Budget Statement and Economic Policy

of the

for the

Presented to

On

By

MINISTER OF FINANCE AND ECONOMIC PLANNING

PRESIDENT OF THE REPUBLIC OF GHANA

REPUBLIC OF GHANA 2011 Financial Year Budget Speech

Of the

for the

2011 FINANCIAL YEAR 2011 Financial Year Budget Speech

3. Madam Speaker, this presentation is an abridged version of the Budget Statement. I would like to request the Hanzard Department to capture the entire Budget Statement and Economic Policy tabled and circulated for your information and action.

8. The oil and gas production which will be on stream very soon will further consolidate this effort and ensure accelerated growth. The careful and rigorous rebasing of our national income has revealed that the size of the economy has become bigger.

10. We should all note with satisfaction that, as a result of our collective effort towards good governance since the inception of the fourth republic, our dear nation Ghana has now joined the league of middle income countries. Indeed when we met our Development Partners in Accra in September this year, they reaffirmed their faith in Ghana and in its policies and prospects. With their support and more importantly through our own efforts, we will forge ahead with the challenge to ensure an accelerated growth and development as well as fair and equitable income distribution.

14. Based on experiences from other oil and gas producing countries, government is taking steps to manage the oil and gas revenues in a manner. Our goal is to ensure that the building blocks for accelerated growth and development, namely, social, economic and physical infrastructure are appropriately improved. It is in this context that we recently presented to Parliament, the Petroleum Revenue Management Bill.

18. Madam Speaker, in this abridged presentation of the 2011 budget, I wish to highlight the following: -

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1. Reforms that would complement major policy interventions for achieving the shared growth agenda; and

2. Policy initiatives.

20. Many developed countries are still confronted with huge public debt and fragile financial sector which have to be dealt with through monetary and fiscal measures. Some of these measures may, however, lead to further lowering of global demand and consequently affect the growth rate of global output and worsen the current high unemployment rates globally.

22. In emerging and developing countries, prudent policies that were implemented as part of the policy package to counteract the effects of the global crises have contributed significantly to a favourable medium term growth outlook.

Their continuous good performance will, however, remain dependent on demand in advanced economies.

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businesses to take advantage of the opportunities presented by the wider market that the community will create.

28. In this regard, in 2009 government requested for a three-year programme now called the Extended Credit Facility (ECF) from the IMF.

30. The first and second reviews of the programme have been successfully completed, and a total amount of US$218 million have so far been disbursed to support the country’s balance of payments. The third review of the programme is expected to be completed by the end of January, 2011.

31. The programme has contributed to the stabilization of the economy, as the disbursements have helped to increase the level of Ghana’s reserves, which in turn, has helped stabilize the Cedi and boosted confidence in the economy.

MACROECONOMIC PERFORMANCE 2011 Financial Year Budget Speech

33. Even though real GDP growth slowed down to 4.1percent in 2009, mainly on account of the impact of the world economic crisis, growth is expected to bounce back to about 5.9percent in 2010 as the domestic and world economic environment improves. Real GDP growth is projected to reach about12.3 percent in 2011, on account of strong performance in the manufacturing and services sectors and the coming on stream of oil production and exports.

35. The continued strong performance of the cocoa sub-sector reflects the increased government support to the industry, taking the form 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.

39. Provisional data on the implementation of the budget for the first three quarters of 2010 indicates that, revenues were below the budget target by 1.8 percent. On the other hand, expenditures were higher than estimated by 8.0 percent.

41. 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.

42. Based on the projected revenues and expenditures up to the end of the 2010 fiscal year, the fiscal deficit for the full year is expected to be GH¢2,514.3 million, equivalent to 9.7 percent of GDP. The projected rise in the fiscal deficit is mainly as a result of the projected higher disbursement of project loans from our development partners than was earlier estimated.

43. The domestic primary balance for the period under review registered a deficit equivalent to 2.1 percent of GDP, against a budget target of a deficit equivalent to 3.2 percent of GDP. The domestic primary balance is expected to be a deficit equivalent to 1.4 percent of GDP at the end of the year.

1. 175 classroom blocks were completed across the country to replace schools under trees, and contracts for 165 new schools were awarded. Work is in progress to construct additional 214 six-unit classroom blocks for Senior High Schools.
2. The three Northern Regions benefitted from 67 classroom blocks with sanitary facilities for kindergarten, primary and junior high schools under the Northern Floods Program
3. GH¢4.9 million was spent to subsidize the cost of conducting Basic Education Certificate Examination (BECE).
4. We have given the real meaning to word "FREE" in the FCUBE.About 23 million exercise books were distributed to school pupils and 526,263 uniforms provided to children of need.
5. GH¢23.8 million was paid as capitation grant to pupils in all public basic schools.
6. GH¢50 million was spent by government to support the School Feeding Program under which 670,000 pupils benefitted.

1. 45 CHPS zones were created;
2. 600,000 Rapid Diagnostic Test Kits for the confirmation of malaria cases were supplied;
3. The 100-bed hospital with Malaria Research Centre at Teshie, Accra was completed; 5 Polyclinics in the Northern Region (one each at Kpandai, Tatale, Kanga, Chereponi and Karaga); and 21 health centers were completed;
4. Phase two of the rehabilitation and upgrading of Bolgatanga Regional Hospital was completed;
5. Essential nutrition actions, aimed at preventing neonatal deaths and enhancing health services for children, were implemented in all the 10 regions of the country.
6. 140 trainers of trainers were exposed to the use of the new World Health Organization Growth Chart.
7. 5 new midwifery training colleges were established to run courses in Post Basic Certificate in Midwifery

Agriculture

1. The National Food Buffer Stock Company (NAFCO) was established during the year and the company purchased and stored 6,949 metric tons of rice and 416 metric tons of maize.
2. 60,000 metric tons of fertilizer was subsidized at an average cost of GH¢16 per bag for distribution to farmers under the Fertilizer Subsidy Program.
3. 2,584 livestock of various improved species were supplied to farmers in 6 regions. In addition, 35,000 cockerels were supplied to 1,750 farmers in 25 districts.
4. The construction of cold stores in 6 fishing communities (Nyanyanor, Koromantse, Apam, Half -Assini, Shama and Sekondi) commenced during the year. This was in addition to about 11.1 hectares of ponds and 192 fishing cages that were constructed.

