Finance Minister Presents 2020 Budget Statement and Financial Policy to Parliament
13-11-2019
Finance Minister, Ken Ofori-Atta, has presented the New Patriotic Party (NPP) government’s fourth Budget Statement and Economic Policy to Parliament which he said is focussed on providing liquidity to boost industrialisation in the country; emphasizing the type of liquidity that is required to support industrialisation as a key element in the 2020 Budget.
The Minister characteristically arrayed in a white Kaftan, used in 2017, 2018 and 2019 said God's blessing of hard work is beginning to manifest in the country and that the NPP government has stabilised the macroeconomic turbulence.
The Minority however demonstrated their unhappiness about the Minister's reference to the poor state of the economy that he said the NPP inherited in 2017 from the NDC and heckled him for his reference to Bible verses which are a constant feature of the his budget statements.
Mr Ken Ofori Atta also revealed that the 2020 budget would review the country’s tax exemption policy and said a lot of resources are lost in exemptions and it is therefore time to straighten it out and make the exemptions count.
He communicated to the House that government flagship programmes including the Free Senior High School (SHS) programme and Planting for Food and Jobs will receive dedicated funding and admitted that the government will ensure the roads are done and flagship projects are going on.
The government, the Minister noted is thinking structurally about tax reforms and added that the Akufo-Addo government is poised on its export drive and doing things that now begin to place the country in a position of real growth strategy that will also bring the needed employment.
The 2020 Budget, he said, highlights the importance of macroeconomic stability in helping the country achieve her development objectives saying that is the reason the Fiscal Responsibility Act has been passed to check reckless decision-making and revealed that Ghana is among the fastest growing economies in the world in the last two years.
He further explained that the 2020 Budget is important because it is an election year Budget and also the second Budget since Ghana's exit from the IMF as well as the first Budget to be prepared following the passage of the Fiscal Responsibility Act.
The Finance Minister expounded that in 2020, the government will focus on radical policies to raise taxes not by introducing more but through enhanced collections and intensification of Foreign Direct Investment (FDI) as well as enhancement of financial support to local enterprises.
Government, he clarified, will also use digitization to improve her services, accelerate infrastructural development, focus on science and technology and its commercialization and resource the Electoral Commission to run a free and fair elections.
The Minister articulated that government will not overspend because it wants to win elections and that the Nana Akufo Addo government is not prepared to throw away all the sacrifices and gains over the last three years. Despite the limited resources at government's disposal, the Minister posited, it implemented flagship programmes, gave out stimulus packages and funded social programmes.
Ken Ofori-Atta reverberated that the economy has experienced an economic miracle explaining that economic growth has doubled under Akufo-Addo and that inflation has fallen from over 15% in 2016 to 7.6% in 2019 - the lowest rate in 27 years while the year 2019 has experienced the slowest ever rise in prices in the entire Fourth Republic.
He summarized key highlights and indicators of the 2020 Budget Statement and Financial Policy and macroeconomic stability achievements over the last three years with a Fiscal deficit projected to reach 9% of Gross Domestic Product (GDP) and rate of debt accumulation excluding banking sector clean-up at 14.1%
The Minister enumerated the specific macroeconomic targets that have been set for the 2020 fiscal year:
- Overall Real GDP growth of 6.8 percent;
- Non-Oil Real GDP growth of 6.7 percent;
- End-period inflation of 8.0 percent;
- Fiscal deficit of 4.7 percent of GDP;
- Primary surplus of 0.8 percent of GDP; and
- Gross International Reserves to cover not less than 3.5 months of imports of goods and services.
Macroeconomic targets for the medium term
- Total public debt is GHC208.6 billion (including the cost of the banking sector clean-up) at the end of September 2019.
- Overall Real GDP growth to average 5.7 percent for the period;
- Inflation to be within the target band of 8±2 percent;
- Overall fiscal deficit to remain within the Fiscal Responsibility Act Threshold of not more than 5 percent of GDP;
- Gross International Reserves to cover at least 3.5 months of imports of goods and services.
Resource Allocation for 2020
- Total Expenditure (including clearance of Arrears) is projected at GH¢85.9 billion (21.6% of GDP) in 2020.
- Wages and salaries are projected at GH¢22.9 billion and constitute 26.7 percent of the Total Expenditure (including Arrears clearance).
- Use of Goods and Services is also projected at GH¢8.3 billion (2.1% of GDP) and 9.7 percent of the Total Expenditure (incl. Arrears clearance).
- Interest Payments on public debt is projected at GH¢21.7 billion (5.4% of GDP).
Resource Mobilization for 2020
- Total Revenue and Grants for 2020 is projected at GH¢67.1 billion (16.9% of GDP).
- Domestic Revenue is estimated at GH¢65.8 billion.
- Grants disbursement from Development Partners is estimated at GH¢1.2 billion (0.3% of GDP).
The following specific macroeconomic targets have been set for the 2020 fiscal year:
- Government spent a total GH¢11.7 billion to safeguard the deposits following the banking sector clean-up.
- Government estimates that GH¢2.4 billion will be spent to provide relief for depositors following the revocation of the licenses of 347 Micro Finance Institutions, 15 Savings & Loans and 8 Finance Houses.
- The Securities and Exchange Commission also revoked the licenses of 53 Asset Management Companies that were distressed, with an estimated fiscal cost to protect investors of GH¢1.5 billion.
- Government also provided bridge funding of up to GH¢800 million for Ghana Amalgamated Trust (GAT) to enable it invest in four (4) indigenous banks that were struggling to meet the minimum capital requirement GH¢400 million.
- From 36 banks in 2016, Ghana now has 23 banks following the banking sector reforms began in August 2017.
- Nonetheless, total assets in the banking sector have increased from GH¢89.1 billion in 2017 to GH¢115.2 billion at end August 2019.
- Total deposits have improved from GH¢55.7 billion to GH¢76.0 billion over the same comparative period, reflecting a stronger deposit base owing to more trust and confidence in the banking sector with fewer but stronger banks.
The Minister concluded that the Nana Akufo-led NPP government have performed so well in one good term as a result of bold and courageous leadership and therefore called for the renewal of its mandate for another one good term which the government deserves.
