The Budget Statement and Economic Policy for Fiscal Year 2011

Dr. Kwabena Duffuor, Finance Minister, and his Deputy, Fifi Kwetey walking into Parliament House

194.    The National Board for Small Scale Industries will organize 2000 tailor made entrepreneurial and technical improvement programs for 60,000 entrepreneurs.  It will also support 1,800 MSE’s to improve the packaging and quality of their products.  It will establish 10 new Business Advisory Centres in 10 Districts to support MSE development.

POLICY INITIATIVES

Water for All

195.    Madam Speaker, good water is a basic human need and a requirement for the sustenance of life.  Unfortunately, many of our compatriots have to live without potable water.  In most of our rural communities, citizens have to depend on streams and rivers as their source of water.  Madam Speaker, government will provide safe and portable water to the citizenry to reduce the incidence of health related water borne diseases government will provide 20,000 boreholes across the country over the next five years starting 2011 fiscal year.

Addressing Endemic Poverty (Savannah Accelerated Development Authority and Central Region Development Commission –CEDECOM)

196.    Madam Speaker, in fulfillment of Government’s pledge to address the unacceptably high incidence of poverty in the northern Savannah regions and in the Central Region, the two institutions will be supported to facilitate and implement major poverty reducing programmes.

197.    In that regard, adequate provision has been made for SADA to implement their programmes for the 2011 fiscal year.

198.    For CEDECOM budgetary provision has made for the implementation of initiatives in the areas of tourism development, agribusiness, salt production and human resource development to create jobs and facilitate business in the region.

Protecting the Non-Oil Sector

199.    Madam Speaker, the recent rebasing of the country’s national accounts provides data on the growth poles of the economy to guide policy analysis and decision making.  It is evident from the rebased data that the traditional sectors of agriculture and manufacture have lost out to the service sector in terms of contribution to GDP.

200.    Based on rebased data, growth rates recorded in the Agriculture, Industry and Service Sector were – 1.7 per cent, 6.1 percent and 7.7 per cent respectively in 2007. Provisional figures for 2010 show agriculture and Industrial growth of 4.8 per cent and 6.0 per cent respectively compared to 8.2 per cent growth in the service sector.

201.    Madam Speaker, Government recognizes the immense contribution of the non-oil sector towards the growth and development of this country. Measures will be put in place to ensure the continuous sustenance of the non-oil sector in order that it does not play second fiddle to the oil sector as has happened in some oil producing countries.

202.    Madam Speaker, the 2011 budget would seek to address this by specific interventions in the agriculture and the manufacturing sectors to revamp their lead in the growth agenda.  The private sector would be supported in diverse ways in the effort of increasing industrial production and output that would create jobs.

203.    Designing and implementing policies and strategies to modernize the agricultural sector and at the same time targeting the development of the industrial and services sectors to increase their contribution to GDP will therefore be top priority of government.

204.    Madam Speaker, Government’s agriculture development strategy is based on the knowledge that agriculture has significant potential to grow beyond the levels experienced in recent years. Specific interventions in the agric sector to ensure growth in output and the elimination of income variability will include the following:

·    Accelerating the use of mechanization;

·    Establishing district centres for agriculture advisory services;

·    Improving the application of modern science and technology;

·    Promoting the development of appropriate irrigation schemes; and

·    Providing agriculture financing through the establishment of Agricultural Development Fund.

205.    Madam Speaker, the private sector will also be assisted to become globally competitive in support of government’s growth and development agenda. In this respect, government will ensure the creation of a diversified, innovative and fully integrated industrial sector with the active participation of the private sector.  Government expects the oil and gas sector to impact significantly on economic activities over the medium term to achieve the right synergies for job creation. In this connection, the Public-Private Partnership (PPP) option in the implementation of mega projects in the construction, transport, manufacturing and service provision sectors will be explored.

206.    The issue of high economic and non-economic cost of doing business will be tackled in consultation with other stakeholders and government will continue to promote public-private partnership to accelerate the development and implementation of policies.