53. The following agriculture interventions were undertaken under the agriculture commercialization project, as part of the Millennium Development Authority programs:

1. 47,000 farmers in 940 Farmer Based Organizations were trained in business capacity;

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1. US$2.0 million was disbursed to farmers and small and medium term enterprises under the Alliance for Green Revolution in Africa (AGRA) project; and
2. GH¢4.0 million Agricultural Credit was disbursed.

55. The Ghana Cocoa Board (Cocobod) purchased a total of 632,024 metric tons of cocoa (main and light crop) during the season and paid a total of GH¢ 50 million to cocoa farmers as bonus for the 2008-2009 crop season.

58. About 1,716 kilometers of feeder roads were routinely maintained while 521.8 kilometers were rehabilitated, including the construction of 8 bridges.

61. The following transport projects were also undertaken by the Millennium Development Authority:

1. Refurbishment of floating dock in Akosombo to aid the construction of two RoRo Ferries;
2. Construction of 75 kilometers of trunk and 348 kilometers of feeder roads is in progress;
3. Construction is in progress on the 14 kilometers N1 highway in Accra;

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1. 64 new boreholes, 58 small town pipe systems and 2 small community pipe systems were constructed under the Program for Providing Safe and Portable Water to Communities.
2. Construction works on a 500 cubic metre reservoir to provide potable water for residents in Kasoa, Gomoa Nyanyano, and Senya Breku were substantially completed, while the expansion programme to meet water demands in Accra, Koforidua, Cape Coast, Kumasi and Sunyani are at various stages of completion.
3. 160 two-bedroom houses and 49 septic tanks were constructed at Kedezi, Vodza and Adzido to enhance life and protect properties of families residing along the sea in Keta.

1. The consolidated International Gateway Monitoring System was installed to help the communication sector accelerate the development of mobile telephony.

• 90 percent of the Kumasi-Techiman-Tamale stretches of the National Fibre Backbone Project was completed. In addition, 90 percent of the Navrongo-Paga path and 50 percent of the Tumu-Wenchi stretch were also completed.

• The Enterprise Architecture (EA) and e-Government Interoperability Framework designed to bring efficiency and transparency into government operations were launched during the year.

• As part of the Schools Connectivity Project, 760 computers were supplied to 38 training colleges.

66. The Ministry of Trade and Industry completed the repositioning of the Destination Inspections services in the country after the review of the scheme.

67. To streamline the import management process and facilitate the speedy clearance of goods through customs, and at the same time improve record keeping, the Electronic Import Declaration form was introduced. Paper Import Declaration Forms have been phased out wherever there is GCNet Connectivity.

68. To reduce linguistic barriers and improve Ghana’s trade relations with French speaking countries, 320 Officers from both public and private sector institutions are being trained through the Ministry’s Business French Program.

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69. The Tariff Advisory Board became fully operational and is addressing inadequacies in the tariff system. The Board will ensure that Tariff are set to promote the national economic development agenda and ensure equity and fairness vis-à-vis the competition between imported products and local production.

70. The Ghana Export Promotion Council participated in the following International Fairs and provided the opportunity for Ghanaian SME Enterprises to also participate in these fairs: the Ambient Fair in Germany, the Abuja and Lagos Trade Fairs in Nigeria, the Tripoli International Fair in Libya and the Shanghai Expo in China.

71. A Nations Traceability System based on a Geographic Information System for priority exports has been established for priority driven exporter database. 26 trainers, 200 exporters and business support organizations have been trained to use and manage the traceability system.

72. The Export Development and Investment Fund through the Mango Development Project supported the planting of 12,000 acres of mango seedlings in the Northern, Upper East, Upper West, Brong-Ahafo and Northern Volta regions, with a view to developing mangos as a major export crop.

73. The Ministry of Trade and Industry with funding from the Export Development and Investment Fund and support from the fertilizer subsidy program of the Ministry of Food and Agriculture started the Cotton Support Program, and assisted 3000 farmers in the three Northern Regions to cultivate cotton for export.

74. The Rural Enterprise Skills Project, has provided training and start up kits for 4,252 rural apprentices in metal works, auto-repairs, electronics, leatherworks, masonry and blacksmithing.

75. 500 rural micro and small-scale enterprises were supported through the training of master crafts persons and created about 8000 new jobs in the rural areas. In addition, over 520 rural entrepreneurs have been supported with credit facilities in the sum of GHC1,120.00.

76. Moreover, three rural technology facilities in the Assin South, Garu Tempane and North Tongu Districts were completed and 4 more are at a 70 percent level of completion. These will allow for the manufacture of simple machinery to support agro processing and small-scale industrial activities.

77. Eighteen Rural Technology facilities were provided with Nissan Pick-ups and standby generators, 40 District Business Advisory Centres were supplied with motorbikes, and 6 new Business Advisory Centres were also supplied with office equipment.

