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2014 Mid-Year Review and Supplementary Estimates
a
REPUBLIC OF GHANA
MID-YEAR REVIEW
of the
BUDGET STATEMENT AND ECONOMIC POLICY
and
SUPPLEMENTARY ESTIMATES
of the
GOVERNMENT OF GHANA
for the
2014 FINANCIAL YEAR
presented to
PARLIAMENT
on
WEDNESDAY, 16TH JULY, 2014
by
SETH E. TERKPER
MINISTER FOR FINANCE
on the Authority of
H. E. JOHN DRAMANI MAHAMA
PRESIDENT OF THE REPUBLIC OF GHANA
i
2014 Mid-Year Review and Supplementary Estimates
MID-YEAR REVIEW
of the
BUDGET STATEMENT AND ECONOMIC POLICY
and
SUPPLEMENTARY ESTIMATES
ii
2014 Mid-Year Review and Supplementary Estimates
For copies of the Mid-Year Review, please contact the Public Relations Office of the
Ministry:
Ministry of Finance
Public Relations Office
New Building, Ground Floor, Room 001/003
P. O. Box MB 40
Accra – Ghana
The 2014 Mid-Year Review of the Budget Statement and Economic Policy and
Supplementary Estimates of the Government of Ghana is also available on the
internet at: www.mofep.gov.gh
iii
2014 Mid-Year Review and Supplementary Estimates
LIST OF ACRONYMS AND ABBREVIATIONS
ABFA
AIDS
BOG
bps
BR
CAPI
COLA
CPI
DACF
E-SPV
FITAB
GDP
GES
GETFund
GHFI
GHS
GIFMIS
GIIF
GNPC
GOG
GPFs
GRA
GSE
GSE-FI
GSF
GSS
H.E
HIV
HRMIS
IBES
IPPD
LGS
M2
M2+
MDAs
MDBS
MMDAs
MOF
MoFA
NDA
NFA
Annual Budget Funding Amount
Acquired Immune Deficiency Syndrome
Bank of Ghana
Basis Points
Benchmark Revenue
Carried and Participating Interest
Cost of Living Allowance
Consumer Price Index
District Assemblies Common Fund
Electronic Salary Payment Voucher
Free Income Tax Assessment Bureau
Gross Domestic Product
Ghana Education Service
Ghana Education Trust Fund
Ghana Housing Finance Initiative
Ghana Health Service
Ghana Integrated Financial Management and Information
System
Ghana Infrastructure Investment Fund
Ghana National Petroleum Company
Government of Ghana
Ghana Petroleum Funds
Ghana Revenue Authority
Ghana Stock Exchange
GSE Financial Stock Index
Ghana Stabilisation Fund
Ghana Statistical Service
His Excellency
Human Immunodeficiency Virus
Human Resource Management Information System
Integrated Business Establishment Survey
Integrated Personal Payroll Database
Local Government Service
Domestic Currency Component
Broad Money Supply
Ministries, Departments and Agencies
Multi-Donor Budget Support
Metropolitan, Municipal and District Assemblies
Ministry of Finance
Ministry of Food and Agriculture
Net Domestic Assets
Net Foreign Assets
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2014 Mid-Year Review and Supplementary Estimates
NIR
NOP
OHCS
OIN
PFM
PIAC
PRMA
PSC
PSC
PSJSNC
SOEs
SPVs
VAT
WAMZ
Net International Reserves
Net Open Position
Office of the Head of Civil Service
Other Items Net
Public Financial Management
Public Interest and Accountability Committee
Petroleum Revenue Management Act
Public Services Commission or the
Public Services Commission
Public Service Joint Standing Negotiating Committee
State-Owned Enterprises
Special Purpose Vehicles
Value Added Tax
West Africa Monetary Zone
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2014 Mid-Year Review and Supplementary Estimates
TABLE OF CONTENTS
SECTION ONE: INTRODUCTION ..............................................................................................1
SECTION TWO: MACROECONOMIC PERFORMANCE IN 2013 ...........................................6
MACROECONOMIC TARGETS FOR 2013 ....................................................................... 6
INFLATION ....................................................................................................................... 8
MONETARY DEVELOPMENTS ..................................................................................... 9
FISCAL PERFORMANCE .............................................................................................. 11
SECTION THREE: MACROECONOMIC PERFORMANCE IN 2014 .....................................23
MACROECONOMIC TARGETS FOR 2014 ................................................................. 23
GDP GROWTH................................................................................................................ 23
INFLATION ..................................................................................................................... 24
MONETARY DEVELOPMENTS ................................................................................... 25
EXTERNAL DEVELOPMENTS .................................................................................... 29
FISCAL PERFORMANCE .............................................................................................. 29
SECTION FOUR: STATUS OF IMPLEMENTATION OF KEY POLICY INITIATIVES.......41
SECTION
FIVE:
REVISED
2014
MACROECONOMIC
TARGETS,
FISCAL
FRAMEWORK AND REQUEST FOR SUPPLEMENTARY BUDGET ...................................59
SECTION SIX: CONCLUSION ..................................................................................................64
LIST OF TABLES
Table 1: Economic Aggregates (2009 – 2013) .......................................................................... 7
Table 2: Summary of Central Government Operations and Financing – 2013 ....................... 11
Table 3: Summary of Central Government Revenues and Grants – 2013 ............................... 12
Table 4: Total Government Tax Revenue – 2013 .................................................................... 14
Table 5: Wage-to-Tax Revenue and GDP Ratios (%) ............................................................. 16
Table 6: Trends in Interest Cost to Revenue and GDP Ratios (%) ......................................... 17
Table 7: Summary of Central Government Expenditures – 2013............................................ 19
Table 8: Summary of Central Government Financing – 2013 ................................................. 20
Table 9: Sources of fiscal slippage in 2012 and 2013 ............................................................. 20
Table 10: Domestic Debt by Maturity Structure...................................................................... 22
Table 11: Summary of Central Government Operations and Financing ................................. 31
Table 12: Summary of Central Government Revenue and Grants .......................................... 32
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2014 Mid-Year Review and Supplementary Estimates
Table 13: Details of Central Government Tax Revenue ........................................................................ 33
Table 14: Summary of Central Government Expenditures ............................................................ 34
Table 15: Summary of Central Government Financing ................................................................... 35
Table 16: Petroleum Receipts in the First Quarter of 2014 ........................................................... 36
LIST OF FIGURES
Figure 1: GDP Growth Rate (2008-2013) ......................................................................................... 7
Figure 2: Inflation Trend (2009 – 2013) .................................................................................................. 9
Figure 3: Inflation Trends, January 2013-May 2014 ...................................................................... 25
Figure 4: Public Debt 2010 to May 2014 (Millions of US$) ................................................................... 37
APPENDICES
Appendix 1: Summary of Central Government Operations - 2013 – 2014
Appendix 2: Economic Classification of Central Gov't Revenue - 2013 – 2014
Appendix 3: Economic Classification of Central Gov't Expenditure - 2013 – 2014
Appendix 4: Summary of Central Government Operations – 2014
Appendix 5: Economic Classification of Central Gov't Revenue - 2014
Appendix 6: Economic Classification of Central Gov't Expenditure - 2014
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2014 Mid-Year Review and Supplementary Estimates
SECTION ONE: INTRODUCTION
1.
Right Honourable Speaker, on behalf of His Excellency, President John
Dramani Mahama, and in accordance with Article 179(8) of the 1992
Constitution, I stand before this august House, to present a Mid-Year Review
and revised budget and macroeconomic targets for 2014. These are
necessitated by recent, and in some cases, longstanding global and domestic
developments. Consequently, we seek approval for Supplementary Estimates
for the 2014 fiscal year.
