GDP projected to reach 12.3 per cent

Accra, Nov. 18, GNA - The government, envisaging strong performance

in

the manufacturing and services sectors and the coming on stream of oil

production and exports, has projected real GDP growth to reach about 12.3=

per cent in 2011.

Dr Kwabena Duffuor, Minister of Finance and Economic Planning,

announced this when he presented the government's fiscal policy (budget)

for

the 2011 financial year at the Parliament House in Accra on Thursday.

The buddget is on the theme: "Stimulating Growth for Development an=

d

Job Creation."

Dr Duffuor said even though real GDP growth slowed down to 4.1 per c=

ent

in 2009, mainly on account of the impact of the world economic crisis,

growth was expected to bounce back to about 5.9 per cent in 2010 as the

domestic and world economic environment improved.

He said provisional GDP estimates released by the Ghana Statistical

Service (GSS) indicated that the Ghanaian economy had undergone a

significant structural change. GSS added that the services sector had

overtaken the agricultural sector, which had for long dominated the count=

ry's

economic activity.

He said: "Cocoa production, the mainstay of the agricultural sector,=

however, continues to grow strongly, with output expected to reach 650,00=

metric tons this year".

The Minister attributed the continued strong performance of the coco=

a

sub-sector to increased government support to the industry, taking the fo=

rm

of higher domestic producer prices, improved disease and pest control

programmes, rehabilitation of feeder roads in cocoa growing areas, and

payment of decent bonus packages to cocoa farmers.

Dr Duffuor said the growth of the economy in the medium term would b=

e

more broad-based, with the manufacturing sector expected to expand and th=

e

oil and gas sector joining in very strongly.

"Growth in the manufacturing sector will be driven by the increased

activity in construction, mining, oil-related infrastructure, electricity=

and water. The services sector is also expected to continue to grow at a

faster rate, on account of the expected increase in activities in the

tourism, wholesale and retail trade sub-sectors, as well as finance."

Dr Duffuor said provisional data on the implementation of the budget=

for the first three quarters of 2010 indicated that revenues were below t=

he

budget target by 1.8 per cent as against rising expenditures, which were

higher than estimated by 8.0 per cent.

He said given the performance of revenues and expenditures for the

first three quarters of 2010, the overall budget balance showed a deficit=

of

GH¢2,294.3 million, which was equivalent to 8.8 per cent of GDP, compar=

ed

with a budget target of a deficit equivalent to 7.6 per cent of GDP.

"The bigger deficit is mainly as a result of increased disbursement

of

project loans than was anticipated, and the accelerated clearance of

domestic arrears than programmed for the first three quarters of the year=

.."

He said based on the projected revenues and expenditures up to the e=

nd

of the 2010 fiscal year, the fiscal deficit for the full year was expecte=

d

to be GH¢2,514.3 million, equivalent to 9.7 per cent of GDP.

Dr Duffuor said the projected rise in the fiscal deficit was mainly

as

a result of the projected higher disbursement of project loans from

development partners than was earlier estimated.

He said on the domestic front, primary balance for the period under

review registered a deficit equivalent to 2.1 per cent of GDP, against a

budget target of a deficit equivalent to 3.2 per cent of GDP.

He said the performance of the external sector of the economy in 201=

fiscal year had been very remarkable.

The Minister added that for the first time in many years, the balanc=

e

of payments registered a surplus of over USD100 million in the first nine=

months of the year, and the projected surplus for the fiscal year is USD3=

15

million.

"The stock of gross foreign reserves of the country increased to

USD3,973 million in October 2010 from USD3,165 at the end of December 200=

9.

"This shows that the NDC Government has increased the country's cove=

r

of imports of goods and services from 1.8 months in 2008 to 2.4 months in=

2009, and to 3.2 months in 2010," he said.

Major Achievements of the Economy

Accra, Nov. 18, GNA - Dr Kwabena Duffuor, Minister of Finance and

Economic Planning on Wednesday, presented the Government's fiscal and

economic policy to Parliament in Accra.

It was under the theme: Stimulating Growth for Development and Job

Creation.

Some of the achievements highlighted were a GDP growth of 4.1 per ce=

nt

in 2009 compared to the sub-Saharan Africa growth of 2.0 per cent.

Fiscal deficit reduced significantly from the double digit of 14.5 p=

er

cent on cash basis at the end of 2008 to 9.7 per cent in 2009.

Inflation has trended downwards in sixteen (16) consecutive months f=

rom

20.74 per cent at the end June 2009 to reach 9.38 per cent in October 201=

0,

the lowest in the last two decades.