78. The National Board for Small Scale Industries provided business development assistance to 23,879 businesses, 322 SMME entrepreneurs, also provided training and finance and were assisted with loans amounting to GH¢234,281.00 as part of the effort to facilitate job creation.

79. The GRATIS Foundation provided training to 300 technical apprentices in metal machining, welding and fabrication, foundry and woodwork. The company manufactured 141 units of cassava, and Palm fruit processing equipment, which were exported to Sierra Leon and Cameroon. The company also developed several new prototype machines for use on the local market. The machines include crop residue processor, multi-crop thresher with a winnower5, food wormer, a tomato pulping machine, and a soap processing plant.

80. The Business Development Services Fund provided US$3.3 million grants to 142 SME’s to acquire technical assistance to address issues of low productivity, access to markets, product development and access to finance.

81. The Ghana Standards Board (GSB) through the Private Sector Development Strategy phases 1 program refurbished the soil and fertilizer laboratories. The GSB has also developed an Export System AlertWebsite to provide information to exporters on export quality queries and alerts from the country’s major export markets to exporter. The GSB also inspected 2,663 fuel pumps and accessories at 432 fuel stations, calibrated 3,438 weighting and measuring instruments, verified 18,572 trading devices,reviewed and adopted 252 standards for ensuring the quality of selected products.

82. To streamline exports of non-ferrous scrap metal L.I. 1969 was passed this year to ensure that exporters do not misclassify ferrous scrap for local production.

83. L.I.1962 was also passed to ensure the payment of corporate income tax by free Zone Enterprises registered under the Free Zones Act.

97. Although, the implementation of this new wage policy is stretched over a period of five years, the wage bill for fiscal year 2011 is estimated at 12 percent of GDP, making it one of the highest in sub-Saharan Africa. Not only that, but also over 75 percent of the total wage bill and the associated increases resulting from the Single Spine Salary Structure goes to employees in only three MDAs, namely the Education, Health and Local Government, which ironically are the very sectors with the statutory funds that introduce rigidities in the budget structure and leaves no space for the sustainable implementation of the Single Spine Salary Structure.

101. The arrears liquidation plan will include the following:-

1. For the first 3 to 4 years, however, the oil revenue will be considerably lower than the non-oil tax and non-tax revenues.
2. For the fiscal year 2011, the expected revenue from oil sales will represent only 6 percent of total domestic revenue.

We all, therefore, need to help manage public expectation.

1. Deferred payments of VAT will be discontinued, but we will introduce measures to improve the refund system; and

1. Our practice of allowing importers of finished products, to warehouse them for up to two years before payment of assessed taxes is not consistent with bonded warehousing regime. It imposes cost on the treasury. Henceforth, the bonded warehousing facility will be restricted to only raw materials for manufacturing as originally intended.

110. The current withholding tax of 5 percent applied across board for foreign suppliers of services makes local entrepreneurs who are subject to 25 percent corporate tax plus all other payroll taxes uncompetitive, especially in the supply of services in the extractive sectors of the economy. This defeats our goal to enhance local content particularly in the petroleum sector. The withholding tax on foreign supply of services is hereby increased from 5 percent to 15 percent and shall be treated as final tax. 0243332929

117. In order to improve the efficiency in tax administration following the integration of VAT and IRS, and improve on tax audits of the top tier VAT payers, the VAT threshold will increase 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 will now fall into a new scheme of combined VAT and income tax assessment. The details of the combined assessment will be in the VAT Amendment Bill that I will submit to you in due course.

118. In order to protect the environment, government proposes a 20 percent environmental tax on plastic packaging materials and products, excluding bottled water which already attracts excise duty. The environmental tax will be charged at the importation and any production or collection points.

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18 months. In lieu of bringing in additional Profit Tax, government proposes to extend the NFSL for an additional year.

1. For the first GH¢1,140 of income, the tax is free;
2. For the next GH¢360 the tax rate is 5 percent;
3. For the next GH¢840, the tax rate is 10 percent;
4. For the next GH¢17,976, the tax rate is 17.5 percent; and
5. For income exceeding GH¢20,280, the tax rate is 25 percent.

1. For marriage/dependant responsibility the new rate is 100 currency points;
2. For old age, the new rate is 100 currency points;
3. For child education, the new rate is 100 currency points up to 3 children;
4. For aged dependant relative, the new rate is 50 currency points; and
5. For training cost, the new relief is 200 currency points.
6. Personal relief for the disabled remains at 25 percent of the taxable income. I encourage and urge tax payers to file their returns and get the requisite credit.

130. Under the present tariff code, energy saving compact fluorescent lamps are exempt from all taxes. In furtherance of promoting energy savings and reduction of power consumption, light emitting diode (LED)lamps are being added to the exemption list. Local companies producing energy saving bulbs will have the same treatment for their primary raw materials.

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statements and a certified record of their activities by the appropriate sector ministry. We want to reiterate government’s intent to enforce this policy.

140. I wish to notify this House that in the near future government releases to the Assemblies may place more weight on their revenue mobilization efforts as reflected in the DACF formula.

1. Total non-oil revenue and grants is estimated at GH¢10,017.8million, equivalent of32.1 percent of GDP. The expected non-oil revenue and grants for the year represents a 13.5 percent increase over the projected outturn for 2010.
2. Total revenue from oil into the budget is estimated at GH¢584.0 million, equivalent to 1.9 percent of GDP.
3. Total oil and non-oil revenue and grants are thus estimated at GH¢10,601.0 million of 34.0 percent of GDP.
1. Domestic revenue is estimated at GH¢9,299.5 million, representing 21.5 percent increase over the projected outturn for 2010.

1. Tax revenue is estimated at GH¢7,712.5 million representing 24.8percent of GDP. Non-tax revenue is expected to increase by 26.4 percent over the projected outturn in 2010.