2.
Mr. Speaker, let me convey to you and Honourable Members, the appreciation
of His Excellency, President John Dramani Mahama, to the House, for the
cooperation we receive any time we present major policy statements. While
presenting an Urgent Policy Statement on the fiscal consolidation measures
for the Ghanaian Economy to this august House in April 2014, I indicated
that, if necessary, and as required by our laws, I will appear before the House
with a Mid-Year Review and a Supplementary Budget.
3.
Let
me
also
Representatives,
convey
through
President
you,
John
Mr
Speaker,
Mahama’s
and
commitment,
the
People’s
focus
and
determination to lead this nation out of our current temporary economic
challenges. In doing so, I wish to communicate Government’s appreciation of
the sacrifices, fortitude, and support of the people of Ghana. As a nation, we
have risen above many challenges before, and we shall rise again. Indeed,
the signs of recovery are already beginning to show.
4.
Mr Speaker, in the early 2000s when we faced difficulty as a nation, we opted
for debt relief under the HIPC Initiative, which gave us significant borrowing
space to accelerate our development. In 2010 when we rebased our GDP, we
became a Lower Middle Income Country (LMIC) with some pride but also with
serious implications. Then in 2011 when we started to export crude oil, our
LMIC status got consolidated. As at today, the World Bank has changed our
status, moving us from softer loan terms (that is, 10-year grace period, with
30-year repayment) to stricter terms (that is, 5-year grace period and 20-year
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2014 Mid-Year Review and Supplementary Estimates
repayment). The African Development Bank has also introduced and
implemented similar loan repayment measures. Again, in the last few months,
the World Bank has started the process of upgrading Ghana to a “blend”
status, which will make us eligible to access the resources of both the
International Development Agency (IDA) and International Bank for
Reconstruction and Development (IBRD) at the same time. Following on from
this, Ghana is now experiencing limited access to concessional loans and
grants from development partners.
5.
Mr. Speaker, since November 2013, however, when the 2014 Budget was
presented and approved by Parliament, the economy has experienced a
number of pressures, which continue to pose challenges to the attainment of
our 2014 economic targets. Notable among these challenges are:
 the continuing shortfalls in tax and non-tax revenues, notably from grants
and concessional financing – in the case of tax revenues, it is also partly
due to the lower national output;
 the consequential depreciation of the Cedi, which is having significant
adverse effects on economic activity, public expenditure and other
macroeconomic variables; and
 declining gold and cocoa prices in 2013 which continue to have a lingering
effect on the economy. Although cocoa prices have recovered, the
continuous decline in the prices and volumes of gold still pose risks to the
country’s external position and domestic revenue mobilization;
6.
Power-sector disruptions, arising from the year-long shortages in gas supply
from the West Africa Gas Pipeline and the frequent downtime of the TICO and
BUI projects, amongst other disruptions, that have adversely affected power
production and output have resulted in our reliance on higher imports of
crude oil for thermal power generation. Mr. Speaker, these challenging factors
have adversely affected the nation’s growth and output, domestic revenue
mobilization effort, as well as balance of payments and reserves position. In
addition, they have considerably undermined the implementation of policy
decisions, such as the automatic utility price adjustments, thereby, giving rise
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2014 Mid-Year Review and Supplementary Estimates
to the payment of higher subsidies. These have added to the complexity in
managing an economy in transition to a Middle Income Status—a complexity
reinforced by the cuts in grants and in the terms on which the country can
now attract grants and concessional financing, notably from the development
partners, including the World Bank and African Development Bank.
7.
Mr. Speaker, going forward, a very important lesson arising out of this
situation is the need to further sharpen and enhance our economic
management systems so that we can better manage volatilities such as
disruptions in power supply and commodity price shocks. The new realities
associated with the implementation of the Single Spines Salary Structure, and
our Lower Middle Income Country status are also being confronted head-on
by this Government.
We shall continue to rely on the cooperation of all
stakeholders. We must also improve on various proposals that are emerging
and which we are implementing to manage our transition to LMIC status.
Furthermore we must endeavour to address the risks posed by events in the
global environment, including the difficulty with which the global economy
continues to emerge from the worldwide financial and economic crisis.
8.
Mr. Speaker, notwithstanding these challenges—and our bold efforts to
address them with measures that include those approved by this august
House—we wish to reiterate that the short-to-medium term prospects for
Ghana remain positive. This encouraging assertion is supported by the
following:
 expected increases in oil and gas exploration and production, particularly
from the Jubilee, Sankofa-Gye Nyame and Tweneboa-Enyenra-Ntomme
(TEN) fields backed by factual evidence such as the building of a second
Floating Production Storage and Offloading (FPSO) vessel and ongoing
negotiations for gas pricing;
 the recovery in cocoa prices, a stable outlook for petroleum prices (with
positive impact on revenue yields), and further expansion of the services
sector;
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2014 Mid-Year Review and Supplementary Estimates
 public-private sector investments, including FDI, in key sectors of the
economy, contributing to the diversification and value addition into the
economy; reduction of the infrastructure deficit; and boosting Ghana’s
growth potential. A notable example is the imminent completion of the gas
pipelines and processing plant to stabilize and improve the supply of
energy and domestic output;
 effective and more durable long-term public financial management
systems, including GIFMIS, that will lead to better control of extrabudgetary expenditures as well as increased efficiency in public
expenditure management; and
 benefits from the next generation of revenue reforms, to improve
efficiency—mainly, by moving all GRA tax processes to an electronic
platform in order to enhance tax administration and compliance.
9.
It is estimated that strategic infrastructure investments in the oil and gas
sector could generate an additional US$2.5 billion in revenues, and increase
our GDP growth: they also form the basis for tailoring our “Home Grown”
Fiscal Consolidation Programme to overlap with firm goals that help achieve
our medium term targets.
10.
Mr. Speaker, we are presenting these Supplementary Estimates to ensure that
we maintain the pursuit of our growth and macroeconomic stability agenda. It
has, therefore, become necessary to make adjustments to accommodate the
following:
 higher interest costs due to rising interest rates, borrowing, and exchange
rate depreciation;
 higher foreign-financed capital expenditure due to the exchange rate
depreciation;
 higher subsidies due to slower-than-expected implementation of utility and
petroleum price adjustments;
 higher compensation payments to public sector employees despite the
moderation in wage negotiations – thanks to organised labour - that has
4
2014 Mid-Year Review and Supplementary Estimates
led to the implementation of a 10 percent Cost of Living Allowance
(COLA), effective May 2014; and

11.
lower-than-expected tax revenues and grants.
Mr. Speaker, let me use this opportunity to caution MDAs and MMDAs, that
this Revision and Supplementary Estimates will not necessarily result in
automatic increases in expenditure across the board.
12.
Mr. Speaker, against this background, I beg to move that this august House
approves the Supplementary Estimate of GH¢3,196,855,671.00 in conformity
with Article 179(8) of the Constitution and Standing Order 143 of this House.
13.
Mr. Speaker, this year’s Mid-Year Review and Supplementary Estimates aim
to:
 update Honourable Members of this House on the performance of the
economy in 2013 and the first five months of 2014;
 revise the macroeconomic targets for 2014;
 revise our budget estimates based on current information;
 request for approval of the 2014 Supplementary Estimates; and
 outline measures for addressing our Nation’s International Reserves to
restore the value of the Ghana Cedi.
