Minister of Finance and Economic Planning, Dr. Kwabena Duffuor on Wednesday kick-started the National Democratic Congress (NDC) political campaign when he presented the 2012 Budget Statement in Parliament.
He insisted that government had significantly delivered on its promise of a better Ghana for Ghanaians, justifying his claim with a seemingly endless list of what he described as achievements. Waxing lyrical, poetical and hilarious, Dr. Duffour told the august House:
"We promised to remove schools under trees, and we are very much on course!
We promised to remove inequities in incomes through the single spine, and we are very much on course!
We promised to move the economy from fragility to robustness, yes we have!
We promised to significantly expand the economy, yes we have!
We promised to arrest inflation, yes we have!
We promised to arrest the rapid depreciation of the Cedi, yes we have! We promised to provide free school uniforms and exercise books, yes we have!
We promised to deliver skills training and jobs to our youth, yes we have!
We promised deeper competition in the telephone industry, yes we have through Mobile Number Portability!"
He stated, "These achievements give us confidence that in the coming years, Ghanaians can continue to trust the NDC Government to faithfully steer the affairs of our dear nation."This indeed is a budget that heralds the march towards the "Better Ghana" and gives hope of a brighter tomorrow and the building of a nation that is truly great and strong."
The theme for the 2012 Budget Statement and Economic Policy is "Infrastructure Development for Accelerated Growth and Job Creation."
According to the Finance Minister, the focus of the 2012 Budget was on the provision of key infrastructure in various sectors of the economy to further stimulate growth, support the private sector to create more jobs and improve the incomes of Ghanaians.
He said the key infrastructural projects to be implemented in 2012 , and which were consistent with the Ghana Shared Growth and Development Agenda (GSGDA) would principally be in the following areas: Electricity, Oil and Gas; Water and Sanitation; Railways, Roads, and Ports; and Health, Education, and Agriculture.
He stated that in order to accelerate the achievement of universal health coverage, government would commence the implementation of the one-time premium payment policy under the National Health Insurance Scheme (NHIS).
To further improve financial controls and efficiency, the NHIS would pilot capitation as an alternative Provider Payment Mechanism (PPM). Furthermore, the review of the NHIS law would result in a major restructuring of the scheme at the district, regional and national levels.
To further improve financial controls and efficiency, the NHIS would pilot capitation as an alternative Provider Payment Mechanism (PPM). Furthermore, the review of the NHIS law would result in a major restructuring of the scheme at the district, regional and national levels.
Dr. Duffuor said Ghana's economy has witnessed significant growth and stability since 2009. The huge fiscal and external current account deficits that characterized the pre-2009 period have been reduced significantly; inflation has dropped to single-digit levels; the stock of international reserves has risen to over three months of import cover; and the exchange rate has stabilized since August 2009, except for some minor volatility earlier in the year.
Real GDP growth has been very strong while the rebasing and revision of the national accounts saw the country's national income expanded by more than 60 percent, moving the country into a lower middle-income status.
"There has been a significant growth in real GDP from 4.0 per cent in 2009, to 7.7 per cent in 2010 and 13.6 per cent in 2011 on provisional basis, making Ghana one of the fastest growing economies in the world in 2011 "At the end of 2008, the fiscal deficit on cash basis was 8.5 per cent of GDP (14.5 percent of GDP - old series).
As at the end of September 2011, it had been reduced significantly to 2.0 percent of GDP." Inflation which was 18.1 per cent at the end of 2008 now stands at 8.40 per cent in September, 2011.
This single digit inflation, he maintained, was real and had been sustained for the longest period of our economic history, from June 2010 to date. Dr. Duffuor said interest rates have continuously declined since 2009.
This was evidenced by the significant reduction in the yield of the 91-day money market instrument from 24.67 per cent in 2008 to 9.1 per cent in September 2011, making it the lowest recorded money market rate in decades.
Gross International Reserves of US$4.98 billion recorded in October 2011 exceeded 3.0 months of import cover of goods and services, compared to reserves of US$2.0 billion at the end of December 2008.