Automation and Modernization Programme Of The National Lottery Authority

207.    Madam Speaker, as part of its automation and modernization programme, the National Lottery Authority will deploy ten thousand (10,000) points of sales terminals during the year. This will create at least 10,000 jobs for new lotto marketing companies, and facilitate the participation of the remaining banker to banker and former private lotto operators in the lotto marketing business as defined under the lottery Act 722. New products will be introduced and commissions restructured to increase NLA’s contribution to the treasury.

Private Sector Competitiveness

208.    The Government of Ghana (GoG) has developed a new Medium Term Development Plan to replace the Growth and Poverty Reduction Strategy (GPRS II covering 2006-2009), which like the previous strategies, is expected to prioritize growth as the way of reducing poverty. The design and development of Ghana’s Medium Term Private Sector Development Strategy Phase II, has been designed with the theme: ‘A thriving private sector – Job creation and enhanced livelihood for all’. This initiative has three main strategic objectives:

·    To improve the investment climate;

·    To transform the economy from a factor driven economy with a competitive, efficiency driven economy;

·    To provide greater incentives for creating formal jobs and improving livelihoods.

209.    To achieve these three objectives, the government is committed to creating an environment which broaden investment and encourage greater enterprise development and innovation. Government also will create a more supportive basis for transforming the economy by increasing productivity, especially in the small and medium enterprise sector and will provide greater incentives for creating formal jobs. Finally, the Government will work towards increasing economic opportunities for the poor especially in underdeveloped regions.

210.    To achieve these two objectives, Government is committed to creating an environment that is conducive for the private sector to expand and create jobs.

211.    Madam Speaker, challenges still remain, but Government is committed to making improvements in the areas of:

·    Starting a business;
·    Dealing with licenses;
·    Increasing Job creation;
·    Registering property;
·    Access to credit;
·    Payment of  taxes; and
·    Contract Enforcement.

212.    Madam Speaker, Ghana’s regulatory system has been characterized by unclear divisions of regulatory responsibilities between agencies, duplication in functions, and lack of clarity in the roles and powers of the agencies among others.

213.    To address these challenges, Government will undertake the following specific actions:

·    Design a transparent, simplified and client-friendly business application process that covers divergent and cross-cutting issues for small, medium and large enterprises.

·    Provide support to develop and strengthen public-private dialogue.

·    Ensure the continual implementation of an outreach and capacity building programme to raise awareness among potential private sector players.

214.    Madam Speaker, as part of government’s continuous commitment to support the private sector, a well coordinated reform initiative within the framework of Public Private Partnership (PPP) has begun. The PPP policy document has been finalized and will be submitted to cabinet for approval. In this regard projects such as the Alstom Power Plant in the energy sector, the Takoradi and Tema Port expansion and the Accra Kumasi Toll road will be undertaken within the PPP framework.

215.    Madam Speaker, we wish to assure Ghanaians and the international community that we will not be complacent but rather maintain the pace of reforms that have brought us this far.

Affordable Housing Using Local Raw Material

216.    Madam Speaker, housing is recognized as one of the important infrastructural development necessary for the economic growth of this nation.  Ghana faces an acute housing deficit of one million units especially in the urban centres.  The cost of housing and other infrastructural development is excessively high as most of the materials used are imported.  However, there exist abundant raw materials which can be used in the construction industry to reduce import content in the construction industry.

217.    Madam Speaker, government is seeking to ensure that by the year 2015 at least 60 per cent of materials used in the building and construction industry will be indigenous raw materials.  A housing policy programme on the utilization of local building materials such as clay brick and tiles, pozzolana cement, bamboo etc. in the construction industry has already been prepared on the initiative of government.

218.    It is anticipated that the increased use of these durable local materials will considerably reduce the import bill on building materials in addition to the following:

·    conserving capital;
·    providing employment for the youth especially within the localities;
·    providing affordable housing;
·    improving engineering qualities;
·    generating revenues to the state; and

·    improving infrastructural development especially in districts where indigenous building material plants will be located.

