HIGHLIGHTS OF BUDGET STATEMENT AND ECONOMY POLICY OF

GOVERNMENT, 2005

THEME: This budget which seeks to inspire the public sector, private sector and

organized labour to work together the single goal of NATIONAL DEVELOPMENT

also gives a lot of HOPE to its citizenry (both corporate and natural persons) who double

as the clientele and owners of our beloved country, Ghana.

Macroeconomic Developments in 2004

• Real GDP growth was higher than expected –5.8 % as against 5.2%
• Inflation declined from 23.6 % to 11.8 %.
• Depreciation of cedi (against the dollar was 2.2 %
• The overall budget deficit was 3.2 % as against the target of 1.7%
• Net domestic borrowing was 0.5% of GDP
• Gross foreign exchange reserves 3.8 months of imports
• Interest rates declined
• Treasury Bill rates from 18.7 to 17%
• Total receipts

Projections- ¢24,301.9 billion

Provision Outturn-¢28,736.9 billion

SIGNIFICANT DEVELOPMENTAL ACTIVITIES IN 2004

INFRASTRUCTURE DEVELOPMENT

• Development of the Accra –Kumasi trunk road with the Ofankor to Nsawam and
• Kumasi to Fumesua sections developed into a dual carriageway.
• Physical completion of the Accra-Yamoransa road by end of 2004 was 61 %.
• Significant progress has been made on the Accra Aflao road with 78% of physical work completed.
• Increase in the fleet of buses for the Metro Mass Transit Limited (MMT) had increased
• to 354 buses by end of 2004 and expanded it operations to cover the six Metropolitan and
• Municipal areas of Accra, Kumasi, Sekondi Takoradi, Tamale, Sunyani and Cape Coast.
• About 38 million passengers (measured by tickets sold) accessed the services of the transit bus services in these urban areas.

ENHANCED SOCIAL SERVICES AND PROTECTIONS OF THE

VULNERABLE

• National Gross primary Enrolment Ration (GPER) increased from 81.per cent to the programmed 86.1per cent
• Posting of 3,812 trainee teachers sponsored by the district assemblies were posted to the remote areas to improve teacher supply.
• Construction of 440 6unit classroom blocks with ancilliary facilities in all districts
• Malaria cases fatality rate in children less than five years reduced from 4.4 per cent to 1.2 per cent
• The Expanded Programme on Immunization (EPI) coverage was on course with coverage of third dose of pentavalent vaccine at 36 % and that for measles at 41 per cent
• Three out of the 4 districts hospital being constructed were completed and preliminary work on 12 sites for upgrading rehabilitation, and construction of health facilities completed.
• Inauguration of the National Health Insurance Programme.

GOOD GOVERNANCE

• Operationalising of the 3 Public financial Management Laws- the Financial

Administration Act 2003 (Act 654), the Internal Audit Agency, 2003 (Act 658) and the Public Procurement Act, 2003 (Act663).

• A total of 2,000 new police personnel were recruited with 1,514 trained and passed out while the rest are still undergoing training.

Utilization Of HIPC Funds

• Disbursement amounted to ¢1,975.77 billion out of which ¢301.4 billion was used for domestic debt.
• The rest of the ¢1,674 billion was disbursed to MDAs for the priority areas outlined in the GPRS. Of the total.
• An amount disbursed to MDAs, about 46 per cent was utilized on human resource development: 8.5 per cent on governance and the rest on other projects.
• A total of ¢393.62 billion was released fro various educational programmes.
• About ¢1.78 billion was released for health facilities including: the expansion of 21 health training institutions, the facilitation of 22 district Health Insurance Schemes, maternal delivery exemptions and in support of efforts to reduce increases reported in maternal mortality rates in certain regions of the country. Other areas re model health centers and Community Health Planning Services (CHIPS), completion of the Sunyani Hospital and outstanding payments for the Ho Hospital.
• About ¢97 billion of the total health sector allocation was released largely to the Metropolitan and District Assemblies to supplement their efforts to improve sanitation across the country.
• A total of 79 billion was released for the provision of and improvements to potable water supply schemes in some rural communities and institutions in the country. This included an allocation of about ¢9 billion for the eradication of Guinea worm and other water borne diseases in the Upper East, Upper West and Eastern Regions.
• About ¢5677 billion was disbursed for various activities including agriculture and infrastructure. About ¢228 billion was also released under the Government’s energy programme for the continuation of the Self Help Electrification Project (SHEP) for rural communities, promotion of renewable energy systems and reimbursement of insurance premium for the Osagyefo Power Plant. The rural electrification schemes are expected to facilitate social and economic improvements in the rural areas through the promotions of micro and small-scale enterprises that need to be powered by electricity.