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2014 Mid-Year Review and Supplementary Estimates
SECTION TWO: MACROECONOMIC PERFORMANCE IN 2013
MACROECONOMIC TARGETS FOR 2013
14.
Mr. Speaker, as you may recall, at the time of presenting the 2014 Budget,
we did not have full year information but rather provided projected outturn
for 2013 based on actual data for January to September. We now have the
full complement of the actual outturn for 2013.
15.
Mr. Speaker, before we present the 2013 macroeconomic outturn, please
permit me to restate the 2013 macroeconomic targets which were as follows:
 real overall GDP growth including oil of 8.0 percent;
 real non-oil GDP growth of 6.5 percent;
 end period inflation of 9.0 percent;
 average inflation of 8.9 percent;
 overall budget deficit equivalent to 9.0 percent of GDP; and
 gross International Reserves of not less than three months of import cover
for goods and services.
GDP Growth
16.
Mr. Speaker, GDP data for 2013 released by the Ghana Statistical Service
(GSS) showed an overall GDP growth of 7.1 percent against a target of 8.0
percent. Mr. Speaker, I wish to emphasize that the 7.1 percent growth shows
a robust and strong performance, especially when compared to the SubSaharan average of 4.9 percent.
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2014 Mid-Year Review and Supplementary Estimates
Figure 1: GDP Growth Rate (2008-2013)
16.0
15.0
14.0
Percent
12.0
10.0
8.0
8.8
8.0
7.1
6.0
4.0
4.0
2.0
2009
2010
2011
2012
2013*
Source: Ghana Statistical Service
Notes: *Revised
17.
Mr. Speaker, even though the 2013 GDP growth rate was slightly lower than
projected, both the real and nominal GDP values were higher than projected.
As shown in Table 1, the real GDP in 2013 was GHȻ32,507 million against a
target of GHȻ32,109 million for the year. In nominal terms, GDP was
GHȻ93,461 million, against a projected amount of GHȻ88,764 million.
Table 1: Economic Aggregates (2009 – 2013)
Item
GDP at costant 2006 prices (GHȻ million)
GDP in current prices (GHȻ million)
GDP in current prices (US$ million)
Non-Oil GDP in current prices (GHȻ million)
Non-Oil GDP in constant prices (GHȻ million)
Per capita GDP (GHȻ)
Per capita GDP (US$)
2009
22,454
36,598
25,773
36,698
22,454
1,563
1,100
Source: Ghana Statistical Service
Notes: *Revised
7
2010
24,252
46,042
32,186
44,353
24,187
1,900
1,328
2011
27,891
59,816
39,517
56,070
26,519
2,431
1,606
2012
30,343
74,959
41,459
71,627
28,674
2,898
1,603
2013*
32,507
93,461
48,678
89,545
30,538
3,530
1,838
2014 Mid-Year Review and Supplementary Estimates
Sectoral Performance
18.
Mr. Speaker, the Services sector was the largest contributor to GDP, with a
growth of 8.9 percent in 2013, compared to 11.0 percent in 2012. Key
performing subsectors in the Services sector were the Information and
Technology (24.7%), Financial and Insurance Activities (23.2%), Public
Administration & Defence; Social Security (9.1%) and the Health and Social
Work (7.8%) subsectors.
19.
The Industry sector recorded a growth of 7.0 percent, down from 11.0
percent in 2012 on account of strong performances in the Mining and
Quarrying (11.7%), Electricity (16.1%) and the Construction (8.6%)
subsectors. Upstream petroleum activities also grew by 18.0 percent
compared to 21.6 percent in 2012. The Manufacturing subsector, however,
continued with its declining growth trend by recording a growth of 0.6
percent in 2013, with the Water and Sewerage subsector declining by 1.4
percent.
20.
The Agriculture sector doubled its growth rate of 2.3 percent in 2012 to 5.2
percent in 2013. This was mainly on account of growth in the Crop subsector
(5.9%), Livestock subsector (5.3%) and the Fishing subsector (5.8%).
21.
In terms of sector shares, the Services sector increased its share of GDP from
48.4 percent in 2012 to 49.5 percent in 2013. The Agriculture sector, on the
other hand, continued to experience a declining share of GDP while the
Industry Sector maintained its share of GDP.
INFLATION
22.
Mr. Speaker, inflation surged in 2013 mainly on account of the removal of
subsidies on petroleum and utilities. Inflation moved from 10.1 percent in
January to 11.8 percent in July and ended the year at 13.5 percent in
December, compared to a rate of 8.8 percent in 2012, as shown in Figure 2.
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2014 Mid-Year Review and Supplementary Estimates
Figure 2: Inflation Trend (2009 – 2013)
Source: Ghana Statistical Service
23.
Food inflation for the review period was 7.2 percent, while non-food inflation
was 18.1 percent. Housing, water, electricity, gas and other fuels (35%) and
transportation (25.6%) were the main “price drivers” for non-food inflation.
Communication recorded the lowest inflation (4.4%) in the subgroup
category. The main price drivers for food inflation were mineral water, soft
drinks, fruits and vegetable juices (9.6%), fish and seafood (8.8%) and
cereals and products (7.6%).
MONETARY DEVELOPMENTS
Monetary Aggregates
24.
Mr. Speaker, the annual growth rate of broad money supply (M2+) declined
on year-on–year basis. The growth rate reduced to 19.1 percent as at endDecember 2013 from 19.6 percent at the end of December 2012.
25.
The growth in M2+ was mainly from growth in Net Domestic Assets (NDA)
which was moderated by a decline in Net Foreign Assets (NFA) of the banking
system. While NDA went up by 36.7 percent, NFA decreased by 19.5 percent.
From the components of NFA, the Bank of Ghana’s holdings went up by 1.1
percent while that of the commercial banks declined by 123.2 percent by end-
9
2014 Mid-Year Review and Supplementary Estimates
December 2013. This compares with a decrease in both Bank of Ghana
(12.8%) and commercial banks (3.2%) holdings in 2012.
Interest Rate Developments
26.
Mr. Speaker, developments in interest rates for 2013 in general indicated a
downward trend on year-on-year basis. The Bank of Ghana Policy Rate which
was increased to 16.0 percent in May 2013 remained unchanged till the end
of the year.
27.
The rate on the 91-day and the 182-day Treasury bills went down by 390 and
433 basis points (bps), respectively, from 23.12 percent and 22.99 percent at
the end of December 2012 to 19.22 percent and 18.66 percent at the end of
December 2013. The 1-year note, 2-year note, 3-year and 5-year bonds rates
decreased from 22.90 percent, 23 percent, 21 percent and 23.00 percent in
December 2012 to 17.0 percent 16.8 percent, 19.24 percent, and 19.04
percent at the end of December 2013, respectively.
28.
During the year under review, the interbank weighted average rate decreased
by 77 bps to 16.34 percent on year-on-year basis. The Deposit Money Banks’
average 3-month time deposit rate remained unchanged on year-on-year
basis at 12.50 percent as at December 2013. The Savings rate gained 50 bps
year-on-year to settle at 5.75 percent as at December 2013.
29.
The average lending rates decreased by 15 bps on year-on–year basis to
25.56 percent as at December 2013. The spread between the borrowing and
lending rates also narrowed from 13.22 percent at end-December 2012 to
13.06 percent at end-December 2013.
Exchange Rate Developments
30.
