The last time Ken Ofori-Atta presented a budget it was perhaps before a small group of NPP bigwigs and he did so as chairman of NPP fundraising committee. That budget was key to how the NPP won the general elections.
But today, he presents another type of budget – an exponentially different responsibility because this budget is the national budget. It will be a huge signal to everybody because according to some analysts, every Ghanaian owes GHC4,436.
Ghana owes GHC122billion. With a depressing economic growth rate below and around 4% for the past few years, the question is, will this budget give the hope the NPP government promised?
Already, the NPP economic focus is to move away from taxation to production by:
i.reducing the corporate tax rate from 25% to 20%
ii. removing import duties on raw materials and machinery for production within the context of the ECOWAS Common External Tariff (CET) Protocol
iii.abolishing the Special Import Levy
iv.abolishing the 17.5% VAT on imported medicines not produced in the country
v.abolishing the 17.5% VAT on Financial Services
vi.abolishing the 5% VAT on Real Estate sales
vii.abolishing the 17.5% VAT on domestic airline tickets
viii.reducing VAT for micro and small enterprises from the current
17.5% to the 3% Flat Rate VAT introduced by the Kufuor-led NPP government
ix.introducing tax credits and other incentives for businesses that hire young graduates from tertiary institutions, and
x.reviewing withholding taxes imposed on various sectors (including the mining sector) that have constrained the liquidity of many businesses.
Off we go, Ken Ofori-Atta in his characteristic white print begins reading the budget. ‘Mr. Speaker, I come in peace’, he says.
He thanks Parliament for approving him after three and a half hours of vetting and thanks the President for taking a ‘bold’ step of appointing him Finance minister. He weighs in on Ghana’s 60th anniversary and says he is thankful to be in charge of helping move Ghana beyond aid.
He is heavily heckled for paying tribute to founding members of the country including JB Danquah. Speaker is furious at the heckling and threatens to suspend sitting if MPs cannot listen.
‘Through Jesus Christ we can resolve this challenges and establish a righteous and just society for all’
The economy is distressed about of excessive borrowing, weak commitment to control, excessively priced procurements, inflated costs.
Debt stock is about 73% of GDP in excessive sustainability threshold of 70%
Interest payment 42% of tax revenue.
Total expense is 30.3 against 23.6 of GDP as at 2016. 5.5% Fiscal deficit target missed sharply at 10%.
Private sector is struggling. The macroeconomic fundamentals need to be fixed.
Budget is a ‘clear road map’ to build the most business-friendly economy in Africa.
Low revenue, high expenditure, corruption, high wage bill, high debt service payments are the factors that undermine government’s goal of building a business friendly economy.
In 2016 budget allocation for five ministries was 2.2bn cedis. But interest payments was 10billion cedis. ‘This is how pernicious our debt strangehold is’
Key policy priorities in the 2017 budget are: The creation of the infrastrucure for povery alleviation where every constituency will receive $1million to each constituency to combat poverty. Implement one-district,one factory. Establish Zongo development fund, roll out free SHS and National Identification Scheme, National digital address system and restore teachers and nurses training allowance.
He assures Ghanaians, investors that government will continue with the IMF program but review becnhmarks to accomodate government priorities.
‘We cannot borrow our way out of poverty. The budget is to grow our way out of poverty’ he says.
Global economic performance
Economy is expected to improve growth rate of 3.4% after lucklusre performance. Oil prices are expected at $55 per barrel, a 20% increase over 2015. Cocoa price expected to reach $2,940 per tonne.
Implications of global development: There could be commodity price volatility.
MACROECONOMY
Minining and quarrying underperformed. Agriculture recorded positive growth rate. Service sector keeps dominating. Inflation began to slow down ending at 15.4% in 2016. Ghana cedi remained relatively stable in 2016 on account of tighter monetary policy and improved foreign exchange inflows. But in December, exhcange rate stability was undermined.
FISCAL DEVELOPMENT
The targeted fiscal consolidation in 2016 was not achieved. Total revenue and grants was 11% below target. While expenditure exceeded target by 13.1%. This increased the fiscal deficit. This is because tax compliance was relatively weak, the energy crisis and revenue mobilisation was relatively weak.
Energy Sector levies is to pay for legacy debts estimated at 2billion cedis. 3.2bn was programmed to be collected. But actual collection is 3.3bn cedis.
Growth target(non-oil): 4.6%
Growth target (with oil): 6.6%
End-year inflation of 11.2%
Overall fiscal deficit of 6.5% GDP
Gross foreign assets to cover at least three and a half months.
Resource mobilization
Total revenue and grants and petroleum receipts: 44.9bn cedis (33.5% increase from 2016)
Total tax revenue for 2017 is GHC 34.4billion
Taxes on goods and service 13.9billion cedis
International trade taxes GHC7.9bn
Resources allocation for 2017
3.7bn to be used to clear arrears and outstandling claims
Compensations and wages: 16billion cedis
Expenditures on good s and services: about 1bn cedis
240million budgeted for reliefs for lifeline power consumers
The 2017 overall budget deficit is expected to reach 13.2bn or 6.5% of GDP
Net domestic financing :14.6bn
Net foreign financing $1.3bn
Petroleum revenue estimated at $515m. He wants Parliament to maintain the current distribution scheme of oil revenue although it is set to expire.
Sectorial outlines
Parliament in 2016 passed 25 bills and 19 loan agreements.
Agriculture: In 2017, government will launch the planting for food and jobs campaign to mimick ‘Operation feed yourself’. 755,00 jobs expected to be created. 180,000 tonnes of subsided fertilizers to be distributed in 2017.
Trade and Industry: Gov’t intends to roll out one export policy from each district.
Tourism,culture and creative arts: It remains very underdeveloped despite potential.
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