1. Grants from development partners are estimated to increase to GH¢1,301.6 million, equivalent to 4.2 percent of GDP and accounting for 12.3 percent of total revenue and grants.

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144. Total interest payments for fiscal year 2011 is estimated at GH¢1,831.3 million, equivalent to 5.9 percent of GDP, and 14.5 percent of total expenditure. Of this amount, GH¢459.1 million will be used to pay interest on foreign debt and GH¢1,372.2 for domestic interest payments.

145. An amount of GH¢262.2 million from oil revenue will be transferred to the Ghana National Petroleum Company to fund its investments activities.

148. In order to reduce the cost of domestic debt, Government will continue to exercise fiscal discipline to limit the increase in public sector borrowing requirements. This would reduce

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domestic interest rates and permit the rolling over of existing debt at lower cost. Lower interest cost will free resources for productive expenditures.

1. Accelerating agriculture modernization;
2. Developing oil and gas industry;
3. Developing critical infrastructure;
4. Sustaining natural resource management and environment;

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152. Madam Speaker,as a commitment to these priory areas, Food and Agriculture has been allocated GH ¢ 221.6 million for major interventions in food security, agriculture modernization and productivity. The energy, water resources, works and housing will receive GH¢ 405.5 million and GH¢558.6 million respectively for electrification, housing, potable water and other critical areas to accelerate

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growth. The roads, highway and transport has been allocated GH ¢354.1 million for road construction in various parts of the country. Under the social sector infrastructure, education and health have both been allocated an amount of GH¢ 2.9 billion.

153. In addition, Madam Speaker, the MiDA projects in the areas of Agriculture, Transportation and Rural Development programmes under an integrated agricultural developmentapproach in 2011 will amount to GH ¢354.8 million.

154. Madam Speaker, our development partners have significantly improved on the predictability of their direct budget support to the government. Unfortunately, a large part of the financial resources provided by development partners remain unutilized.

155. The slow disbursements of funds are as a result of the following’

1. Inadequate matching funds for projects;
2. Difficulty in project design;
3. Non adherence to disbursement procedures;
4. Poor management and supervision of projects; and
5. Ineffective reporting systems.

156. Madam Speaker, to address the slow disbursement of project loans and grants steps have been taken to ensure a high disbursement rate of donor funds especially in the 2011 priority areas. These include the provision of adequate counterpart funds for the project loans and grants. In

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addition, project management and procurement guidelines and training will be provided for all staff managing projects with support from our development partners.

157. Efforts will be made to improve on effective monitoring of projects through the development of a comprehensive monitoring and evaluation plan and schedule to guide project implementation. This will be complemented with quarterly projects meetings of sector ministries, development partners and Ministry of Finance and Economic Planning

158. Madam Speaker, the US$547 million Millennium Challenge Account Ghana programme, will be nearing completion by the end of 2011. Grant disbursement under the scheme to support Agriculture, Transportation and Rural Development programmes in 2011 will amount to GH 354.8 million.

159. Madam Speaker, the agriculture sector is the second largest contributor to the country GDP, yet it is characterized by low productivity and limited competitiveness. This is because the sector is dominated by subsistence and small holder production units applying mostly basic and low level technology.

160. Madam Speaker, in the 2011 fiscal year, government will address the challenges by accelerating the modernization and development of agriculture. To raise productivity and increase production, agricultural mechanization will be accelerated through the establishment of Agricultural Mechanization and Service Centres (AMSEC). Government

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will also support the private sector to build capacity in the local production and/or assemble of appropriate and affordable agricultural machinery, tools, and other equipment. The machinery hire purchase and lease schemes with backup spare parts for all machinery and equipment would be facilitated to improve farmers’ access to appropriate farming equipment and machinery. Support willalso be given to the private sector to produce and use small-scale multi-purpose machinery and equipment, including farm level storage facilities, appropriate agro-processing machinery/equipment. The intermediate means of transport (IMTs) will also be fully implemented.

161. Other key projects and programs to be implemented in the sector, Madam Speaker, include the following: the inland valley rice development project, Afram plains district agricultural development project, export marketing and quality awareness project, northern rural growth programme, promotion of perennial crops (rubber and oil palm), rice sector support project, out-grower value chain fund project phase 1. In addition, the block farming project, youth in agriculture, and the fertilizer subsidy program will all continue.

162. Madam Speaker, Government will continue to implement policy measures to enable the cocoa sub-sector contribute significantly to the growth of agricultural GDP. The following interventions will take place in the cocoa sub-sector in the 2011 fiscal year.

•An amount of GH¢104.4 million will be spent on the Cocoa Diseases and Pest Control Program (CODAPEC) to mitigate

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the risks associated with the incidence of diseases and pests that attack cocoa. COCOBOD will spend GH10.2 million to intensify the treatment and control of cocoa swollen shoot virus diseases.

1. The fertilizer subsidy policy will be harmonized between the Ministry of Food and Agriculture and COCOBOD during the year. An amount of GH¢140.5 million has been set aside for the Cocoa Hitech Program which will ensure that appropriate cocoa fertilizers are available at the right time for use by farmers.

1. The Special Housing Scheme for cocoa farmers will be supported with an amount of GH¢868,000.

1. The rehabilitation and tarring of selected roads in the major cocoa growing areas will continue in 2011. For the 2009/2010 cocoa crop year, an amount of GH¢20 million has been set aside to complete roads under the Cocoa Roads Improvement Project (CRIP)

1. The Cocoa Farmers Pension Scheme will commence in 2011 with an initial capital of GH¢9.3 million.

163. Madam Speaker, the following interventions will be undertaken by the Millennium Development Authority (MIDA) as part of the Agriculture Commercialization Project.