Mr. Speaker, the Ghana Cedi generally traded weak against the currencies of
the major trading partners during the review year. In the Inter-Bank Market,
the Ghana Cedi recorded cumulative annual depreciation of 14.6 percent
against the US dollar during the review period. The recorded annual
depreciation of 14.6 percent in 2013 was however lower than the 17.5
10
2014 Mid-Year Review and Supplementary Estimates
percent annual depreciation recorded in 2012. The Ghana Cedi recorded
depreciations of 16.7 percent and 20.1 percent against the Pound Sterling
and the Euro, respectively, in 2013.
31.
On the Forex Bureau Market, the Ghana Cedi also traded weaker against the
major currencies and recorded cumulative depreciations of 16.3 percent, 17.5
percent and 19.3 percent against the US dollar, the Pound Sterling and the
Euro, respectively.
FISCAL PERFORMANCE
32.
Mr. Speaker, fiscal policy outlined in the 2013 Budget aimed to achieve fiscal
prudence and debt sustainability by reducing the budget deficit from 11.5
percent of GDP in 2012 to 9.0 percent of GDP in 2013. The fiscal and other
related targets were to be achieved through the following measures:
 improved revenue mobilization through the Ghana Revenue Authority’s
(GRA) on-going Modernization Programme;
 enhancing the efficiency of public expenditures through the ongoing Public
Financial Management (PFM) reforms, (including GIFMIS); and
 reviewing capital expenditures and the strategy for financing them.
33.
Provisional end-year fiscal data for 2013 indicate that both revenue and
expenditure were below their respective targets for the year. However, the
shortfall in revenue far exceeded the shortfall in expenditure, resulting in a
cash fiscal deficit equivalent to 10.1 percent of GDP against the original
budget target of 9.0 percent and the revised target of 10.2 percent. This
compares to a deficit equivalent to 11.5 percent of GDP recorded in 2012, as
shown in Table 2.
Table 2: Summary of Central Government Operations and Financing –
2013
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2014 Mid-Year Review and Supplementary Estimates
Description
2012 Outturn
a
2013 Budget
Estimate
(Million GH¢)
Provisional
Outturn for 2013
(Million GH¢)
Percent
Deviation
Percentage
Change over
2012 outturn
b
c
(c/b-1)*100
(c/a-1)*100
Total Revenue and Grants
16,668.4
22,533.4
19,471.6
-13.6
16.8
Total Expenditure and Arrears Clearance
25,317.1
30,544.3
28,926.2
-5.3
14.3
Overall Fiscal Balance
-8,648.7
-8,010.8
-9,454.6
18.0
9.3
8,648.7
8,010.8
9,454.6
18.0
9.3
7,018.0
5,700.8
6,920.4
21.4
-1.4
Total Financing
o/w Domestic Financing
Source: Ministry of Finance
Revenue
34.
Mr. Speaker, total revenue and grants for the period was GH¢19,471.6
million, equivalent to 20.8 percent of GDP, against a target of GH¢22,533.4
million, equivalent to 25.4 percent of GDP. The shortfall in total revenue and
grants was partly as a result of low disbursement of grants from our
development partners and, mainly due to the lower than anticipated
performance of domestic revenue. The outturn was 13.6 percent lower than
the budget target and 16.8 percent higher than the outturn for the same
period in 2012.
35.
Domestic revenue, made up of tax and non-tax revenue, amounted to
GH¢18,732.1 million, against the budget target of GH¢21,275.0 million. The
shortfall in domestic revenue was due to weak tax revenue performance in all
tax types, except corporate income tax from the oil companies and
communication service tax. The outturn was 12.0 percent lower than the
budget target and 20.8 percent higher than the outturn for the same period
in 2012, as shown in Table 3.
Table 3: Summary of Central Government Revenues and Grants – 2013
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2014 Mid-Year Review and Supplementary Estimates
2013 Budget
Estimate
(Million GH¢)
Provisional
Outturn for 2013
(Million GH¢)
Percent
Deviation
Percentage
Change over
2012 outturn
a
b
c
(c/b-1)*100
(c/a-1)*100
Total Revenue and Grants
16,668.4
22,533.4
19,471.6
-13.6
16.8
Domestic Revenue
15,508.1
21,275.0
18,732.1
-12.0
20.8
970.9
1,122.7
1,634.0
45.5
68.3
12,517.3
17,090.8
14,307.7
-16.3
14.3
270.2
385.2
670.9
74.2
148.3
2,853.0
4,019.9
4,265.4
6.1
49.5
700.7
737.5
876.7
18.9
25.1
137.9
164.2
159.1
-3.2
15.3
1,160.3
1,258.5
739.4
-41.2
-36.3
2012 Outturn
Description
o/w Oil Revenue
Tax Revenue
o/w Oil Revenue
Non-Tax Revenue
o/w Oil Revenue
Others
Grants
Source: Ministry of Finance
36.
Non-oil tax revenue, excluding exemptions for the period, amounted to
GH¢12,708.3 million (13.6% of GDP), 18.7 percent lower than the budget
target of GH¢15,634.5 million (17.6% of GDP). Including oil and exemptions,
tax revenue amounted to GH¢14,307.7 million, equivalent to 15.3 percent of
GDP. This was 16.3 percent lower than the target of GH¢17,090.8 million
(19.3% of GDP). In nominal terms, tax revenue was 14.3 percent higher than
the outturn recorded in 2012.
37.
Mr. Speaker, given the need for further fiscal consolidation, after the first half
of the year, Cabinet and subsequently Parliament in July 2013 approved the
following tax measures to improve revenue performance and support the
fiscal consolidation effort:
 National Fiscal Stabilisation Levy of 5 percent of profit before tax of
institutions in banking, insurance, other financial services, communication,
and brewery sectors with a sunset clause to end at the end of 2014;
 Special Import Levy of 1 and 2 percent on some imported goods also with
a sunset clause to end at the end of 2014;
 a broadened base of the environmental tax and a reduction in the tax rate
from 15 percent to 10 percent; and
 re-imposition of import duty of 20 percent and VAT on imported mobile
handsets.
13
2014 Mid-Year Review and Supplementary Estimates
38.
In total these revenue measures yielded revenue of about GH¢168 million or
0.2 percent of GDP in 2013. The full effect of these measures are expected to
strongly impact on revenue performance in 2014 and contribute to the
continuing fiscal consolidation, in line with the multi-year adjustment effort.
39.
The weak performance of tax revenue in 2013 was partly due to the following
factors:
 lower import volumes which negatively affected import taxes;
 decline in world commodity prices, particularly gold, which resulted in
lower than expected corporate taxes and mineral royalties;
 the slowdown in economic activities during the first half of the year, due
partly to the energy crisis; and
 low tax compliance and disruptions due to tax administration reforms.
Table 4: Total Government Tax Revenue – 2013
2013 Budget
Estimate
(Million GH¢)
Provisional
Outturn for 2013
(Million GH¢)
Percent
Deviation
Percentage
Change over
2012 outturn
a
b
c
(c/b-1)*100
(c/a-1)*100
Total Tax Revenue excluding exemptions
11,738.3
16,019.7
13,459.2
-16.0
14.7
Total Tax Revenue including exemptions
12,517.3
17,090.8
14,307.7
-16.3
14.3
5,536.2
7,825.0
6,301.7
-19.5
13.8
o/w Personal Income Tax
2,204.4
2,908.5
2,367.5
-18.6
7.4
o/w Company Taxes
2,361.5
3,432.7
2,315.6
-32.5
-1.9
4,212.0
5,576.2
4,833.0
-13.3
14.7
2,777.3
3,768.0
3,317.1
-12.0
19.4
o/w Excise
730.3
903.8
694.2
-23.2
-4.9
o/w NHIL
576.1
753.6
647.7
-14.1
12.4
o/w CST
128.4
150.8
174.0
15.4
35.5
2,769.0
3,689.7
3,173.0
-14.0
14.6
778.9
1,071.1
842.0
-21.4
8.1
2012 Outturn
Description
Taxes on Income and Property
Taxes on Domestic Goods and Services
o/w VAT
International Trade Taxes
Exemptions (non-cash)
Source: Ministry of Finance
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2014 Mid-Year Review and Supplementary Estimates
40.