Gross international reserves of 3,973.0 million dollars at the end o=

f

October 2010 have exceeded three months of import cover compared with

reserves of 2,036.2 million dollars at end December 2008 which could bare=

ly

cover two (2) months of import.

The Ghana Cedi had strengthened and appreciated by 0.1 per cent, 2.2=

per cent and 5.4 per cent against the dollar, pound sterling and euro

respectively as at the end of September, 2010.

Met three out of the four primary convergence criteria of the West

African Monetary Zone for the first time, since the inception of the

programme of regional integration.

The 2010 Macroeconomic Performance included:

Provisional figures based on January-June, 2010 actual data indicate=

that as at September 2010, the economy had expanded by 5.9 per cent again=

st

a GDP target of 6.5 per cent.

The Agriculture Sector grew by 4.8 per cent in 2010 against a target=

of

6.0

per cent.

The Industry Sector grew by seven per cent against a target of 6.6 p=

er

cent.

The Services sector grew by 6.1 per cent and displaced the Agricultu=

re

Sector as the highest contributor to GDP.

Overall Budget deficit of 8.8 per cent f GDP for the first three

quarters of 2010.

Gross international reserves at the end of October 2010 stood at 3,9=

73

million dollars, enough to cover 3.2 months of imports of goods and

services.

The Medium-Term Macroeconomic Framework (2011-13)

The "Ghana Shared Growth and Development Agenda" (GSGDA) which is the

medium term development strategy of Government 2010-13 is the medium term

strategy of Government.

The thematic areas under the GSGDA:

* ensuring and sustaining macroeconomic stability;

* enhancing international competitiveness in Ghana's private sector;

* accelerated agricultural modernisation and sustainable natural resource management;

* oil and gas development and management; infrastructure,

* energy and human settlements development;

* human development, productivity and employment; and

* transparent and accountable governance.

Macroeconomic targets of the 2011 Budget.

Real GDP growth (excluding oil) of 7.0 per cent.

Real GDP growth (including oil) of 12.3 per cent.

Average inflation target of 8.8.

End-period inflation target of 8.5.

Fiscal balance of a deficit equivalent to 7.5 per cent; and

gross external reserves equivalent to not less than three months import

cover of goods and services.

Resource Mobilisation Initiatives

Increase in Withholding Tax Threshold of the five per cent from fifty=

currency points (GH¢50.00) to five hundred currency points (GH¢500.00=

).

Abolishing the five-year tax exemption for real estate developers. R=

eal

estate developers who partner the Ministry of Works and Housing to provid=

e

affordable houses will continue to benefit from the five year exemption.

Repeal of the LI 1817, which empowers the Ghana Investment Promotion

Council (GIPC) to grant tax exemptions for the hotel and hospitality

industry.

Increase in gift tax to be in tandem with general income tax. This wi=

ll

avoid shifting of Capital Gains to Gift Tax.

The Communication Service Tax coverage would now be extended to all

companies and persons across the industry, in conformity with the existing

law.

Increase in Value Added Tax Threshold from GH¢10,000.00 to GH¢90,000.00

for both goods and services.

The VAT taxpayers who fall below the GH¢90,000 threshold would now

fall

into a new scheme of combined VAT and income tax assessment.

The following zero rated items would be reclassified as exempt items

-

i. pharmaceutical products,

ii. paper for the publishing industry

Twenty per cent environmental tax on plastic packaging materials and

products, excluding bottled water which already attracts excise duty.

Propose to reduce the ad valorem rate by 2.5 per cent on all excisabl=

e

goods except on spirits and cigarette.

Vehicle Income Tax Rates are to be reviewed.

Tax Stamp will be reviewed for the Informal Sector Operators.

The taxation of Professionals and the Informal Sector will be

effectively monitored.

Mining List which was last reviewed in 2004, will be reviewed in 2011=

..

National Fiscal Stabilisation Levy to be extended for an additional

year.

The withholding tax on foreign supply of services will be increased f=

rom

five per cent to 15 per cent and shall be treated as final tax.

Tax holiday for APEX Bank to be inceased from five years to 10 years.

The Ministry will amend the law to allow the Commissioner-General to

tax

all commercial activities of Institutions with Tax-Free Status.

Personal Income Tax Reliefs will be reviewed.

LED Lamps are to be added to the exemption list. Local companies

producing energy saving bulbs will have the same treatment for their prim=

ary

raw materials.

Import Tax on Rice and Poultry Products to be reviewed.