1. Disbursement of GH4 million under the Agriculture Credit to train farmer-based organisations;
2. Completion of 14 agribusiness/buying centres;

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164. Madam Speaker, government will continue to improve access and mobility in the road network to reduce traveling and vehicle operating cost associated with bad roads, prioritize the maintenance of the existing road infrastructure to reduce vehicle operating costs and future rehabilitation costs will be prioritized; improve accessibility by determining key centers of population, production and tourism; re-introduce labor-based methods of road construction and maintenance to improve rural roads and maximize employment opportunities.

165. Madam Speaker, the implementation of the following key projects will continue: Nsawam-Apadwa road project (Nsawam by-pass including bridges), Awoshie-Pokuase road, Tema-Aflao road development project (Lot1-Akatsi-Abgozome, Lot2-Abgozume-Aflao section & Akatsi bypass, Akatsi-Akanu road rehabilitation project (Lot1-Akatsi-Dzodze, Lot2-Dzodze-Akanu & overlay for Akatsi-Dzodze, Techiman-Kintampo (Techiman-Apaso, Lot2 Apaaso-

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Kintampo), Ghana Urban Transport Project & Transit facilitation and Transport Sector Development Programme.

166. Madam Speaker, government will also consider entering into pre-financing arrangements with financial institution and contractors to raise funds to complete such key projects like the Achimota-Ofankor, Tetteh Quashie- Madina, Nsawam-Apedwa by-pass. Efforts will also be made to build the capacity of local road contractors, ensure their proper classification and use, and develop the institutional and regulatory arrangements to support effective and efficient movement of freight and passengers.

167. Madam Speaker, the following road construction projects will also be completed in fiscal year 2011.

1. 346 kilometers of feeder roads in the Northern, Central, Eastern and Volta Regions to link food growing areas to the marketing centers;
2. 75 kilometers Agogo to Dome trunk road in the Ashanti Region;
3. 14 kilometers of the N1 Highway - Tetteh Quarshie to Mallam Junction - into a three-lane dual carriage way, including two interchanges at Dimples Inn and Mallam Junction.

168. Madam Speaker, in the 2011 fiscal year, efforts will be geared at increasing access of households and industry to reliable and adequate energy supply and the diversification of the national energy mix to include the use of indigenous sources of energy. This will be achieved through the

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rehabilitation and expansion of energy infrastructure. Specific interventions will also be undertaken to increase access to modern forms of energy to the poor and vulnerable through the extension of the national grid to poor communities.

169. Madam Speaker, specific projects and programs to be implemented in the year include the following: Bui Hydroelectric Power Project, Ghana Energy Development and Access Project, Ghana–Togo Benin 330kv Power interconnection project, Power systems reinforcement project, West African Power Pool (Phases 1&2), 30kv Aboadzi-Volta transmission line project and major activities in oil and gas.

170. Madam Speaker, Ghana’s existing rail network is confined mostly to the southern part of the country which is economically more advanced and has a higher population density. Nonetheless, the current rail network is characterized by old tracks and rotten coaches, and inadequate railway terminals, stations and platforms.

171. Madam Speaker,Government will source funds torehabilitate and/or totally re-build and modernize the rail sector.

172. Madam Speaker, the recently commissioned Accra-Tema railway line will be extended from the Tema harbour area to Tema Community 1 to improve the suburban railway system. The rehabilitation of the Western line, which commenced in 2009, will be continued to facilitate freight movement in the region.

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173. Madam Speaker, funds will also be made available to the Ministry of Transport to support the supply of 150 VDL buses for the Metro Mass Transport Limited and the Rural Transport Program to improve inter/intra city movement of people and goods.

174. Madam Speaker, the Millennium Development Authority will undertake the following projects to support the efforts of the Ministry of Transport:

1. Launching of two (2) new RoRo Ferries for the Volta Lake Transport Company at Adawso and Ekye Amanfrom
2. Completion of Ferry Terminal / Landing Stages
3. Removal of Tree Stumps in Volta Lake (5kms)

175. Madam Speaker, government will enhance access to housing by commencing the construction of 200,000 affordable housing units in selected cities and towns across the country for which government has entered into the loan agreement with STX Company. In addition, arrangement with private sector to raise funds to complete the affordable housing schemes which were started by the previous government will unfold during the year.

176. Madam Speaker, implementation of the following water projects will commence in fiscal year 2011: urban water project, rural water and sanitation project, Kpone water project, Kumawu, Konongo and Kwahu water supply and expansion projects, and Wa water supply and rehabilitation project. It is hoped that the implementation of these

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projects will increase access to potable water, reduce the incidence of water borne diseases, and improve sanitation in the beneficiary communities.

177. Madam Speaker, government will continue to improve enrolment, retention and quality of education at all levels of education through continued provision of free uniforms for children in basic schools in deprived communities. In addition, government will continue with its social interventions program of providing capitation grant, free exercise books and school subsidies as well as the school feeding scheme.

178. Madam Speaker, to further expand and improve educational infrastructure, government will join hands with the District Assemblies and other non-state actors to providing infrastructural facilities for pre-school education, primary, junior and senior high schools. Furthermore, government will continue with the program of upgrading basic school infrastructure, especially schools under trees throughout the country. Government will also abolish all extra school fees and the shift system in junior high schools.

179. Madam Speaker, to achieve MDG Gender Parity Index of 1:1 Government will provide support to needy girls as well as engaging in enrolment drive activities in collaboration with District Assemblies.