Although the performance of tax revenue from the traditional sources was
weak, oil revenue performance for the year was very strong as a result of
higher than expected crude oil prices, higher production levels and higher
corporate income taxes from the sector. Total oil revenue for 2013, amounted
to GH¢1,634.0 million (1.7% of GDP), against a target of GH¢1,103.9 million
(1.2% of GDP).
41.
On the other hand, grant disbursement from our development partners was
41.2 percent lower than the budget target of GH¢1,258.5 million and 36.3
percent lower than the outturn recorded during the same period in 2012. The
lower than expected outturn of grants was mainly due to the nondisbursement of budget support from some of our Multi-Donor Budget
Support (MDBS) partners as well as the slow disbursement of project grants.
Expenditure
42.
Mr. Speaker, in addition to the revenue measures that were announced in
2013, expenditure measures were introduced to help contain expenditures
and to ensure the achievement of the fiscal deficit target for the year. These
measures included:
 agreement on a lower percentage increase in salaries compared to
immediate past years;
 regular adjustment of fuel and utility prices to reduce subsidies to the
barest minimum;
 minimising the award of new contracts and contracting of new loans;
 refinancing of short term debt with a view to extending the tenure and
reducing interest costs; and
 processing of all GoG expenditures on the Ghana Integrated Financial
Management and Information System (GIFMIS) to control unauthorised
commitments.
43.
These
expenditure
rationalisation
measures
expenditures within the 2013 total Appropriation.
15
helped
to
contain
most
2014 Mid-Year Review and Supplementary Estimates
44.
Total expenditure, including payments for the clearance of arrears and
outstanding commitments for 2013 amounted to GH¢28,926.2 million (31.0%
of GDP), against a target of GH¢30,544.3 million (34.4% of GDP). The
outturn was 5.3 percent lower than the budget target and 14.3 percent higher
than the outturn for the corresponding period in 2012.
45.
Mr. Speaker, as a result of the shortfall in revenue and grants, government
reduced spending on goods and services as well as other expenditure items.
This led to total expenditures being lower than budgeted. Although overall
spending was lower than planned, spending on wages and salaries as well as
interest cost were higher than budgeted.
46.
Mr. Speaker, expenditure on Wages and Salaries for the period totalled
GH¢8,242.9 million, 10.4 percent higher than the budget target of
GH¢7,465.4 million and 23.7 percent higher than the outturn for the same
period in 2012. In addition to this, an amount of GH¢1,065.0 million was
spent on the clearance of wage arrears compared to GH¢1,872.0 million in
2012. Nonetheless, in 2013, expenditure on wages and salaries alone was
64.9 percent of non-oil tax revenue (excluding exemptions) and 61.2 percent
of tax revenue (excluding exemptions). Including the wage arrears paid
during the period, expenditure on wages was 73.2 percent of non-oil tax
revenue (excluding exemptions) and 69.1 percent of tax revenue (excluding
exemptions). These ratios are significantly higher than the West African
Monetary Zone (WAMZ) secondary convergence criteria of wage-to-tax
revenue (excluding exemptions) ratio of 35 percent.
Table 5: Wage-to-Tax Revenue and GDP Ratios (%)
16
2014 Mid-Year Review and Supplementary Estimates
Description
2007
2008 2009 2010 2011
2012
2013
Wage/Non-oil Tax Revenue (excl exemptions)
46.0
53.0
56.0
52.6
50.6
58.1
64.9
Wage (incl. arrears)/Non-oil Tax Revenue (excl. exemptions)
46.0
53.0
56.0
52.6
50.6
74.4
73.2
Wage/Tax Revenue (excl exemptions)
46.0
53.0
56.0
52.6
49.6
56.8
61.2
Wage (incl. arrears)/Tax Revenue (excl. exemptions)
46.0
53.0
56.0
52.6
49.6
72.7
69.1
Wage/GDP
6.1
6.6
6.8
6.9
7.6
8.9
8.8
Wage (incl. arrears)/GDP
6.1
6.6
6.8
6.9
7.6
11.4
10.0
Source: Ministry of Finance
47.
Mr. Speaker, interest payment for the period totalled GH¢4,397.0 million, 37.6
percent higher than the budget target of GH¢3,194.4 million and 80.5 percent
higher than the outturn for the corresponding period in 2012. Of this amount,
domestic interest payment constituted 86.2 percent of total interest costs and
was 47.2 percent higher than the budget target. On a year-on-year basis,
domestic interest payment grew by 101.5 percent, reflecting very high
domestic borrowing in 2013 to finance the deficit.
Table 6: Trends in Interest Cost to Revenue and GDP Ratios (%)
17
2014 Mid-Year Review and Supplementary Estimates
Description
2007
2008 2009 2010 2011
2012
2013
Domestic Interest Cost/Tax Revenue (excl. exemptions)
10.5
12.9
17.5
18.6
14.3
16.0
28.1
Domestic Interest Cost/Total Revenue (excl. exemptions)
9.4
11.5
14.4
15.3
11.8
12.8
21.2
Total Interest Cost/Tax Revenue (excl. exemptions)
14.3
18.1
23.3
23.8
17.6
20.8
32.7
Total Interest Cost/Total Revenue (excl. exemptions)
12.9
16.2
19.3
19.6
14.6
16.5
24.6
Domestic Interest Cost/GDP
1.4
1.6
2.1
2.4
2.2
2.5
4.1
Total Interest Cost/GDP
1.9
2.3
2.8
3.1
2.7
3.2
4.7
Source: Ministry of Finance
48.
High domestic interest rates coupled with the continuous rise in the level of
domestic borrowing to finance the budget over the years accounts for the
strong growth in domestic interest cost.
49.
Expenditure on Goods and Services amounted to GH¢1,449.1 million, against
a budget target of GH¢1,742.4 million. The lower expenditure on Goods and
Services was mainly as a result of the rationalization of discretionary spending
in the face of revenue shortfalls, high expenditures on wages and salaries, as
well as high interest cost.
50.
Total capital expenditure for the period amounted to GH¢4,791.2 million,
equivalent to 5.1 percent of GDP. This compares with a budget target of
GH¢5,155.1 million, equivalent to 5.8 percent of GDP. The shortfall in capital
expenditure was mainly as a result of the slow disbursement of some project
loans. Of the total capital expenditure for the period, domestically-financed
capital expenditure was GH¢1,646.0 million, 26.2 percent higher than the
budget target.