Monetization of Government Interests in Mining

219.    Currently, Ghana has shares and carried interests in a number of mining companies that enable government to receive significant cash flows from royalties and dividends. The current increases in gold prices, increased demand for gold exposure by investors, and the appreciation in the equity interests in the gold mining companies present a unique opportunity for the government to consider the monetization of all or portion of its gold interests to deliver a significant capital sum to support the nation’s growth and development.

220.    Beginning in fiscal year 2011 therefore, government will commence discussions on the establishment of a national vehicle, the ‘Ghana Gold Company (GGC)’, which will hold the country’s gold royalties and equity interest. The GGC will be a newly incorporated company that will be 100 percent owned by the government and into which the government will transfer its gold and equity interests.

221.    The benefits to government of having such a company are several, including the following:

·    delivery of significant capital sum to the government, raised from private markets;

·    innovative way to capitalize on the market premium for royalties;

·    provides government with continued exposure to capital appreciation of a national company, together with ongoing dividends;

·    availability of capital raising options to government, including trade sale, stock market listing, gold-linked bond issue, etc;

·    existence of a national vehicle that can raise further capital from future royalties and/or other assets.

Pension Scheme for the Informal Sector

222.    Madam Speaker, H.E. the President, Prof. J.E. Atta Mills launched the new pension scheme on 16th September, 2009. Following the passage of the National Pension Act, 2008 (Act 766), the National Pensions Regulatory Authority has been established to oversee the administration and management of the new three-tier pension scheme.

223.    Implementation of the new scheme started in January 2010 with the mandatory first and second tier schemes, followed by the voluntary third their which commenced on 1st May 2010. The Pensions Regulatory Authority has issued provisional registration to a number of employer sponsored provident fund schemes and group pension scheme for the informal sector.

224.    Madam Speaker, it is important to note that provision has been made in the third-tier voluntary personal pension scheme to cater for the peculiar needs of workers in the informal sector who are about 85 percent of the working population.

225.    Informal sector contributors will have two accounts, a retirement account (to provide benefits on retirement) and a personal savings account with rules for withdrawals before retirement. What this means is that workers in the informal sector can now participate in a pension scheme which will take care of them in their old age and just like counterparts in the formal sector, will also receive monthly pensions as well as a lump sum.

Social safety nets

226.    The most vulnerable groups are supported through a number of programmes, including the capitation grant (financial support for school fees), school feeding, fertilizer subsidies for small-scale farmers, NHIS and reduced electricity tariffs for lifeline consumers. In updating the government’s poverty reduction strategy for the medium term, the government reviewed the complementarity and effectiveness of the various social safety nets. At the same time, the government has worked with key stakeholders to review the current classification of poverty-reducing expenditure, and will ensure that the support focuses on the key programmes.

Public Safety and Security

227.    Madam Speaker, the safety and security of all Ghanaians is a major pre-occupation of the NDC Government. Despite the emerging challenges in sophisticated crimes, our security agencies are ready to maintain peace and order for all Ghanaians.

228.    In this regard, Government is committed to provide the necessary support and logistics for our security agencies. For the 2011 budget, major housing projects and other interventions will be pursued with the objective of ensuring a reduction in crime levels and the maintenance of stability in all parts of the country.

Programme of Persons with Disability

229.    The share of the Common Fund for person with disability is to be increased from the current 2 percent to 3 percent in line with the social democratic tenets of the NDC of supporting the disadvantaged. District Assemblies are to ensure speedy releases of the funds to support the programme of persons with disability.

Electricity sector

230.    Following finalization of a study of the operations of the electricity sector, government adopted a comprehensive financial restructuring and recovery plan for the sector. The key elements of this plan are: (i) an upward adjustment in electricity tariffs; (ii) implementation of actions to strengthen revenue collection by the electricity sector public utilities; and (iii) adoption of a plan to restructure the balance sheets of the utilities by the end of 2011. Going forward, tariffs will be subject to quarterly reviews to ensure continued cost recovery. However, Government will continue to make provision in the Budget to provide subsidies to support life-line consumers of electricity.