Based on the ratification of the ECOWAS CET, it is proposed that the=

CET's recommended tariff of 35 per cent be imposed on imported rice and

poultry products.

Government proposes to increase airport tax as follows:

* from US$75 to US$100 for Economy Class;

* from US$75 to US$150 for Business Class;

* from US$75 to US$200 for First Class;

* from US$50 to US$60 for regional travel; and

* from GH¢ 1 to GH¢ 5 for domestic travel.

The government proposes an upward adjustment to the current Debt

Recovery levy to retire the TOR debt and its effect on the banking system=

..

The exemption list will be reviewed. The special permit is now

abolished across board, except for government imports

STRUCTURAL REFORMS

Public Financial Management Reforms include:

Ghana Integrated Financial Management Information Systems (GIFMIS) to=

transform public financial reporting system.

Introduction of Programme Based Budgeting (PBB) as part of efforts to=

address existing weaknesses in the budgeting system.

Preparatory work will begin on a new and comprehensive budget law to

effectively regulate the management of the entire public finances.

MoFEP has also established a contract database framework which tracks=

the engagement in contracts by all MDAs

The GRA intends to review the Internal Revenue Act, Customs, Excise a=

nd

Preventive Act and complete the project to review the VAT Act.

Work on fiscal decentralization will be scaled up as part of efforts

to

improve Public Financial Management at the local level

Wage Management

Public sector headcount will be continue in other public sector

institutions.

The following measures are proposed over the medium term to ensure t=

he

sustainability of the SSSS:

* Single Spine Pay Policy will be implemented within a five-year period;

* The rationalization and standardization of allowances and benefit will

be

undertaken as a matter of urgency;

* payroll audits in public sector institutions will be intensified

* performance management-related public sector reform such as labour

rationalization and others which ensure that remuneration is tied to

productivity will be accelerated; and

* migration of all subvented agencies onto the IPPD will be accelerated.

To ensure that the Social Intervention Programmes of Government are

implemented on a sustainable basis consistent with the medium term

expenditure framework, distribution formulas for parliamentary approvals

of

the DACF, GETFund and the National Health Insurance Fund will be structur=

ed

to allow for up to 30 per cent of such transfers to be used to finance th=

ese

programmes.

KEY ACHIEVEMENTS OF SECTORS

The National Food Buffer Stock Company (NAFCO) was established to hold

food security buffer stocks and to intervene in the market to ensure

competitive prices at all times. About 6,949 metric tonnes of rice and 416

metric tonnes of maize were purchased and stored.

Government subsidised 60,000 metric tonnes of fertilizer at an average

cost of GH¢16.00 per bag, as part of efforts to increase productivity under

the fertilizer subsidy programme.

The first phase of the rehabilitation of the Tono Irrigation dam has

been completed making available 1,874 ha of land for cultivation.

Under the Block Farm Programme, about 47,000 hectares of land were

cultivated with maize, rice, sorghum, soybean and vegetables. This programme

provided financial opportunities to 80,000 beneficiaries.

COCOBOD successfully raised an amount of US$1.5 billion in the 2010/2011

crop season from 30 international banks in a syndicated loan arrangement

compared with the US$1.2 billion raised during the 2009/2010 crop year.

The government reviewed the producer price of cocoa upwards during the

2009/2010 crop year, in October 2009 and January, 2010.

The producer price has been revised upwards again in October 2010 to

a

high level of GH¢3,200.00 per tonne (ie GH¢200.00 per bag). This new

price

is 75.15 percent of the net FOB price, the highest in the history of this=

country.

The Export Development and Investment Fund through the Mango Developm=

ent

Project, has over the period 2009/2010 funded the planting of 12,000 acre=

s

of Mango Seedlings in the Northern, Upper East, Upper West, Brong-Ahafo a=

nd

Northern Volta regions, with a view to developing Mango as a major export=

crop for the country.

Establishment of a Constituency Development Fund.

Construction of Member of Parliament's Constituency Office.

Government considers it equally necessary to provide decent office

accommodation for MPs at the constituency levels.

To help alleviate the burden on parents, Government subsidized the

conduct of Basic Education Certificate Examination (BECE) in 2010 to the

tune of GH¢4,911,494.

The provision of free school uniform and exercise books to enhance

participation and quality of teaching and learning went on as promised.

About 23 million exercise books were distributed to school pupils

Provision of uniforms for 526,263 needy children.