18
2014 Mid-Year Review and Supplementary Estimates
Table 7: Summary of Central Government Expenditures – 2013
2013 Budget
Estimate
(Million GH¢)
Provisional
Outturn for 2013
(Million GH¢)
Percent
Deviation
Percentage
Change over
2012 outturn
a
b
c
(c/b-1)*100
(c/a-1)*100
25,317.1
30,544.3
28,926.2
-5.3
14.3
20,944.7
28,163.4
27,463.0
-2.5
31.1
7,177.6
9,004.0
9,479.1
5.3
32.1
o/w Wages and Salaries
6,665.5
7,465.4
8,242.9
10.4
23.7
Use of Goods and Services
1,321.8
1,742.4
1,449.1
-16.8
9.6
Interest Payments
2,436.2
3,194.4
4,397.0
37.6
80.5
1,879.7
2,574.2
3,788.2
47.2
101.5
809.0
1,022.2
1,158.1
13.3
43.2
3,765.0
6,208.8
4,547.9
-26.8
20.8
38.8
1.1
-97.3
2012 Outturn
Description
Total Expenditure and Arrears Clearance
Total Expenditure
Compensation of Employees
o/w Domestic Interest
Subsidies
Grants to Other Government Units
Social Benefits
-
Others
1,851.0
1,797.7
1,639.7
-8.8
-11.4
Capital Expenditure
3,584.2
5,155.1
4,791.2
-7.1
33.7
3,829.8
2,380.9
2,352.5
-1.2
-38.6
Arrears Clearance and Tax Refunds
Discrepancy
-
542.5
-
889.3
Source: Ministry of Finance
Overall Budget Balance and Financing
51.
Mr. Speaker, based on the revenue and expenditure outturns for 2013, the
overall budget balance on cash basis registered a deficit of GH¢9,454.6
million, equivalent to 10.1 percent of GDP. This was against a deficit target of
GH¢8,010.8 million, equivalent to 9.0 percent of GDP.
52.
The domestic primary balance registered a deficit of GH¢667.8 million,
equivalent to 0.7 percent of GDP, against a target deficit of GH¢154.2 million,
equivalent to 0.2 percent of GDP.
53.
Mr. Speaker, the overall budget deficit for the period was financed from both
domestic and foreign sources. Domestic financing amounted to GH¢6,920.4
million, against a target of GH¢5,700.8 million. Foreign financing of the deficit
was GH¢3,212.0 million, against a target of GH¢2,536.0 million. The higher
foreign financing was as a result of partially utilising the 2023 Eurobond to
finance some capital expenditures in the Budget and to refinance highinterest maturing domestic debt.
19
2014 Mid-Year Review and Supplementary Estimates
54.
An amount of GH¢677.7 million out of the total oil revenue due Government
in 2013 was lodged in the Ghana Petroleum Funds Accounts in accordance
with the Petroleum Revenue Management Act, 2010 (Act 815).
Table 8: Summary of Central Government Financing – 2013
2012 Outturn
Description
a
Total Financing
2013 Budget
Estimate
(Million GH¢)
Provisional
Outturn for 2013
(Million GH¢)
Percent
Deviation
Percentage
Change over
2012 outturn
b
c
(c/b-1)*100
(c/a-1)*100
8,648.7
8,010.8
9,454.6
18.0
9.3
Foreign
1,630.6
2,536.0
3,212.0
26.7
97.0
Domestic
7,108.9
5,700.8
6,920.4
21.4
-2.7
-90.8
-226.0
-677.7
199.9
646.0
Petroleum Funds
Source: Ministry of Finance
55.
Mr. Speaker, the fiscal overrun in 2013 was mainly due to significant shortfalls
in revenue and grants, higher spending on wages and salaries as well as
interest payments. The table below summarizes the details of the sources of
the fiscal overruns in 2012 and 2013.
Table 9: Sources of fiscal slippage in 2012 and 2013
2012
Description
Amt (Mil
GH¢)
Wages and Salaries
2013
% of
GDP
Amt (Mil
GH¢)
% of
GDP
1,028.0
1.4
777.6
0.8
Wage Arrears
881.0
1.2
922.6
1.0
Interest Payments
245.0
0.3
1,202.6
1.3
Grants
-389.4
-0.5
-519.0
-0.6
Corporate Income Tax (oil)
-384.1
-0.5
311.0
0.3
Non-oil Tax Revenue
-112.3
-0.1 -3,155.3
-3.4
Utility and Fuel Subsidies
339.0
0.5
135.8
0.1
Goods & Services
354.7
0.5
-293.2
-0.3
Source: Ministry of Finance
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2014 Mid-Year Review and Supplementary Estimates
Developments in Public Debt
56.
Mr. Speaker, Ghana’s total public debt stock, which stood at GH¢35,999.64
million (US$19,150.78 million) as at end-December 2012, increased to
GH¢52,125.91million (US$24,021.16 million) at the end of December 2013. Of
the total public debt stock, external debt was GH¢24,871.9 million
(US$11,461.71 million) while domestic debt amounted to GH¢27,254 million
(US$12,559.45 million), representing 47.72 percent and 52.28 percent,
respectively. Total public debt as a percentage of GDP stood at 55.77 percent
as at end-December 2013, an increase from the December 2012 figure of
48.03 percent. The increase in the public debt was largely on account of the
issuance of Eurobond and disbursement for major infrastructure projects such
as the Bui Dam, the Ghana Gas Project, the Coastal Protection Projects, and
Redevelopment of the Police Hospital.
57.
Ghana’s total public external debt stock amounted to GH¢17,206.90 million
(US$9,153.6 million) at the end of December 2012 and increased to
GH¢24,871.90 million (US$11,461.71 million) in December 2013. Total
external debt as a percentage of GDP stood at 26.61 percent at the end of
2013, slightly up from 22.96 percent recorded for the same period in 2012.
58.
Total public domestic debt stock, which stood at GH¢18,792.7 million (US$
9,997.2 million) in December 2012, increased to GH¢27,254.00 million (US$
12,559.45) by end-December 2013. This represents a year-on-year growth of
44.4 percent. As a percent of GDP, total domestic debt was 29.16 percent at
the end of December 2013, against 25.07 percent at the end of December
2012.
59.
Of this total, short-term instruments (91-day, 182-day and 1-year) amounted
to GH¢8,806.4 million (US$ 4,058.25million), forming about 32.3 percent of
the total domestic debt stock.
An increase from December 2012 of 30.5
percent.
21
2014 Mid-Year Review and Supplementary Estimates
60.
Medium-term instruments added up to GH¢12,576.8 million (US$5,795.78
million), long-term instruments totalled GH¢5,282.5 million (US$ 2,434.3
million) and standard loans equalled GH¢466.9 million (US$ 271.1 million) at
the end of December 2013. There was also a slight decrease in the shares of
the medium-term instruments (2-year note, 3-year bond, 5-year bond and 7year bond) from 50.8 percent of the total domestic stock in December 2012
to about 46.1 percent as at end-December 2013, while standard term loans
(usually with commercial banks) comprised about 2.2 percent of the total
domestic debt stock.
Table 10: Domestic Debt by Maturity Structure
DOMESTIC DEBT BY MATURITY STRUCTURE (MILLIONS OF USD)
2012
%
2013
%
SHORT TERM
3,050.8
30.5
4,058.2
32.3
MEDUIM TERM
5,077.4
50.8
5,795.8
46.1
LONG TERM
1,676.5
16.8
2,434.3
19.4
STANDARD LOANS
192.5
1.9
271.1
2.2
TOTAL
9,997.2
100.0
12,559.4
100.0
Source: Ministry of Finance
22
2014 Mid-Year Review and Supplementary Estimates
SECTION THREE: MACROECONOMIC PERFORMANCE IN 2014
MACROECONOMIC TARGETS FOR 2014
61.