He said in accordance with provisions of the Petroleum Revenue Management Act, Act 805, 2011 (PRMA), the Ghana National Petroleum Corporation (GNPC) has, on behalf of Government, lifted oil from the FPSO Kwame Nkrumah four times as at the end of October 2011.
The proceeds from the first three liftings amount to 2,980,720 barrels which realized a total sum of US$337.3 million (GH? 506.0 million). have been received. The proceeds for the fourth lift are expected later in November 2011.
"The total oil revenue received so far has been allocated to the various allowable sources in accordance with the PRMA. A total of US$112 million (equivalent to GHC168 million) has been transferred into the Consolidated Fund as the Annual Budget Funding Amount and is being utilized in the four priority areas as set out in the 2011 Supplementary Budget in accordance with relevant sections of the PRMA."
"An amount of US$54.8 million and US$14.4 million have been transferred into the Stabilization and Heritage Fund accounts respectively in accordance with relevant sections of the PRMA."
Also, in line with Section 7 of the PRMA, an amount of US$156.1 million has been transferred to GNPC as equity financing cost and GNPC s share of net Carried and Participating Interest. Some highlights of the 2012 budget statement are as follows:
MACROECONOMIC FRAMEWORK FOR THE MEDIUM-TERM (2012-14) In fiscal year 2012 and the medium term, government macroeconomic policy will focus on three complementary objectives, namely: - preserving the gains of macroeconomic stabilization and fiscal consolidation achieved since 2009; - creating fiscal space for high-priority investments to spur long-term growth and development; and - maintaining inflation in single digits
To achieve these objectives, fiscal deficits will be kept at levels that can be prudently financed, without crowding out private sector credit, while efforts to fill the country's large infrastructure gaps will be accelerated and kept consistent with the Ghana Shared Growth and Development Agenda (GSGDA).
Over the medium term, economic growth is expected to average 8 percent, reflecting strong expansion in both the oil and non-oil sectors of the economy.
The fiscal deficit reduction will be driven by rising oil revenues, strengthened revenue administration and prudent expenditure management. Monetary policy will be geared at maintaining single-digit inflation, while the balance of payments is projected to remain in surplus, reflecting high commodity export prices, oil production and exports, and continuing portfolio capital inflows To finance infrastructure projects critical to the country's growth and development, a US$3 billion non-concessional but competitive facility from the China Development Bank has been sourced.
The details of the macroeconomic targets for fiscal 2012 are as follows: - Real non-oil GDP growth of 7.6 percent; - Real overall GDP growth of 9.4 percent; - Average inflation of 8.7 percent; - End-period inflation of 8.5 percent; - Overall budget deficit equivalent to 4.8 percent of GDP; and - Gross international reserves of not less than three months of import cover for goods and services. Petroleum Revenues- Outlook for 2012 The total revenue from crude oil sales in 2012 fiscal year is projected at GHC 1,239.82 million based on an estimated average oil price of US$90.00 per barrel and production of 90,000 barrels per day.
This amount comprises royalty payments of GHC 236.87 million, income from government Carried and Participating Interest of GHC 618.84 million, and corporate income tax of GHC384.11 million.
Transfer of oil revenue to the National Oil Company will amount to GHC361.90 million. The benchmark revenue will amount to GHC877.92 million. The proposed 70 percent of the benchmark revenue determined as the Annual Budget Funding Amount will amount to GHC614.55 million. Transfer to the Ghana Petroleum funds will amount to GHC263.28 million.
In line with Section 21(5) of the PRMA, the Annual Budget Funding Amount would be spent in the following four priority areas: - Expenditure and amortization of loans for oil and gas infrastructure; - Road and other infrastructure; - Agricultural modernization; and - Capacity building (including oil and gas) Monetary Sector Outlook Monetary policy in the medium-term will focus on maintaining single digit inflation while responding to volatility in the foreign exchange market.