Supporting Poultry Farming

231.    Madam Speaker, last year, Government promised to assist poultry farmers to acquire equipment, chicken feed, chemicals and other inputs to enable them undertake large scale production of poultry in the country. Government also promised to levy duties to cut down on imports of poultry and fish into the country and to support local production.

232.    During the year, government engaged the Poultry Farmers Association on how to increase local production to the level where domestic demand can be met in fiscal year 2010. Government found that the major constraints to large-scale poultry production in the country are lack of credit, equipment, and poultry feed.

233.    To support poultry farmers to increase local production of chicken and eggs, a significant portion of the Japanese grant and other grants will be made available to poultry farmers to be used to acquire the necessary equipment and chemicals for the industry. Government also believes that the huge production of maize in recent times should support local production of poultry feed in the country. Discussions are also underway with some foreign investors on the production of poultry feed in the country. Once the discussions are concluded and production commences, the problem of lack of poultry feed will become a thing of the past.

Public Debt Management

234.    Madam Speaker, while grant financing and concessional loan financing will constitute the core component of external support in the near future, non-concessional financing will be used for projects contracted or guaranteed by the government where there is no scope for concessional or grant financing, the impact on debt sustainability is manageable, and project evaluations show a high rate of social or economic return.

235.    A number of reforms are being introduced to further strengthen debt management. These include:

·    the adoption of an explicit debt management strategy, establishing clear objectives for debt management in terms of the cost and risk of the debt portfolio, and identifying potential funding sources and consideration for probable changes in the relevant legislation in the face of the possible use of new financial instruments;

·    close monitoring of all public sector external debt contracts by the Ministry of Finance’s Debt Management Division; and

·    the adoption of clearly defined framework for appraising Public investment projects being considered for non-concessional external loan financing, their benefits and prioritization across projects, to ensure consistency with the government’s developmental priorities. Guidelines laying out this process will be developed by the Ministry of Finance and submitted to Cabinet for approval.

Public Private Partnership

236.    Madam Speaker, the Government is committed to improving public investment management through a framework that facilitates public and private investment in the delivery of infrastructure and public service projects. In this regard, the Ministry of Finance & Economic Planning has established a Public Investment Division (PID) which will be the central organ within Government to provide strategic guidance to: (1) national investment and project development;(2) project appraisal;(3) project screening, selection and budgeting;(4) project implementation;(5) project adjustment; and (6) project evaluation and monitoring.

237.    Madam Speaker, the establishment of the PID reflects an assurance of efficiency in public investment decisions to boost investment in public infrastructure and services that contribute to improvements in human capital.

238.    Madam Speaker, in line with Government’s policy in accelerating infrastructure modernization a Public-Private Partnership arrangement has been concluded for the Construction of a Fly-Over and Vehicular Interchange over the Accra-Tema Motorway at Teshie Link. This aims at reducing congestion, reducing travel time and facilitating the movement of goods and people within the Accra-East Corridor.

SME DEVELOPMENT

239.    Madam Speaker, Growth and Employment in Ghana, are directly linked to the growth of SMSE’s.  Most businesses in Ghana fall within the category of Micro, Small and Medium Enterprises, with an employment capacity of close to 70 percent of the Ghanaian labour force.

240.    SME’s thus have significant contribution to make to Ghana’s socio-economic development and growth, and the attainment of its middle income status.

241.    Despite these benefit, the tremendous potential of small and Medium Enterprises are yet to be realized, due to the challenges confronting the sector – which has led to the shifting of focus from entrepreneurship to a proliferation of petty trading nationwide.

242.    Madam Speaker, Government has put in measures to remove bottlenecks constraining MSME’s development.

243.    These measures include:

·    The Government through the Ministry of Trade and Industry under the (Private Sector Development Strategy stage II)will strengthen SME Support institutions such as NBSSI, GEPC, EMPRETEC and NGO’s working in the area of entrepreneurship and enterprise development;

·    Collaboration with and strengthening of SME’s business associations, through consultations and dialogue;

·    Provision of vital information to SME’s to facilitate effective linkages and networking among SME’s and between SME’s and Large Scale Enterprises;

·    Entrepreneurial Skills Development through Harmonization and Coordination of entrepreneurial programmes and activities of various training agencies, so as to enhance the managerial, technical and other competencies of SME operations.