Mr. Speaker, against the backdrop of a challenging macroeconomic
environment in 2013, the 2014 Budget aims at restoring stability and sets the
following targets:
 overall real GDP (including oil) growth of 8.0 percent;
 non-oil real GDP growth of 7.4 percent;An end year inflation target of 9.5
percent within the band of ±2 percent;
 Overall budget deficit equivalent to 8.5 percent of GDP; and
 Gross international reserves of not less than 3 months of import cover of
goods and services.
62.
Developments from January to May 2014 indicate that the economy continues
to face challenges due to unfavourable developments in both domestic and
external environments. The details of the macroeconomic performance for the
period under review are highlighted below.
GDP GROWTH
63.
Mr. Speaker, GDP grew by 6.7 percent in the first quarter of 2014, down from
9.0 percent in the corresponding period in 2013. In a marked departure from
the sectoral performance in the first quarter of 2014, the Agriculture Sector
led with a growth of 12.7 percent, up from 6.7 percent in the analogous
quarter in 2013. The Services Sector followed with a growth of 4.6 percent,
down from 10.4 percent in the same quarter in 2013, while the Industry
Sector declined by 1.1 percent, down from 8.1 percent in the corresponding
period in 2013.
Agriculture Sector
64.
Mr. Speaker, the remarkable performance of the Agriculture Sector resulted
mainly from a growth of 71.9 percent in the Livestock subsector, up from 5.3
percent in the first quarter of 2013, and a 20 percent growth in the Fishing
subsector, up from a decline of 5.0 percent in the first quarter of 2013. The
Crops and Cocoa subsector grew by 5.0 percent, up from 4.5 percent in the
23
2014 Mid-Year Review and Supplementary Estimates
first quarter of 2013, while the Forestry subsector declined by 7.6 percent,
down from 27.6 percent in the first quarter of 2013.
Industry Sector
65.
Mr. Speaker, the decline of the Industry Sector’s real output in the first
quarter of 2014 resulted mainly from a general underperformance of all
subsectors, as compared with performance in the corresponding period in
2013, notably the 19.3 percent decline in the output of the Manufacturing
subsector, compared with a decline of 1.9 percent in the first quarter of 2013.
The Mining and Quarrying subsector grew by 7.5 percent, down from 19.6
percent in the first quarter of 2013. This could be attributed to low outputs
from the gold industry, owing to rising costs and falling gold prices, and a
marginal decline of crude oil output due to the delay in lifting the gas from
the Jubilee Field.
66.
The Electricity subsector grew by 8.9 percent, compared to 11.8 percent in
the first quarter of 2013. The Water & Sewerage subsector grew by 0.2
percent, an improvement over the decline of 3.4 percent in the analogous
quarter in 2013. The Construction subsector grew by 4.7 percent compared to
8.1 percent in the same period in 2013.
Services Sector
67.
Mr. Speaker, the Services Sector grew by 4.6 percent in the first quarter of
2014, down from 10.4 percent in the corresponding period in 2013. The slow
growth was due mainly to lower growth rates in most of the subsectors.
INFLATION
68.
Mr. Speaker, inflation has continued to increase in 2014, after assuming
double digit rates in 2013. Inflation rose to 15 percent in June, 2014 from
13.5 percent at the end of December 2013. The rise in inflation during the
period was mostly influenced by cost push pressures arising from upward
adjustments of petroleum and utility prices, higher transportation cost, and
the pass through effect of the currency depreciation.
24
2014 Mid-Year Review and Supplementary Estimates
69.
The upsurge in prices has been influenced mainly by the non-food
components of the Consumer Price Index (CPI). The non-food group recorded
an average year-on-year inflation rate of 20.3 percent in June 2014,
compared to 20.0 percent recorded in May 2014. Among the non-food group,
the Housing, Water, Electricity, Gas, and other Fuels component recorded the
highest inflation rate of 53.6 percent followed by Transport which recorded
24.6 percent. The main drivers for the food inflation include, Mineral waters,
soft drinks, fruit and vegetable juice (21.7 percent), Coffee, tea and cocoa
(14.2 percent), Milk, cheese and eggs (12.8 percent), and Food Products
(12.6 percent).
Figure 3: Inflation Trends, January 2013-May 2014
Source: Ghana Statistical Service
MONETARY DEVELOPMENTS
Monetary Aggregates
70.
Mr. Speaker, provisional data for May 2014 showed that the annual growth
rate of broad money supply (M2+) which is currency, demand deposits,
savings and time deposits as well as foreign currency deposits, increased on
year-on–year basis. The growth rate went up to 30.8 percent as at the end of
May 2014 compared with a growth rate of 19.1 percent at end-December
25
2014 Mid-Year Review and Supplementary Estimates
2013 and 17.1 percent at the end of May 2013. Broad money supply stood at
GH¢30,371.4 million at the end of May 2014.
71.
The change in M2+ during the period under review reflected growth in both
the domestic currency component (M2) and foreign currency deposits.
Demand deposits, and savings & time deposits which are the most liquid
components of M2, increased by 38.9 percent and 22.6 percent respectively
for the five months of 2014 compared with the respective growth of 23.1
percent and 18.9 percent recorded for the corresponding period in 2013. The
Ghana Cedi value of foreign currency deposits also went up by 40.4 percent
as at May 2014 from 3.9 percent in May 2013.
72.
The main source of annual growth in M2+, as at the end of May 2014, was
from strong growth in Net Domestic Assets (NDA) which was moderated by a
decline in Net Foreign Assets (NFA) of the banking system. While the NDA
went up by 42.7 percent, the NFA decreased by 6.9 percent. The Bank of
Ghana’s components of the NFA declined by 12.0 percent while that of the
commercial banks rose by 46.6 percent.
73.
The growth in the NDA of the banking system largely reflected increases in
claims on the private sector (GH¢6,141.7 million or 46.1%), net claims on
Government (GH¢4,585.8 million or 47.7%) and claims on the public sector
(GH¢2,481.0 million or 144.7%). Other Items Net (OIN) also increased by
GH¢5,668.3 million or 81.2%.
Banks’ Outstanding Credit
74.
Mr. Speaker, the annual growth rate of banks’ outstanding credit to the public
and private institutions in May 2014 indicated an upward trend on year-onyear basis. The nominal growth rate of banks’ outstanding credit went up
from 34.6 percent (GH¢3,756.8 million) as at the end of May 2013 to 46.0
percent (GH¢6,725.3 million) in May 2014. In real terms, it grew from 21.4
percent in May 2013 to 27.2 percent in May 2014. The private sector
accounted for 88.8 percent of the total outstanding credit at the end of May
2014 compared with 88.1 percent at the end of May 2013.
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2014 Mid-Year Review and Supplementary Estimates
75.
The nominal growth rate in outstanding credit to the private sector increased
from 32.7 percent at the end of May 2013 to 47.2 percent at the end of May
2014. In real terms, growth rate of outstanding credit to the private sector
increased from 19.5 percent at the end of May 2013 to 28.2 percent at the
end of May 2014.
Interest Rate Developments
76.
Mr. Speaker, developments in interest rates in the first five months of 2014
indicate a rising trend. The Monetary Policy Committee increased the Policy
Rate by 200 bps to 18.0 percent at its meeting in February and recently to
19.0 percent to rein in the volatility in the domestic foreign exchange market
so as to meet the inflation target.
77.
Consequently, money market instruments recorded significant increases in
rates during the review period compared to their levels at the end of
December 2013. Interest rates on the money market generally moved
upwards in tandem with the Bank’s tight monetary policy stance. Between
December 2013 and May 2014:
 The 91-day Treasury bill rate moved from 19.2 percent to 24.1 percent;
and
 The 182-day Treasury bill rate rose from 18.7 percent to 21.3 percent.