To this end, Bank of Ghana will continue to deploy its instruments within the inflation targeting framework to preserve the gains of macroeconomic stabilization. Recognizing the crucial role the private sector is expected to play in the country's growth and development process, real credit to the private sector will increase on a sustained basis to an average of 18 per cent per annum over the medium term.
The Bank of Ghana will continue to engage the deposit money banks on the determination of base rates in the banking sector, with the view to bringing standardization and transparency into the determination of lending rates.
It is envisaged that there will be a further build-up in Gross International Reserves to an average of US$7.5 billion (estimated around 4.5 months of import cover) over the medium term. Government will build higher benchmark bonds.
Seven-year and 10-year fixed rate bonds will be introduced in 2012 to reduce liquidity in the short-dated instruments and extend the yield curve.
To mitigate the risks of rising floating interest rates for debt servicing, government will hedge the interest rates through swap arrangements to allow for enhanced predictability of debt service planning and forecast.
RESOURCE MOBILISATION AND ALLOCATION FOR 2012 As a result of the rebasing and revision of the national accounts, Ghana became a lower middle-income country. However, this resulted in a reduced tax revenue-to-GDP ratio from 22 percent to 13.1 percent in 2010. This figure is below the average of 15 percent for the sub-Saharan African countries and also below the average of 18 percent for lower middle-income countries. Ghana's estimated tax revenue-GDP ratio outturn of 16.5 percent for 2011 indicates a strong improvement in revenue mobilization and is above the average for sub-Saharan African countries and below the average for lower middle-income countries. Proposed Tax Policy Measures for 2012 The focus therefore of revenue management in fiscal year 2012 is to expand the tax base and improve the efficiency of the tax administration. The following tax proposals will therefore take effect in 2012. Taxation of Professionals and Informal Sector The Self-Employment Income Tax Revenue Enhancing Project has been set up to broaden the tax net. Through this project, the contribution of the self-employed in the domestic tax revenue would improve from the current 4% to a targeted level of 8%. Increase in VAT threshold As part of the continued efforts to improve efficiency in tax administration, Government will raise the VAT registration threshold from an annual turnover of GHC90,000 in 2011 to GHC120,000.00 in fiscal year 2012. Businesses with a turnover of less than GHC120,000.00 over a twelve month period will pay a presumptive tax of 6 per cent of turnover. These taxpayers will fall within the category of small taxpayers and the Ghana Revenue Authority (GRA) will put in place the necessary measures to operationalize the small taxpayer office concept. The increase in VAT threshold does not constitute an increase in the VAT rate. Transfer PricingRecent studies in the mining sector showed that Ghana loses about US$36 million a year through transfer pricing. Together with the GRA we have drafted regulations to strengthen existing tax legislation to deal with taxation of multinational companies and minimize the incidence of abuse of transfer pricing. The regulation will soon be presented to Parliament. Tax Amnesty Government is aware that many companies and individuals are operating outside the tax net. To address this problem, Government is offering amnesty to all such companies and individuals who have evaded taxes. The GRA will embark on a registration and re-registration exercise of tax payers during this period. All tax payers are therefore encouraged to take advantage of this opportunity to register. The tax amnesty will start from January 2012 and end on 30th September 2012. Natural Resource Taxation Beginning in the fiscal year 2012, the following changes to the taxation of mining activities will apply: - Following established practice in the extractive industry, and in the oil and gas sector, the corporate tax rate for mining companies will be increased from the current 25 percent to 35 percent; - A windfall profit tax of 10 percent will be collected from all mining companies; and - A uniform regime for capital allowance of 20 percent for five years for mining, as is the case in the oil and gas sector. Ring Fencing The principle of Ring-fencing as applicable to the natural resource sector (petroleum and mining) will be made more explicit. Beginning in fiscal year 2012, cost in one contract area or site will not be allowed to be set off against profits from another (belonging to the same company) in determining chargeable income for tax purposes. This will prevent companies undertaking a series of projects from deducting costs from new projects against profitable ventures yielding taxable income.
No comments:
Post a Comment