Full speech, Budget 2009
Minister of Finance and Economic Planning, Dr.
March 5, 2009
1. Madam Speaker, it is with great
pleasure and humility that I present to this august
House the 2009 Budget Statement and Economic Policy
of the National Democratic Congress (NDC) government
on behalf of His Excellency, President John Evans
2. Madam Speaker, in pursuit of its social
democratic agenda to promote „A Better Ghana‟ in
which real opportunities for gainful employment
prosperous enterprise and social and economic
welfare for all our people, the NDC Government has
identified four broad themes by which the challenges
confronting the national economy can be addressed.
3. Job creation will require the expansion of
infrastructure, investing in Ghana‟s human capital
and providing transparent and accountable
4. Madam Speaker, in his State of the Nation
Address, H.E. the President highlighted the
fundamentals of our current economic situation and
predicament which include a large fiscal and trade
deficits higher than expected rate of inflation, an
increase in the national debt stock, and the
depreciation in the value of the Cedi.
5. We also have to contend with low levels of
productivity in agriculture, industry and
manufacturing among others.
6. Externally, the world economy has been
experiencing a severe credit crunch alongside the
recent global energy and food price hikes.
7. Madam Speaker, the general effects of these
developments were that MDAs had expenditure
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Government Commitment and 2009 Policy Thrust
8. Madam Speaker, the implication of the domestic
and external state of affairs briefly described
above is that 2009 will be very challenging for the
new NDC administration. The Government is
nevertheless committed to its pledge of providing
improved social services to uphold the living
conditions and dignity of the average Ghanaian.
9. The policy thrust of the 2009 budget is to reduce
the current budget deficit to sustainable levels,
improve the exchange rate regime, and work towards
the attainment of single digit inflation.
10. The main strategies to be used will include
enforcement of fiscal discipline, significant
reduction in unproductive recurrent expenditure and
improvement in revenue generation (including
dividends from state owned enterprises).
Infrastructure development in the roads, energy and
water sectors will be accelerated and expanded
whilst providing security and justice for all.
11. These measures will be pursed within a process
of monitoring and evaluation of all MDA activities
to ensure the effective implementation of government
policies and the achievement of objectives and set
12. The savings so achieved will be channeled into
projects beneficial to our people.
13. Madam Speaker, we will also focus attention on
some key expenditure in our budget in an effort to
rationalize them and infuse some level of efficiency
and value for money. These will include a critical
look at the wage bill administration, the management
of statutory funds, and the profitability, financial
situation and relevance of state-owned enterprises
and subvented organizations.
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14. In that regard Madam Speaker, Ghanaians should
expect a significant change in the management of the
economy. Managers of government institutions,
especially state-owned companies, will be held to a
high level of accountability.
15. Government will also partner the private sector
to provide the necessary enabling policy environment
and incentives for both enterprise growth and the
efficient and effective delivery of public services.
16. Madam Speaker, we believe that these strategies
will lead to the delivery of improved and better
social services and generate sustainable employment
opportunities within a secure environment for the
people of Ghana.
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SECTION TWO: WORLD ECONOMIC DEVELOPMENTS AND
The World Economy
Developments in 2008 and Outlook for 2009
17. Madam Speaker, the world economy witnessed three
major shocks between 2007 and 2008: a global
financial crisis, and upward spiral in food and fuel
prices. These shocks have led to decreases in
business investments and in consumer confidence,
especially in the developed economies. For these
reasons, the world economy turned sharply into a
downturn in 2008.
18. The result, according to the World Economic
Outlook Update, is that world economic growth is
projected to be 3.4 per cent in 2008 down from 5.2
per cent in 2007. This downturn is mostly led by the
advanced economies, which have been hit the hardest
by the financial and economic crisis. Growth rate in
the developed economies is projected to decline from
2.7 per cent in 2007 to 1.0 per cent in 2008.
19. Growth prospects are worse than expected not
only in the United States of America and Europe but
also in major emerging market economies. In the
United States of America and Canada, economic growth
rates in 2008 are projected to decrease to 1.1 per
cent and 0.6 per cent respectively from their
respective 2007 rates of 2.0 per cent and 2.7 per
cent. In the Euro area, rate of economic expansion
is projected to decrease by more than 50 per cent to
1.0 per cent from its 2007 rate of 2.6 per cent.