AGRO-PROCESSING

244.    Madam Speaker, Government intends to boost commercial agriculture by engaging the private sector through the Public Private Partnership framework in agro processing.  The Public Investment Division of the Ministry of Finance and Economic Planning has been tasked to work with the Ministry of Food and Agriculture to consider proposals from private sector organisations in developing large scale commercial farms in rice, maize and soya bean cultivation and processing among others with the expertise from South Africa using state of the art technology.  With the help of the South African expertise, large feed processing mills will be established as part of the agro processing to feed the poultry industry.  This agricultural development programme will help in: –

o    Sustaining the country’s food security and also meet needs of the School Feeding Programme;

o    Stimulation of domestic economic activity particularly in the agro-processing sector; and

o    Contributing to the millennium development goal of required healthy levels of animal protein consumption by the year 2015.

China Framework Agreements

245.    In pursuit of the NDC Government’s Manifesto commitment to invest in the nation’s infrastructure as an anchor for accelerated economic transformation, His Excellency the President in September, this year, led a high powered team to the People’s Republic of China and signed agreements totaling some 13 billion dollars.

246.    The two agreements signed with the China Development Bank and the China Exim Bank respectively, will when crystallised, see a massive investment that will bring about an unprecedented transformation of the nation’s infrastructure in the areas of road, rail, energy, water, education, etc.

247.    In the course of 2011, as the financing terms of the projects covered by these two framework agreements reach their final stages, specific loan agreements will be brought before Parliament to seek approval to pave way for the accessing of these pivotal resources to accelerate the pace of the nation’s infrastructural transformation.

CONCLUSION

248.    Madam Speaker, the budget I have tabled before this august House gives further impetus to the government’s commitment to create a ‘’Better Ghana’’ for all.

249.    Madam Speaker, the NDC Government has done a lot in the two years that it has been in office to restore macroeconomic stability and put the economy on a path of rapid and sustainable growth. Inflation has been reduced to a single digit; interest rates are on a declining trend; the twin deficits of fiscal and current account have been reduced to acceptable levels; foreign reserves have increased significantly, which together have stabilized the value of the Cedi. These are by no means a small feat in a period of two years.

250.    Madam Speaker, the theme for this year’s budget, “Stimulating Growth and Development for Job Creation”, is indeed appropriate. The 2011 budget puts Ghana on the right path to achieving accelerated economic growth and prosperity in an environment of stability. Indeed, the economy will grow rapidly in the coming years, supported by the scaling up of the disbursement of project loans and grants and utilizing the new opportunities for higher growth that may accompany the downstream activities of the oil and gas industry.

251.    Madam Speaker, significant resources have been deployed to modernize agriculture, boost manufacturing, provide critical infrastructure, improve the delivery of water, sanitation and electricity services, support the private sector to grow and become more competitive, and develop our human resource capability. Government is also ensuring that the appropriate structural and institutional reforms take place so that the mixture of agriculture, manufacturing, mining, oil and gas provide a modern, dynamic and diversified economy.

252.    Madam Speaker, government has also kept its commitment to implementing the single spine salary structure which was introduced by the previous government. The government is implementing the policy despite the obvious risks and challenges it poses to fiscal management in the country because of the positive impact it has on welfare and living conditions of employees in the public sector. This is a demonstration to the people of Ghana that, even in the face of serious resource constraints, the welfare of the people cannot be compromised by the government.

253.    Madam Speaker, the proposals I have tabled before the House today seek to grow the Ghanaian economy on a sustainable basis; create jobs to reduce unemployment; improve household and business incomes to broaden the base of wealth creation; and improve the delivery of social services, including healthcare and access to quality education, to improve the quality of life of the people of Ghana.

254.    Madam Speaker, the year 2011 must see Ghana perpetuate hope in its people. I will like to assure my fellow Ghanaians that the government of the NDC has placed the economy of this country on the path of sustainable growth and development, prosperity, stability and peace for the benefit of all.

Madam Speaker, I beg to move.

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