Budget Highlights

The government will by June this year establish a Central Revenue Authority (CRA) to improve revenue administration.

The Authority will coordinate revenue mobilization by the revenue agencies, the Minister of Finance, Mr Kwame Peprah, said in his budget statement to Parliament in Accra today.

The authority will streamline tax administration as well as inject more efficiency into the operations of the revenue collection agencies.

"As the main body responsible for the day-to-day administration of the agencies, the Authority will not only oversee the implementation of the Value Added Tax (VAT) but also ensure the sharing of information, enhance the coordination of programmes and activities of CEPS, IRS and the VAT Secretariat and reduce the cost of collection of taxes in the country."

Mr Peprah said the government will continue to pursue policies to rationalise tariffs, strengthen the administrative framework for expenditure control and effectively mobilize revenue.

Mr Peprah said the programme outlined in the budget calls for increased national resource mobilization in order to limit strictly the extent of government recourse to local borrowings with the associated crowding out of the private sector.

At the same time, government recognises the need to widen the tax net while rationalising the tax system and providing some incentives for enhanced economic activity.

The minister thanked parliament for passing the VAT Act which, he said,''paves the way for the implementation of the major tax reforms''.

Mr Peprah said the personal relief for employees and self employed persons will remain unchanged.

However, the income bands are to be stretched to compensate employees and self-employed persons for any erosion in their incomes due to the fact that the banks lending rates have not been reviewed for the past two years.

Mr Peprah said in order to support agriculture, government is proposing a reduction from 35 per cent to 20 per cent of the tax on income derived from bank lending to agriculture.

Government proposes to reduce income taxes on Rural Banks from 35 per cent to eight per cent following their reclassification as non-traditional banks in recognition of the services they render to the rural communities.

Mr Peprah said the government proposes to increase penalties and fines for failure to comply with income tax laws which were fixed between 1986 and 1989.

Taxes on commercial vehicles are to be reviewed following discussions with GPRTU and other transport operators.

Rates applicable to high occupancy passenger buses and wet cargo vehicles are to be reduced from 10 to five per cent. The rates for taxis, trotros and light duty cargo vehicles are also be revised.

Mr Peprah said following consultations with the manufacturing sector, government is proposing to reduce the domestic excise duties on selected commodities and introduce equivalent duties on the competing imports in order to level the playing field.

On imported second-hand vehicles, he said, the government will abolish penalties on over-aged vehicles. Instead, vehicles older than 10 years, are to be banned and any vessel which lands with such a vehicle from May one, this year, ''will pay a surcharge per vehicle''.

Ghana's economy seems to be heading for a positive growth pattern as its current account deficit is expected to drop from 1,193.0 billion cedis to 1,184.0 billion cedis this year and inflationary pressure also easing to a targeted single digit figure.

Mr Kwame Peprah, Minister of Finance, said today in the 1998 budget statement to parliament that the economy is expected to grow at a Gross Domestic Product (GDP) rate of 5.6 per cent with an end of year inflation of 9.5 per cent.

It is also estimated that the primary budget surplus will be equivalent to four per cent of GDP while the overall balance of payments surplus will stand at 80 million US dollars.

These targets are comparable to the previous year's which saw the economy grow by 5.1 per cent with the end of period inflation closing at 20.8 per cent. The budget surplus in percentage to GDP last year was 3.4 per cent

Mr Peprah was optimistic the targets set in the financial programme would be achieved through expenditure control, revenue mobilisation and the strengthening of the budget monitoring process.

"The focus of the 1998 budget will be on strengthening budgetary discipline and increasing savings," the Finance Minister told the Parliamentarians. He said that fiscal consolidation which is also necessary for macro-economic stability will be given an added impetus.

On the breakdowns of his financial plan, Mr Peprah said the total revenue and grants for the period will hit 3,821.0 billion cedis while the expenditure pattern will finish at 5,005.0 billion cedis.

This is an increase over last year's total revenue of 2,571.0 billion cedis and expenditure volume of 3,821.0 billion cedis.

Mr Peprah said the net change in the domestic arrears of the nation will drop sharply by 48 billion cedis from 84.0 billion cedis. However, foreign sources of funding will continue to dominate Ghana's budget financing as foreign component of 576.0 billion cedis against domestic sourcing of 456.0 billion cedis are expected to support the 1998 financial plan.

On its estimates of receipts, Mr Peprah said the nation's bulk revenue and grants will be made up of tax revenue of 2,834 billion cedis, non-tax revenue of 438 billion cedis,foreign grants of 549 billion cedis and divestiture receipts of 200 billion cedis.

A Greater chunk of the total expenditure of 5,005 billion cedis will go for recurrent which will take 2,384 billion cedis, while foreign financed capital expenditures will eat up 1,432 billion cedis and the remaining 760 billion cedis will be channelled into domestically-financed capital expenditures. Expenditure on personal emoluments has been targeted at 940 billion cedis against the previous year's of 750.6 billion cedis with items 2-5, (travelling and transport, maintenance, repairs and renewals) programmed to take 390 billion cedis.

The total expenditure on subvented organisations has also been raised from the 1997 level of 238.9 billion cedis to 290 billion cedis. But,of all the recurrent expenditures, the Minister said education and health sectors continue to take up large shares of the allocation, with education bill rising to 452.4 billion cedis from 378.8 billion cedis while the health sector goes up from 85.6 billion cedis to 124.3 billion cedis.

The government is to spend a total of 522.2 billion cedis on road infrastructure and transport this year.

This is made up of 335.8 billion cedis in foreign inflows and 186.4 billion cedis of domestic resources, the Minister of Finance, Mr Kwame Peprah, said in his budget statement to Parliament in Accra today.