20. Madam Speaker, the developing economies also
have not been spared the global economic slowdown.
Growth in developing economies including emerging
economies is projected to be 6.3 per cent in 2008
down from the realized growth rate of 8.3 per cent
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21. For now, Africa seems to have been hit only
mildly by the global financial crisis because of the
limited level of integration of most African
financial markets into those of the rest of the
World. Even then, the rate of growth in economic
activities slowed down in 2008 and is estimated to
be 5.2 per cent in 2008, down from the 6.2 per cent
growth rate in 2007.
22. In developing countries in Asia, the rate of
economic expansion declined from 10.6 per cent in
2007 to an estimated rate of 7.8 per cent in 2008.
China‟s economic growth slowed to 9.0 per cent in
2008, its lowest in seven years from the 2007 rate
of 13.0 per cent. The story is similar in India.
India‟s growth rate is estimated to decrease by 2.0
percentage points in 2008 from the 2007 rate of 9.3
23. A similar pattern of slowdown in economic
activities in 2008 characterized countries in Latin
America, Eastern Europe and Russia. The only region
of the world that was not projected to experience a
lower rate of economic expansion in 2008 relative to
2007 rate is the Middle East, because of the large
revenues from oil exports following the record high
price of oil during the first half of 2008.
24. The general economic downturn has affected world
trade. The rate of growth in the volume of world
trade in goods and services decreased from 7.2 per
cent in 2007 to a projected rate of 4.1 per cent in
2008. The rates of growth in both exports and
imports declined in both developing and advanced
25. Madam Speaker, with the global financial crisis
still deepening, the prospects for World GDP growth
in 2009 are diminishing. World output growth is
projected to be just 0.5 per cent in 2009, down from
3.4 per cent in 2008.
26. Emerging and developing economies are projected
to grow by 3.3 per cent in 2009, down from 6.3 per
cent in 2008. For the developed economies, output is
expected to contract in 2009 by 2.0 per cent. This
would be the first annual contraction since World
War II. This is expected to decrease the volume of
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trade in 2009, leading to a decline in exports from
27. Madam Speaker, global inflation soared in 2008.
This was mostly due to the high food prices, which
worsened in 2008, and the record high price of oil
during the first half of 2008.
28. In advanced economies, inflation rate increased
from 2.1 per cent in 2007 to a projected rate of 3.5
per cent in 2008. In developing economies, inflation
rate increased from 6.4 per cent in 2007 to a
projected rate of 9.2 per cent in 2008.
29. Madam Speaker, the high rate of inflation of
2008, especially the high food prices put a big
burden on consumers in general and the poor in
particular. Inflation generally eats away real
incomes of consumers, and expenditure on food takes
the biggest portion of the poor‟s budget. The World
Bank estimates that the cost of higher food and fuel
prices to consumers in developing countries will be
equal to about US$680 billion in 2008.
International Commodity Prices Oil
30. Starting the year with about US$90 per barrel as
the average price in January 2008, international
price of crude oil continued to soar till it hit a
record high of US$147 per barrel in July. This led
to increases in costs of production of firms,
reinforcing the global economic slowdown of 2008.
However, in response to the slowdown, crude oil
prices started to ease during the later part of
2008. By December 2008, average monthly price of
crude oil had fallen below US$50.
31. International crude oil price is expected to
stay low in 2009 relative to 2008 because of the
collapse in world growth, which is expected to lower
global demand for crude oil.
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32. Madam Speaker, the international price of cocoa
was high in 2008. On the London International
Futures and Funds Exchange (IFFE), the weekly
average price increased from £1,089 for the first
week of January 2008 to £1,701 for the last week of
June. From this period onwards, the price took a
downward trend reaching £1,288 in the second week of
November before surging again to reach £1,763 by the
end of December 2008.
33. Like most international commodities, the
projected decline in the rate of growth of the world
economy is expected to have a negative impact on
cocoa‟s world market price, albeit not to the same
degree of that projected for crude oil price.
34. Madam Speaker, the world market for gold was
very favourable in 2008. The realized international
average weekly price started the year at $861.96 and
reached as high as US$997.80 in the third week of
March. Even though it started to ease a little
thereafter, the weekly average price was $868.98 by
the end of December 2008.