Macroeconomic Objectives for 2005

1. Real growth projected at 5.8 %
2. A commitment to bring the 12 month CPI inflation rate to 13.5% by end December 2005
3. Maintain Gross International Reserves at 4 months of import cover.
4. Domestic primary surplus equivalent to 2.4 %

Growth Prospects

Gross Domestic Project Growth - 5.8%

Agricultural Growth Rate - 6.5 %

Contribution to GDP - 41%

Sub Sector Growth

-Crops and Livestock - 6.05%

-Cocoa Production and Marketing - 13.2%

-Forestry and Logging - 5.6%

-Fishing - 3.6

Industry 5.8%

Contribution to GDP 24.5 %

Sub Sector Growth

-Mining and Query 4.9%

-Manufacturing 5.5%

-Water & Electricity 4.5%

-Construction 7.0%

Services

Contribution to GDP 5.4 %

Sub-Sector growth 27%

-Transport, Storage and Communication 6.0%

-Wholesale/Retail, Trade, Restaurants and Hotel- 6.1%

Resource Mobilization

Total Receipts ¢35,734.5b

Domestic Sources ¢23,147.66b

¢67.9 billion

Domestic Sources 23,739.3b

Contributions of Tax Agencies 2004 2005

Internal Revenue Service 30.7% 32.1%

VAT Service 26% 26 %

CEPS 37.7% 35.6%

Expenditures

Total expenditures exceeded projections

OUTLOOK FOR 2005

Development Priority Areas:

Ø Human resource development through education

Ø Private sector development: envisaging agriculture based on human development infrastructure by government in partnership with the private sector.

Ø Good Governance

A. VIGOROUS HUMAN RESOURCE DEVELOPMENT

Reform of Ghana’s system of education

• Formal education will now start at age four with two years of kindergarten
• Nine years of primary school and Junior High Education
• Four years of Senior High School
• Infrastructure development for more kindergarten and additional classrooms for senior High Schools
• Apprenticeship for high school dropouts fully sponsored by government
• Set up Financial Aid Units for-tertiary students to coordinate support for needy students.
• NHIS to become operations by the end of second quarter

B. PRIVATE SECTOR DEVELOPMENT

• Encourage and promote economic development and efficient operation of a banking and credit system in Ghana by engaging players within the financial sector in a dialogue with the view to finding common grounds for the reduction of interest rates applicable to commercial and other transactions.
• Improving Service Delivery in the public sector development by increasing efficiency and transparency, hence facilitating businesses.
• Management Advisory services for Businesses
• National Board for Small Scale Industries (NBSSI), National Vocational Training Institutes (NVTI), ICCES will be strengthened to provide technical and management advisory services for small and Medium Scale Enterprises (SMEs) in all parts of the country.

Incentives for the Private Sector

• Reduction in corporate tax from 32.5% to 28% effective 2005 and to 25% in 2007 to position Ghana with the other strong destinations for foreign direct investments such as Botswana and Mauritius.
• Continuing motivation of companies listing for the fist time on the Ghana Stock Exchange to enjoy a reduced corporate tax rate of 25%.
• Reduction in withholding tax rate on goods and services from 7.5% to 5%.
• Operationalising the Venture Capital Trust Fund to facilitate access to capital, and the Long Term savings Scheme to mobilize savings.
• Increasing Value Addition by Private Sector by setting up a tomato Processing and promotion Centre at Techiman in the Brong Ahafo region and sourcing funds to procure 840 agro-processing machinery and storage facilities.