He said against this planned expenditure, the momentum of works under the Highway Sector Investment Project (HSIP) which came on stream in 1997 will be increased.

Government will continue to pursue the clearance of the roads maintenance backlog and develop cost recovery systems to put financing of road maintenance on a sustainable basis.

In view of this, the thrust of the policy for the roads sector will be to accelerate the execution of periodic and routine maintenance of roads and ensure regional balance in the provision of roads.

The thrust will also be to continue institutional capacity building for staff and local contractors while removing bottle-necks in project implementation and monitoring and deepen the involvement of the private sector in the financing and operation of road projects.

The budget allocated 225.1 billion cedis to the health sector, with government providing 33.9 billion cedis and the remaining 191 billion cedis from external inflows.

This is against 194 billion cedis voted for the sector last year, out of which government provided 31.2 billion cedis with external flows taking up the remaining 162.8 billion cedis.

Grants totalling 6.1 billion cedis will go to 68 District and Sub-District health facilities throughout the country to support primary health care delivery this year.

Sixteen new health centres will be constructed and 70 others rehabilitated and equipped.

The new health centres will be at Sameyi, Nkroful, Jukwa, Agona Nsaba, Prang, Dromankese, Aprade and Agbogba.

Others will be at Old Ningo, Teshie, Mpaha, Abromase, Kologo, Poase Cement, Nkonya Wurupon and Chinderi.

Work on upgrading 15 health centres to district hospitals, incuding those at New Edubiase, Juabeso, Nkwanta, Bimbilla, Ejura, Dodowa, Wassa Akropong, Walewale and Ada, will be accelerated while rehabilitation of eight polyclinics, 32 district hospitals and six regional hospitals will continue.

Work on the construction of new regional hospitals at Ho and Sunyani will continue, and District Health Management team offices at Ejura, Mampong Akwapim, Breman Asikuma, Kete Krachi, Sogakope, Half Assini, Tarkwa and Tema completed in furtherance of decentralising health management.

The budget allocated 87.6 billion cedis to the Education sectorout of which 23.9 billion cedis is to be mobilized from domestic sources. The remaining 63.7 billion cedis will be obtained from external sources.

Out of the domestic sources, 7.5 billion cedis will go to senior secondary schools and and training colleges, with 6.1 billion going to tertiary institutons.

It said 40.2 billion cedis was spent out of the 44.1 billion cedis allocated to the sector last year. Out of the total amount, external funding made up 25.9 billion cedis with the rest coming from domestice sources.

This year, 100 primary school buildings will be replaced with 50 new Junior Secondary Schools (JSS) as a means of improving the quality of teaching and learning in schools and increasing access to Basic Edcuation under the Free Compulsory Universal Basic Edcuation (FCUBE).

About 2,000 basic school classrooms will be rehabilitated and 200 six-unit accommodation for teachers constructed throughout the country, particulalry in rural and deprived districts.

Work will start on the first phase of the Teacher Training Rehabilitation Project covering the rehabilitation of 11 institutions while government will continue to expand and improve the quality of programmes in SSS to enable them to cater for the increasing numbers of JSS graduates. Five new SSSs will be established in this respect to bring the total to 465.

Parliament today gave the Value Added Tax (VAT) bill a third reading with a head count vote of 107 in favour and 55 against. The bill now requires presidential assent to become law. It provides for the reintroduction of the tax system which was withdrawn after a series of demonstrations in which two persons were killed in 1995.

The total estimated expenditure of the Ministry of Agriculture for this fiscasl year is 77.3 billion cedis.

This is contained in the budget statement presented by Mr Kwame Peprah, Minister of Finance to Parliament today.

The amount, he said, is made up of 11.3 billion cedis from local sources, an expected foreign inflow of 62.61 billion cedis and 3.4 billion cedis in contributions by beneficiary communities.

Mr Preprah said for the realization of agriculture objectives, the Village Infrastructure Project, will take off this year.

The project is aimed at reducing poverty and increasing the quality of life of the rural population through improvement in basic village-level infrastructure in the form of water, transport, post-harvest infrastructure and institutional strengthening.

He said it is proposed to create employment opportunities for the under and unemployed youth by leasing serviced plots to them for the cultivation of short gestation crops ( about six months gestation period) with good marketing prospects.

Ghana recorded a shortfall in export returns compared to the initial projections as stated in the 1997 budget.

Total export receipts, free on board was estimated at 1,481.3 million dollars for 1997 as against the initial projection of 1,549.8 million dollars and an outturn of 1,571.2 million dollars in 1996.

Mr Kwame Peprah, Minister of Finance said this when he reviewed the overall economic performance in the 1998 budget in Accra today.

He said the shortfall in export receipts resulted partly from the under performance of timber, on account of lower export volume and lower international prices for the commodity.

"Timber exports thus contributed 164.6 million dollars to total export receipts compared with an initial projection of 184.8 million dollars. Timber export reciepts in 1996 were 146.9 million cedis".

Mr Peprah said gold also performed below the level projected on account of the unfavourable international prices for gold.

Receipts from the export of gold amounted to 563.7 million dollars, as compared to the 612.4 million dollars realised in 1996.

Cocoa, however, recorded high export receipts than was projected. The commodity fetched 464 million dollars, representing 16 million dollars higher than was projected in the 1996 budget.

Unlike gold and timber, cocoa benefited from a higher unit price on the world market than was expected.

The Finance Minister said receipts from other exports grew by 30 per cent to 188.5 million in 1997 while corresponding receipts from the sector in 1996 were pegged at 145 million dollars.