35. The nature of the international market for gold
in 2008 was caused by demand pressures. The
international financial crisis caused the dollar to
depreciate and dimmed the prospects for the other
major world currencies, causing investors to
increase the gold holdings in their investment
Implications for Ghana
36. Madam Speaker, like other developing economies,
the downturn in the advanced economies in 2009 is
expected to have negative effect on Ghana‟s exports
and, thus, our external balance. Weak demand for
exports and weak commodity prices imply less export
revenue. In addition, expected shortfalls in
remittances, a slowdown in donor support and private
capital inflows as a result of the global recession
are all likely to have negative impact on the
Ghanaian economy in general and on public finances
in particular. These therefore call for vigilance
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careful monitoring of further developments in the
World economy so that corrective actions could be
taken quickly when the need arises.
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SECTION THREE: DEVELOPMENTS AND OUTLOOK IN THE
WEST AFRICA SUB-REGION
Developments in West African Monetary Zone (WAMZ)
37. The macroeconomic performance of the WAMZ
countries was generally satisfactory during the
first half of the year. Real GDP growth remained
strong, on the back of robust performance in the
agricultural sectors of member countries.
Inflationary pressures, however, surged on account
of the global energy and food price shocks. Fiscal
outcomes deteriorated partly reflecting the fiscal
costs of the measures implemented to mitigate the
burden of the external shocks. External sector
performance was mixed, to the extent that although
most countries recorded marked growth in gross
external reserves, the steep rise in import prices
led to the decline in reserves in terms of months of
imports they could cover.
38. Information available from the half-year data
for 2008 compiled by the West African Monetary
Institute (WAMI) indicate that the weighted average
real growth for the region was 6.7 per cent which
was 0.6 percentage points above the 2007 growth. In
terms of country performance, Ghana, Nigeria and
Guinea sustained their growth performance while the
Gambia and Sierra Leone recorded reduced growth
rates. At the sector level, Agriculture and Service
sectors were the main contributors to growth.
39. Broad money (M2+) growth accelerated in the
Region as credit to the private sector expanded
markedly in all countries with the exception of
Guinea that registered a deceleration. Credit to
Government, however, fell across the member
countries. The Net Foreign Assets (NFA) in the Zone
also grew at a slower pace during the review period.
40. In response to the threat of high inflation
occasioned by rising food and energy prices, most
Central Banks in the Zone
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increased policy rates during the review period.
However, with the exception of The Gambia, real
interest rates in all countries were negative during
41. Exchange rates in the Zone remained relatively
stable during the first half of 2008, with some
countries experiencing real appreciation of their
currencies. Ghana‟s exchange rate depreciation was
significant relative to the corresponding half of
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SECTION FOUR: MACROECONOMIC PERFORMANCE FOR 2008
OVERVIEW OF ECONOMIC PERFORMANCE
42. Madam Speaker, in the 2008 Budget Statement and
Economic Policy of the Government of Ghana, the
following targets were set:
a real GDP growth of at least 7.0 per cent;
an end period inflation rate of between 6.0 and 8.0
an average inflation of 7.0 per cent;
accumulation of gross international reserves
equivalent to at least three months of import cover;
an overall budget deficit including divestiture of
4.0 per cent of GDP and a deficit excluding
divestiture of 5.7 per cent of GDP.
43. Madam Speaker, all of these targets were missed.
The provisional results for 2008 indicate that:
real GDP grew by 6.2 per cent;
inflation rate as at end December 2008 was 18.1 per
average inflation for the year was 16.5 per cent;
gross international reserves reduced to the
equivalence of 1.8 months of import cover for goods
and services; and
the overall budget deficit excluding divestiture hit
a high of GH¢2,557.6 million, equivalent to 14.9 of
GDP. Adding divestiture receipts, however, reduced
the deficit to GH¢1,982.9 million, equivalent to
11.5 per cent of GDP.
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Activity20062007*2008**2008*AGRICULTURE4.5 3.1 5.0
4.9 Crops and Livestock3.5 4.0 5.5 5.5 Cocoa
Producation and Marketing2.0 3.5 4.0 5.0 Forestry
and Logging2.6 2.5 3.0 3.5 Fishing15.0 5.0 5.0 3.0
Source: Ghana Statistical Service* Provisional
Outturn, ** Target
44. Madam Speaker, in order to quickly stabilise the
economy, the Ministry of Finance and Economic
Planning intends to deepen collaboration with the
Bank of Ghana to ensure better formulation and
implementation of fiscal and monetary policies.