180. Madam Speaker, government will continue with the process of establishing two more public universities, one each at Ho and Sunyani to broaden access to tertiary education.

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181. Madam Speaker, to promote the use of ICT in basic and senior high schools, the Ministry of Education has entered into partnership with the China Communication Services Corporation Limited to provide ICT equipment and related software for Basic and Senior High Schools nation-wide

182. Madam Speaker, government will continue to concentrate on improving health outcomes by directing resources towards the health of women, neonates, infants and children as well the prevention and control of communicable and non-communicable disease.

183. Madam Speaker, in fiscal year 2011, the following interventions will be made in the health sector:-

1. National Child Health Policy and strategy to increase access to Maternal, Newborn and Child Health services (MNCH);
2. Implement the adolescent health policy
3. Develop measures to ensure safe blood product transfusion;

1. Strengthen surveillance, reporting and emergency response systems for the prevention and control of communicable & non-communicable disease.

1. Improve case detection and management at health facility level

1. Scale up the vector control strategy.

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184. Madams Speaker, about 100 uncompleted and abandoned CHPS compounds will be completed, while an additional 30 will be constructed and equipped.

185. Madam Speaker, the National Health Insurance Scheme will continue to provide financial risk protection against the cost of basic/standard quality health care for all residents in Ghana.

186. Madam Speaker, the following key projects will be undertaken in the 2011 fiscal year.

1. Rehabilitation of Winneba District Hospital;

1. Nutrition and malaria control for child survival

1. Guinea worm eradication through water supply, sanitation and hygiene in the Northern region

1. Construction works on District Hospitals at Tarkwa and Bekwai
2. Refurbishment of the Tamale Teaching Hospital;
3. Expansion of radiotherapy and nuclear medicine centre at Korlebu Teaching Hospital and KomfoAnokye Teaching Hospital;
4. Construction of three regional hospital with staff housing at Wa and Kumasi,
5. construction of seven District Hospitals at Adenta/Madina, Twifo-Praso, Konongo-Odumase, Nkawkaw, Atibie, Tepa and Salaga;
6. Construction of Blood Transfusion Centres at the teaching hospitals in Kumasi and Accra; and

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1. Continuation of the Bolgatanga regional hospitals rehabilitation project, Phase III.
2. Construction of 5 polyclinics in Upper West, at Lambusie, Babile/Brifo, Ko, Wechau, and Han

187. The Government will continue to work with the various stakeholders to support the small and medium enterprise sector, private sector development, industrial development and overall economic growth and job creation.

188. The government has approved a new Industrial Policy for the country, which focuses on Industrial Production and Distribution, technology and Innovation, The Support Program will be operationalized to drive the implementation of the Industrial Policy.

189. Further to support industrial Development and Local Industry the Government will work on comprehensive Industrial Development and Competiveness Legislation for the development of local industries through the promotion of domestic content both in terms of human and material resources, and the transfer of technology.

190. The Government will begin work on the development of a Commodity Exchange to connect the buyers and sellers of locally grown agricultural commodities in an efficient, reliable and transparent manner by making use of innovation, technology and learning from International best practiced from the African Continent and beyond.

191. The Government will begin development of an Industr5ial salt Estate at Kata in the Volta Region to promote large-scale commercial salt development. This will be in addition to ongoing SME salt development activities that are ongoing with UNICEF and the Global Alliance for Improved nutrition.

192. The Government will establish an SME Database to provide up to date information on the operations and activities of SME’s in various parts of the country. This is with a view to providing information and developing relevant support services to the SMS Sector. The Government will also commence the implementation of its program to rehabilitate and strengthen six craft village across the country.

193. The Ghana Standards Board will tighten inspection regime for the inspection of high-risk imported goods to reduce the dumping of substandard goods within the country.

194. The National Board for Small Scale Industries will organize 2000 tailor made entrepreneurial and technical improvement programs for 60,000 entrepreneurs. It will also support 1,800 MSE’s to improve the packaging and quality of their products. It will establish 10 new Business Advisory Centres in 10 Districts to support MSE development.

195. Madam Speaker, good water is a basic human need and a requirement for the sustenance of life. Unfortunately, many of our compatriots have to live without potable water. In

2011 Financial Year Budget Speech

most of our rural communities, citizens have to depend on streams and rivers as their source of water. Madam Speaker, government will provide safe and portable water to the citizenry to reduce the incidence of health related water borne diseases government will provide 20,000 boreholes across the country over the next five years starting 2011 fiscal year.

196. Madam Speaker, in fulfillment of Government’s pledge to address the unacceptably high incidence of poverty in the northern Savannah regions and in the Central Region, the two institutions will be supported to facilitate and implement major poverty reducing programmes.

197. In that regard, adequate provision has been made for SADA to implement their programmes for the 2011 fiscal year.

198. For CEDECOM budgetary provision has made for the implementation of initiatives in the areas of tourism development, agribusiness, salt production and human resource development to create jobs and facilitate business in the region.

199. Madam Speaker, the recent rebasing of the country’s national accounts provides data on the growth poles of the economy to guide policy analysis and decision making. It is evident from the rebased data that the traditional sectors of agriculture and manufacture have lost out to the service sector in terms of contribution to GDP.

2011 Financial Year Budget Speech

200. Based on rebased data, growth rates recorded in the Agriculture, Industry and Service Sector were – 1.7 per cent, 6.1 percent and 7.7 per cent respectively in 2007. Provisional figures for 2010 show agriculture and Industrial growth of 4.8 per cent and 6.0 per cent respectively compared to 8.2 per cent growth in the service sector.

201. Madam Speaker, Government recognizes the immense contribution of the non-oil sector towards the 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 does not play second fiddle to the oil sector as has happened in some oil producing countries.