The impact of these measures on key enrolment targets are shown as

follows:

Education Enrolment Targets

Level of Education

2008/2009 2009/2010

GER (Pre-School Level) 93.0 per cent 97.0 per cent

GER (Primary Level) 95.0 per cent 95.0 per cent

Gender Parity Index- (Primary Level) 0.96 0.97

A number of interventions in the Health Sector include:

* the completion of Winneba District Hospital;

* 100-bed General Hospital with Malaria Research Center at Teshie;

* 21 Health Centres; and

* 5 polyclinics at Kpandai, Tatale, Janga, Chereponi, and Karaga in the

Northern Region to improve access to health services.

* Feasibility studies for the development of a specialized Maternity and

Children's Hospital at Ridge Hospital has also been undertaken.

Nine bills have been approved by Cabinet and forwarded to Parliament

for

approval as part of the Health Sector Legal Reform initiated in early 200=

0.

They include Health Coordination, Mental Health, Health Professionals=

and Regulatory, the Public Health and Traditional and Alternative Medicin=

e

bills.

Under the School Feeding Programme, about 670,000 pupils have been

covered and it is expected to increase to 1,040,000. A social

accountability component has been introduced into the programme and this

has

led to improvement in the management of the Programme.

POLICY INITIATIVES

Priority Spending for 2011

Over the medium term, investment decisions will focus on the followi=

ng

key priority areas that are expected to drive the growth process. The are=

as

are:

* Accelerating agriculture modernisation;

* Developing oil and gas industry;

* Developing critical infrastructure;

* Sustaining natural resource management and environment;

* Enhancing the competitiveness of the private sector; and

* Human resource development

To speed up the slow disbursement of project loans and grants the

following steps have been taken:

i. The provision of adequate counterpart funds for the project loans and

grants.

ii. Provision of project management and procurement guidelines and traini=

ng

for all staff managing projects with support from our development partner=

s.

iii. Improvement on effective monitoring of projects through the developm=

ent

of a comprehensive monitoring and evaluation plan and schedule to guide

project implementation.

China Billion Dollar Framework Agreements

After the signing of the two agreements with the China Development B=

ank

and the China Exim Bank respectively, it is expected that the nation will=

be

significantly transformed through massive investments in nation's

infrastructure in the areas of road, rail, energy, water and education.

Water for All

Government will provide safe and portable water to the citizenry to

reduce the incidence of health related water borne diseases. In addition,=

government will provide 20,000 boreholes across the country over the next=

five years starting from 2011 fiscal year.

Addressing Endemic Poverty (Savannah Accelerated Development Authori=

ty

and Central Region Development Commission -CEDECOM)

In fulfilment of Government's pledge to address the unacceptably hig=

h

incidence of poverty in the northern Savannah regions and in the Central

Region, the two institutions will be supported to facilitate and implemen=

t

major poverty reducing programmes.

Protecting the Non-Oil Sector

Recognizing the immense contribution of the non-oil sector towards t=

he

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 d=

oes

not play second fiddle to the oil sector as has happened in some oil

producing countries.

Automation and Modernization Programme Of The National Lottery

Authority

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 remain=

ing

banker to banker and former private lotto operators in the lotto marketin=

g

business as defined under the lottery Act 722.

Private Sector Competitiveness

To improve private sector competiveness, the Government through its

new

Medium Term Development Plan will create an environment which broaden

investment and encourage greater enterprise development and innovation.

A more supportive basis for transforming the economy by increasing

productivity, especially in the small and medium enterprise sector will b=

e

created and greater incentives for creating formal jobs will be provided.=

In

addition, the Government will work towards increasing economic opportunit=

ies

for the poor especially in underdeveloped regions.

To improve business environment, the following specific actions will=

be

undertaken:

* Design a transparent, simplified and client-friendly business applicati=

on

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 buildin=

g

programme to raise awareness among potential private sector players; and

* Promotion of public-private partnership through projects such as the

Alstom Power Plant in the energy sector, the Takoradi and Tema Port

expansion and the Accra Kumasi Toll road

Affordable Housing Using Local Raw Material

In bridging the huge housing deficit in the country, 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 programe on the utilization of local building

materials such as clay brick and tiles, pozzolana cement, bamboo etc in t=

he

construction industry has already been prepared on the initiative of

government

Monetisation of Government Interests in Mining

Government will consider the monetization of all or portion of its g=

old

interests to deliver a significant capital sum to support the nation's

growth and development to take advantage of 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.

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.

