for the period amounted to GH¢6.8 billion (3.4 percent of GDP) which was within the target of GH¢6.9 billion.
Speaker, expenditures on the use of Goods & Services amounted to GH¢854.6 million (0.4 percent of GDP) against the target of GH¢1.4 billion (0.7 percent of GDP).This represents 61.4 percent of programmed target for the period.
Interest payments amounted to GH¢6.7 billion (3.3 percent of GDP) against a target of GH¢7.1 billion (3.5 percent of GDP), 5.5 percent lower than the target.
Speaker, our liability management programme including re-profiling (extending maturity profile of domestic debt by issuing longer-dated instruments to replace shorter-dated instruments thereby reducing annual debt servicing cost and roll over risk) is expected to provide provisional savings of GH¢612 million.
Domestic interest payment for the period amounted to GH¢5.3 billion against a target of GH¢5.7 billion, indicating potential savings of GH¢374.6 million for the period, arising mainly from the re-profiling of maturing domestic debt.
Speaker, Grants to Other Government Units, which includes the transfers made to Statutory and earmarked Funds, fell below target mainly because of lower domestic revenues.
Speaker, Capital Expenditure (CAPEX) amounted to GH¢2.4 billion (1.2 percent of GDP), 81.8 percent of the period target of GH¢2.9 billion (1.4 percent of GDP), Foreign-Financed Capital spending was, however, higher than target due mainly to improvedproject loan disbursements.
Speaker, at the end of the 2016, new arrears of some GH¢5.0 billion had been accumulated, bringing the total arrears that should be cleared to GH¢7.0 billion.
As I indicated in the 2017 Budget Statement, we are undertaking an audit of these arrears, which is expected to be completed by October 2017.
We plan to eliminate all government arrears by end 2019 following the outcome of an audit of the outstanding commitments generated as at end 2016 and institute stringent measures that will prevent the accumulation of new ones.
To this end, the clearance of arrears will be expedited in the second half of the year to ensure that the risk that these arrears pose especially to financial sector is minimized.
Overall Budget Balance and Financing Mr.
Speaker, the cash fiscal deficit wasGH¢5.6 billion (2.7 percent of GDP) compared to GH¢6.7 billion (4.0 percent of GDP) recorded in the same period in 2016.
This wasfinancedmainly from domestic sources and included a draw down on government deposits with the Bank of Ghana.
Total net Domestic Financing amounted to GH¢5.5 billion, while net Foreign Financing amounted to GH¢76.8 million.
Speaker, the primary balance recorded a surplus of 0.6 percent of GDP, against a target deficit of 0.01 percent, an indication that our fiscal effort is on track.This should ensure a lower rate of debt accumulation.
Petroleum Receipts Mr.
Speaker, petroleum receipts in the first half of 2017 amounted to US$277.79 million, compared to the end-year projection of US$515.57 million.
The revenue accrued from the Ghana Group’s 1 st and 2 nd Tweneboah-Enyerah-Ntomme (TEN) liftings, as well as the 35 th -37 th Jubilee Fields liftings.
The proceeds for the 1 st TEN and 35 th Jubilee liftings,undertaken in December 2016 were received in the first quarter of 2017.
Royalties from the Jubilee and TEN Fields for the first half of the year amounted to US$67.68 million, while Carried and Participating Interest amounted to US$182.13 million.
Other petroleum revenue sources included corporate income tax (US$27.34 million), Surface Rentals (US$0.49 million) and Petroleum Holding Fund (PHF) income of US$0.17 million.
Speaker, of the amount received, a total of US$90.90 million has been transferred to GNPC in respect of Equity Financing Cost (US$51.81 million) and its share of the net Carried and Participating Interest (US$39.10 million).
The balance was transferred to the ABFA (US$117.74 million) and the Ghana Petroleum Funds (US$78.25 million).
Of the amount transferred to the Ghana Petroleum Funds, US$23.48 million and US$54.78 million were transferred to the Ghana Heritage Fund and the Ghana Stabilisation Fund, respectively.
Developments in Public Debt Mr.
Speaker, in nominal terms, the gross public debt stock stood at a provisional figure of GH¢138.5 billion (US$ 31.7 billion) as at end June 2017.
The stock comprised external and domestic debt of GH¢74.6 billion (US$ 17.1 billion) and GH¢ 63.9 billion (US$ 14.6 billion) respectively.
Speaker, contrary to the annual average rate of debt accumulation of 36.7 percent per annumover the last eight years, the rate of accumulation over the last six months is only about 13.3 percent.
Speaker, as of end March 2017, the debt-to-GDP ratio was estimated to be 70.9 percent and given the current trend, we expect the ratio to be around 71.0 percent by the end of the year, once all the effects of this year’s debt re-profiling have materialised.
Speaker, it is important to note that while we do not expect the debt reprofiling to add to the existing stock of debt, it is expected, however, that the stock of debt should increase marginally by the already programmed net financing of this year’s budget deficit.
Debt management strategy Mr.
Speaker, the Medium-Term Debt Management Strategy (MTDS) for 2017-2019 is in fulfilment of Section 59 of the Public Financial Management Act, 2016 (Act 921), and is the first to be prepared under the Act.
Speaker, the chosen strategy is in line with the debt management objectives of borrowing at a minimum cost and maintaining a prudent degree of risk while helping to develop the domestic capital market.
It envisages increased interest by non-resident investors in the domestic bond market.
Government intends to lower borrowing cost, minimize the growth of short-term domestic debt and lengthen the maturity profile of domestic debt under the re-profiling programme.