202. Madam Speaker, the 2011 budget would seek to address this by specific interventions in the agriculture and the manufacturing sectors to revamp their lead in the growth agenda. The private sector would be supported in diverse ways in the effort of increasing industrial production and output that would create jobs.

203. Designing and implementing policies and strategies to modernize the agricultural sector and at the same time targeting the development of the industrial and services sectors to increase their contribution to GDP will therefore be top priority of government.

204. Madam Speaker, Government’s agriculture development strategy is based on the knowledge that agriculture has significant potential to grow beyond the levels experienced in recent years. Specific interventions in the agric sector to ensure growth in output and the elimination of income variability will include the following:

1. Accelerating the use of mechanization;
2. Establishing district centres for agriculture advisory services;
3. Improving the application of modern science and technology;
4. Promoting the development of appropriate irrigation schemes; and
5. Providing agriculture financing through the establishment of Agricultural Development Fund.

205. Madam Speaker, the private sector will also be assisted to become globally competitive in support of government’s growth and development agenda. In this respect, government will ensure the creation of a diversified, innovative and fully integrated industrial sector with the active participation of the private sector. Government expects the oil and gas sector to impact significantly on economic activities over the medium term to achieve the right synergies for job creation. In this connection, the Public-Private Partnership (PPP) option in the implementation of mega projects in the construction, transport, manufacturing and service provision sectors will be explored.

206. The issue of high economic and non-economic cost of doing business will be tackled in consultation with other stakeholders and government will continue to promote public-private partnership to accelerate the development and implementation of policies.

207. Madam Speaker, 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 remaining banker to banker and former private lotto operators in the lotto marketing business as defined under the lottery Act 722. New products will be introduced and commissions restructured to increase NLA’s contribution to the treasury.

Private Sector Competitiveness.

208. The Government of Ghana (GoG) has developed a new Medium Term Development Plan to replace the Growth and Poverty Reduction Strategy (GPRS II covering 2006-2009), which like the previous strategies, is expected to prioritize growth as the way of reducing poverty. The design and development of Ghana’s Medium Term Private Sector Development Strategy Phase II, has been designed with the theme: ‘A thriving private sector – Job creation and enhanced livelihood for all’. This initiative has three main strategic objectives:

2011 Financial Year Budget Speech

210. To achieve these two objectives, Government is committed to creating an environment that is conducive for the private sector to expand and create jobs.

211. Madam Speaker, challenges still remain, but Government is committed to making improvements in the areas of:

212. Madam Speaker, Ghana’s regulatory system has been characterized by unclear divisions of regulatory responsibilities between agencies, duplication in functions, and lack of clarity in the roles and powers of the agencies among others.

2011 Financial Year Budget Speech

213. To address these challenges, Government will undertake the following specific actions:

214. Madam Speaker, as part of government’s continuous commitment to support the private sector, a well coordinated reform initiative within the framework of Public Private Partnership (PPP) has begun. The PPP policy document has been finalized and will be submitted to cabinet for approval. In this regard projects such as the Alstom Power Plant in the energy sector, the Takoradi and Tema Port expansion and the Accra Kumasi Toll road will be undertaken within the PPP framework.

215. Madam Speaker, we wish to assure Ghanaians and the international community that we will not be complacent but rather maintain the pace of reforms that have brought us this far.

216. Madam Speaker, housing is recognized as one of the important infrastructural development necessary for the economic growth of this nation. Ghana faces an acute housing deficit of one million units especially in the urban centres. The cost of housing and other infrastructural development is excessively high as most of the materials used are imported. However, there exist abundant raw materials which can be used in the construction industry to reduce import content in the construction industry.

217. Madam Speaker, 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 programme on the utilization of local building materials such as clay brick and tiles, pozzolana cement, bamboo etc. in the construction industry has already been prepared on the initiative of government.

218. It is anticipated that the increased use of these durable local materials will considerably reduce the import bill on building materials in addition to the following:

1. conserving capital;
2. providing employment for the youth especially within the localities;
3. providing affordable housing;
4. improving engineering qualities;
5. generating revenues to the state; and
6. improving infrastructural development especially in districts where indigenous building material plants will be located.

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219. Currently, Ghana has shares and carried interests in a number of mining companies that enable government to receive significant cash flows from royalties and dividends. 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 present a unique opportunity for the government to consider the monetization of all or portion of its gold interests to deliver a significant capital sum to support the nation’s growth and development.

220. 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. The GGC will be a newly incorporated company that will be 100 percent owned by the government and into which the government will transfer its gold and equity interests.

221. The benefits to government of having such a company are several, including the following:

1. delivery of significant capital sum to the government, raised from private markets;
2. innovative way to capitalize on the market premium for royalties;
3. provides government with continued exposure to capital appreciation of a national company, together with ongoing dividends;

2011 Financial Year Budget Speech

222. Madam Speaker, H.E. the President, Prof. J.E.Atta Mills launched the new pension scheme on 16th September, 2009. Following the passage of the National Pension Act, 2008 (Act 766), the National Pensions Regulatory Authority has been established to oversee the administration and management of the new three-tier pension scheme.

223. Implementation of the new scheme started in January 2010 with the mandatory first and second tier schemes, followed by the voluntary third their which commenced on 1st May 2010. The Pensions Regulatory Authority has issued provisional registration to a number of employer sponsored provident fund schemes and group pension scheme for the informal sector.

224. Madam Speaker, it is important to note that provision has been made in the third-tier voluntary personal pension scheme to cater for the peculiar needs of workers in the informal sector who are about 85 percent of the working population.