Mining

• Supporting the establishment of a college of jewellery in Accra and the department of Jewellery in at the college of Art at the KNSUT, Kumasi.
• Government has also given the green light for the establishment of the first diamond cutting plant in Ghana by a private company as a clear manifestation of government’s catalytic role to private sector initiative.

GOOD GOVERNANCE

Public Sector Reforms

ü Commencements of organizational restructuring of the Civil Service.

ü Finalization of a professional human Resource framework

ü Establishment of Regulatory framework for subvented agencies

ü Development and commencement of implementation of a communications strategy.

ü To further improve the management of the payroll and eradicate the incidence of ghost names on government payroll we will deepen payroll management and control by implementing the following measures:

- Tighten the rules and strengthen systems of control, oversight and enforcement

- Develop and implement systems for capture and management of subvented agencies payroll:

- Clarify institutional responsibilities for payroll and personnel database

management and:

- Independent scrutiny of reports 11 prior to submission to the banks for payment

ü To encourage savings as well as opening up opportunities for people to access credit/Hire purchase system.

- The credit union Bill will be promulgated this year:

- National Identification system would be executed this year to streamline

transactions based on credit information

- House numbering in all cities, towns and settlements in our Districts, Municipal and Metropolitan Assemblies

- Naming of streets to ease up communication and contacts within the society.

Modernising Agriculture and Improving Food Security and Nutrition

ü Modernise agriculture, ensure food security and good nutrition,

ü Support aquaculture and promote the breeding of small ruminants (sheep, goats and pigs) to encourage increased protein intake by Ghanaians.

ü Ensuring that Ghanaians have access to adequate and quality food through

increased local production.

ü In support of this stance, all districts will be provided with ¢350 million for investments in selected areas. The Council for Scientific and Industrial Research (CSIR) will be provided with ¢15 billion to undertake agricultural search. Private sector operators in agri-business will be supported with over ¢70 billion to increase production and processing of these commodities.

Managing and Sustaining Forest Resources

ü Removal of the export duty on limber, veneer and plywood products.

ü Validation of Legal Timber to ensure transparency, accountability and compliance with international Market requirements

Promoting Cocoa Consumption

Promote consumption of one kilogram per person from the current consumption

I. A day will be set aside fro the celebration of cocoa day during which coca will be served at all official functions and to tourists.

II. Promote a policy to serve cocoa at all national, regional and district functions.

III. Adoption of a programme in conjunction with the Ministry of Education and sports to supply pre-school, basic and second cycle educational institutions with cocoa products free of charge as part of a national Food and Nutrition Initiate.

IV. Rationalization of taxes to enhance Private Sector Development (PSD)

Pension Schemes

ü Set up a commission to review pension schemes in the country

ü Government will also encourage the informal sector to join the SSNIT pension scheme

Water Transport Safety

ü Removal of tree stumps from Volta Lake to improve Water Transport Safety.

ü Tree stumps harvested from the Volta Lake could be used as inputs for industrial purposes such as sleepers for railway trucks and boat building.

Petroleum Deregulation And Mitigating Measures

ü Resources hitherto used in subsidizing petroleum products will be freed and channeled into other priority sectors including health, education, agriculture and rural development.

ü Implementation of targeted social protection programmes targeted at poor households in a number of mitigating measures will be undertaken.

ü Government intends to increase its spending to improve education, health and nutrition status of the poorest households. The following measures will therefore be implemented:

Tax Relief- Personal Income tax

1. Reduce personal income tax burden on individuals again this year by increasing the minimum tax-free threshold from I, 500,00 to I, 800,000 Mr. Speaker, a total amount of about 229 billion is expected to be from tax revenues to be put back in peoples, packets as disposal income with the implementation of this relief.
2. These personal tax relief measures are intended to cushion the impact of higher petroleum prices on persons with relatively lower income levels.

Increase Wage levels

1. Restore wage levels by 7.5% as had been negotiated in July 2004, which saw some challenges in its implementation

Mass Transit