Pension Scheme for the Informal Sector

Following the implementation of the new pension scheme this year,

provision has been made in the third-tier voluntary personal pension sche=

me

to cater for the peculiar needs of workers in the informal sector who are=

about 85 per cent of the working population.

Informal sector contributors will have two accounts, a retirement

account (to provide benefits on retirement) and a personal savings accoun=

t

with rules for withdrawals before retirement. What this means is that

workers in the informal sector can now participate in a pension scheme wh=

ich

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.

Programme of Persons with Disability.

The share of the Common Fund for person with disability is to be

increased from the current two per cent to three per cent in line with th=

e

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

Tariffs will be subjected to quarterly reviews to ensure continued c=

ost

recovery. However, Government will continue to make provision in the Budg=

et

to provide subsidies to support life-line consumers of electricity.

Supporting Poultry Farming

To support poultry farmers to increase local production of chicken an=

d

eggs, a significant portion of the Japanese grant and other grants will b=

e

made available to poultry farmers to be used to acquire the necessary

equipment and chemicals for the industry.

Public Private Partnership

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

To address the bottlenecks faced by SMEs in their development,

Government has put in place the following measures:

The Government through the Ministry of Trade and Industry under the

(Private Sector Development Strategy stage II) will strengthen SME Suppor=

t

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

Government intends to boost commercial agriculture by engaging the

private sector through the Public Private Partnership framework in agro

processing.

Proposals from private sector organizations in developing large scale=

commercial farms in rice, maize and soya bean cultivation and processing

among others will be considered. 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: -

Sustaining the country's food security and also meet needs of the Sch=

ool

School Feeding Programme;

Stimulation of domestic economic activity particularly in the

agro-processing sector; and

Contributing to the millennium development goal of required healthy

levels of animal protein consumption by the year 2015.

Dr Duffuor pointed out that the 2011 budget would Ghana on the right

path to achieving accelerated economic growth and prosperity in an

environment of stability.

"Significant resources have been deployed to modernise agriculture,

boost manufacturing, provide critical infrastructure, improve the deliver=

y

of water, sanitation and electricity services, support the private sector=

to

grow and become more competitive, and develop our human resource

capability," he said.

"The budget also seeks to grow the Ghanaian economy on a sustainable

basis and create jobs to reduce unemployment," Duffuor added.

18 Nov. 10

NECO 010

Economics Budget Reserves

Ghana's gross foreign reserves increased in 2010 - Dr Duffuor

Accra, Nov. 18, GNA - Ghana's stock of gross foreign reserves increa=

sed

to 3,973 million dollars in October 2010 from 3,165 at the end of Decembe=

r

2009, Dr Kwabena Duffuor, Minister of Finance and Economic Planning

announced in Accra on Thursday.

He said it was an indication that government had increased the count=

ry's

cover of imports of goods and services from 1.8 months in 2008 to 2.4 mon=

ths

in 2009, and to 3.2 months in 2010.

Dr Kwabena Duffuor made the announcement when presenting the 2011

Budget and Government Fiscal Policy in Parliament.

He said Ghana's balance of payments registered a surplus of more tha=

n

100 million dollars in the first nine months of 2010, with a projected

surplus of 315 million dollars for the fiscal year describing the feat as=

the first ever chalked out in many years.

On inflation, the Finance Minister said the steady decline in the

inflation rate provided concrete evidence of an economy that was recoveri=

ng

from the deep crisis at the end of 2008.

Dr Duffuor said the consumer price index released by the Ghana

Statistical Service for October this year showed a steady decline in the

inflation rate from the peak of 20.7 per cent in June 2009 to 9.38 per ce=

nt

in October this year.

"This steady decline is attributed largely to our prudent fiscal

management, continued monetary restraint, supported by a good food harves=

t,"

he said.

He said food inflation had declined from an average of 15.8 per cent=

in

2009 to 5.6 per cent in October this year adding that over the same perio=

d,

non-food inflation dropped from an average of 21.8 per cent to 11.8 per

cent.

Dr Duffuor observed that the appreciation of the cedi contributed

significantly in lowering inflation in the country.

He said the general downward trend in interest rates which began in

June 2009 was continuing, adding that the Central Bank policy rate had

fallen steadily over the period, reaching 13.5 per cent in July 2010.

Dr Duffuor observed that all short term interest rates on the money

markets had fallen in the last 10 months of the year.

He noted, however, that commercial banks, had been less responsive t=

o

the general fall in interest rates and the inflation rate, citing high ri=

sks

associated with lending to small and medium size businesses as the major

cause of their inability to reduce their lending rates.

18 Nov. 10