225. Informal sector contributors will have two accounts, a retirement account (to provide benefits on retirement) and a personal savings account with rules for withdrawals before retirement. What this means is that workers in the informal sector can now participate in a pension scheme which 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.

226. The most vulnerable groups are supported through a number of programmes, including the capitation grant (financial support for school fees), school feeding, fertilizer subsidies for small-scale farmers, NHIS and reduced electricity tariffs for lifeline consumers. In updating the government’s poverty reduction strategy for the medium term, the government reviewed the complementarity and effectiveness of the various social safety nets. At the same time, the government has worked with key stakeholders to review the current classification of poverty-reducing expenditure, and will ensure that the support focuses on the key programmes.

227. Madam Speaker, the safety and security of all Ghanaians is a major pre-occupation of the NDC Government. Despite the emerging challenges in sophisticated crimes, our security agencies are ready to maintain peace and order for all Ghanaians.

228. In this regard, Government is committed to provide the necessary support and logistics for our security agencies. For the 2011 budget, major housing projects and other interventions will be pursued with the objective of ensuring a reduction in crime levels and the maintenance of stability in all parts of the country.

229. The share of the Common Fund for person with disability is to be increased from the current 2 percent to 3 percent in line with the 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.

230. Following finalization of a study of the operations of the electricity sector, government adopted a comprehensive financial restructuring and recovery plan for the sector. The key elements of this plan are: (i) an upward adjustment in electricity tariffs; (ii) implementation of actions to strengthen revenue collection by the electricity sector public utilities; and (iii) adoption of a plan to restructure the balance sheets of the utilities by the end of 2011. Going forward, tariffs will be subject to quarterly reviews to ensure continued cost recovery. However, Government will continue to make provision in the Budget to provide subsidies to support life-line consumers of electricity.

231. Madam Speaker, last year, Government promised to assist poultry farmers to acquire equipment, chicken feed, chemicals and other inputs to enable them undertake large scale production of poultry in the country. Government also promised to levy duties to cut down on imports of poultry and fish into the country and to support local production.

232. During the year, government engaged the Poultry Farmers Association on how to increase local production to the level where domestic demand can be met in fiscal year 2010. Government found that the major constraints to large-scale poultry production in the country are lack of credit, equipment, and poultry feed.

233. To support poultry farmers to increase local production of chicken and eggs, a significant portion of the Japanese grant and other grants will be made available to poultry farmers to be used to acquire the necessary equipment and chemicals for the industry. Government also believes that the huge production of maize in recent times should support local production of poultry feed in the country. Discussions are also underway with some foreign investors on the production of poultry feed in the country. Once the discussions are concluded and production commences, the problem of lack of poultry feed will become a thing of the past.

234. Madam Speaker, while grant financing and concessional loan financing will constitute the core component of external support in the near future, non-concessional financing will be used for projects contracted or guaranteed by the government where there is no scope for concessional or grant financing, the impact on debt sustainability is manageable, and project evaluations show a high rate of social or economic return.

235. A number of reforms are being introduced to further strengthen debt management. These include:

1. the adoption of an explicit debt management strategy, establishing clear objectives for debt management in terms of the cost and risk of the debt portfolio, and identifying potential funding sources and consideration for probable changes in the relevant legislation in the face of the possible use of new financial instruments;
2. close monitoring of all public sector external debt contracts by the Ministry of Finance’s Debt Management Division; and
3. the adoption of clearly defined framework for appraising Public investment projects being considered for non-concessional external loan financing, their benefits and prioritization across projects, to ensure consistency with the government’s developmental priorities. Guidelines laying out this process will be developed by the Ministry of Finance and submitted to Cabinet for approval.

236. Madam Speaker, the Government is committed to improving public investment management through a framework that facilitates public and private investment in the delivery of infrastructure and public service projects. In this regard, the Ministry of Finance & Economic Planning has established a Public Investment Division (PID) which will be the central organ within Government to provide strategic guidance to: (1) national investment and project development;(2) project appraisal;(3) project screening, selection and budgeting;(4) project implementation;(5) project adjustment; and (6) project evaluation and monitoring.

237. Madam Speaker, the establishment of the PID reflects an assurance of efficiency in public investment decisions to boost investment in public infrastructure and services that contribute to improvements in human capital.

238. Madam Speaker, 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.

239. Madam Speaker, Growth and Employment in Ghana, are directly linked to the growth of SMSE’s. Most businesses in Ghana fall within the category of Micro, Small and Medium Enterprises, with an employment capacity of close to 70 percent of the Ghanaian labour force.

240. SME’s thus have significant contribution to make to Ghana’s socio-economic development and growth, and the attainment of its middle income status.

241. Despite these benefit, the tremendous potential of small and Medium Enterprises are yet to be realized, due to the challenges confronting the sector – which has led to the shifting of focus from entrepreneurship to a proliferation of petty trading nationwide.

242. Madam Speaker, Government has put in measures to remove bottlenecks constraining MSME’s development.

243. These measures include:

245. In pursuit of the NDC Government’s Manifesto commitment to invest in the nation’s infrastructure as an anchor for accelerated economic transformation, His Excellency the President in September, this year, led a high powered team to the People’s Republic of China and signed agreements totaling some 13 billion dollars.

246. The two agreements signed with the China Development Bank and the China Exim Bank respectively, will when crystalized, see a massive investment that will bring about an unprecedented transformation of the nation’s infrastructure in the areas of road, rail, energy, water, education, etc.

247. In the course of 2011, as the financing terms of the projects covered by these two framework agreements reach their final stages, specific loan agreements will be brought before Parliament to seek approval to pave way for the accessing of these pivotal resources to accelerate the pace of the nation’s infrastructural transformation.