78.
The 1-year note rose from 17.0 percent to 22.50 percent while the 2-year
note and 3-year bonds also increased respectively, to 23.50 percent and
25.48 percent on year-to-date terms.
79.
The interbank weighted average rate increased to 22.71 percent from 16.34
percent in December 2013. The Deposit Money Banks’ average 3-month time
deposit rate however remained unchanged at 12.50 percent, same as at
December 2013.
The Stock Market
80.
Mr. Speaker, developments in the capital market in the review period
indicated a continuing positive growth but at a slower pace in activity
compared to the corresponding period a year ago. The slow pace could be
27
2014 Mid-Year Review and Supplementary Estimates
attributed to increased inflation expectations, a sustained depreciation of the
local currency and increasingly attractive money market rates. The GSE
Composite Index posted a year-to-date growth of 8.1 percent at the end of
May 2014. In the same vein, the GSE Financial Stock Index (GSE-FI) also
registered a growth of 13.8 percent as at end May 2014.
Exchange Rates Developments
81.
Mr. Speaker, demand for foreign exchange from both official sources and the
informal sector were high relative to the supply during the period under
review. This resulted in the weakening of the Ghana Cedi in the domestic
currency market. The rate of depreciation moderated after March following
strict implementation of existing foreign exchange regulations by the central
bank.
82.
In the Inter-Bank Market, the Ghana Cedi recorded cumulative depreciation of
23.9 percent against the US dollar, 24.1 percent against the Pound Sterling
and 21.4 percent against the Euro in the first five months of 2014.
Developments in the forex bureau market were similar to those of the
interbank market with the Ghana Cedi depreciating by 22.7 percent, 25.4
percent and 22.7 percent against the US Dollar, the Pound Sterling and the
Euro respectively during the period. Comparatively, during the corresponding
period of 2013, the Ghana Cedi recorded cumulative depreciation of 3.1
percent and 3.6 percent against the US Dollar and the Euro respectively but
appreciated by 2.7 percent against the Pound Sterling in the interbank
market. In the forex bureau market, the Ghana Cedi recorded cumulative
depreciation of 1.9, and 1.7 percent against the US Dollar and the Euro
respectively, but appreciated by 6.2 percent against the Pound Sterling in
2013.
83.
Mr. Speaker, to address the liquidity overhang and improve supply of foreign
exchange in the markets, the cash reserve requirement of banks has been
revised to 11.0 percent from 9.0 percent while Net Open Position (NOP) limits
of banks have been revised downwards. The single currency NOP has been
28
2014 Mid-Year Review and Supplementary Estimates
reduced from 10.0 percent to 5.0 percent and the aggregate NOP has been
reduced from 20.0 percent to 10.0 percent.
84.
Meanwhile the foreign exchange measures introduced in February 2014 were
revised in June to minimise the unintended consequences of the measure.
EXTERNAL DEVELOPMENTS
Balance of Payments
85.
Mr. Speaker, the value of merchandise exports during the first five months of
2014 was estimated at US$5,871.9 million, indicating a decline of 7.5 percent
from the outturn in the corresponding period of 2013. The decline in exports
was as a result of low receipts from gold and crude oil. Total value of
merchandise imports during the review period was valued at US$6,028.4
million, also indicating a decline of 17.8 percent on the level in the
corresponding period of 2013. The decline in imports was recorded in both oil
and non-oil imports. The trade balance for the period January to May 2014
consequently registered a deficit of US$156.6 million, an improvement from a
deficit of US$990.8 million recorded by end-May 2013.
International Reserves
86.
Mr. Speaker, at the end of June 2014, the country’s Gross International
Reserves stood at US$4,471 million sufficient to provide 2.5 months of
imports cover compared to the stock position of US$5,632.15 million at the
end of December 2013 which could cover 3.1 months of imports. This
development partly reflects the seasonality in foreign exchange flows during
the year.
FISCAL PERFORMANCE
87.
Mr. Speaker, in line with Government’s medium term fiscal objectives as
outlined in the 2014 Budget, fiscal policy in 2014 aims at ensuring fiscal
prudence and debt sustainability. This fiscal policy objective is to be achieved
through improved revenue mobilization, rationalizing and enhancing the
29
2014 Mid-Year Review and Supplementary Estimates
efficiency of public expenditures, as well as implementing new debt
management reforms.
88.
In this regard, the 2014 Budget uses the overall budget deficit as the fiscal
anchor, and targets a reduction in the deficit from 10.1 percent of GDP in
2013 to 8.5 percent of GDP in 2014. The 2014 Budget, therefore, introduced
a number of revenue enhancing measures, debt management reforms as well
as measures to realign and rationalize expenditures.
89.
Revenue measures introduced in the 2014 Budget include the following:
 a change in petroleum excise tax from specific to ad valorem in line with
other excise regimes;
 an increase in withholding tax on rent on commercial properties from 8 to
15 percent;
 an increase in the withholding tax on management and technical services
fees from 15 to 20 percent;
 an increase in corporate income tax rate of free zones companies selling
on the local market from 8 to 25 percent; and
 more effective application of the communication service tax.
90.
The VAT rate was also increased by 2.5 percentage points and the base
broadened to cover fee-based financial services and real estate.
91.
Expenditure measures introduced in the 2014 Budget include:
 continuation of the policy of regular adjustment of utility and petroleum
prices;
 a proposal of a moratorium on public sector wage increase in 2014
through the public sector wage negotiation process;
 continuation of the policy of net freeze on employment in some sectors of
the public service.
 payroll
management measures such as payroll audits and Electronic
Salary Payment Voucher (E-SPV) to reduce the incidence of ‘ghost’
workers on government payroll; and
30
2014 Mid-Year Review and Supplementary Estimates
 continuation of the limits on the award of new contracts and new loans
with continuing emphasis on pipeline items.
92.
Mr. Speaker, preliminary data from January to May of the year indicate that,
both revenue and expenditure were below their respective targets for the
period. Since the shortfall in revenue was lower than the shortfall in
expenditure, the resulting cash fiscal deficit was equivalent to 3.6 percent of
GDP, against a target of 3.5 percent. This compares to a deficit equivalent to
4.0 percent of GDP for the same period in 2013.
93.
Table 11 below shows the summary of government fiscal position for January
to May 2014.
Table 11: Summary of Central Government Operations and Financing
2013 (Jan.-May)
Actual Outturn
Description
2014 (Jan.-May)
Estimate
Amt.
Amt.
Amt.
(% of GDP)
(% of GDP)
(Million GH¢)
(Million GH¢)
(Million GH¢)
b
a
% Change over
% Deviation 2013 May
outturn
2014 (Jan.-May)
Provisional Outturn
(% of GDP)
c
(c/b-1)*100
(c/a-1)*100
Total Revenue and Grants
7,912.6
8.5
9,527.9
8.3
9,043.8
7.9
-5.1
14.3
Total Expenditure and Arrears Clearance
11,692.4
12.5
13,587.5
11.8
13,170.9
11.5
-3.1
12.6
Overall Fiscal Balance
-3,779.8
-4.0
-4,059.6
-3.5
-4,127.1
-3.6
1.7
9.2
Total Financing
3,779.8
4.0
4,059.6
3.5
4,127.1
3.6
1.7
9.2
3,412.9
3.7
3,036.9
2.6
3,234.5
2.8
6.5
-5.2
o/w Domestic Financing
Source: Ministry of Finance
Revenue
94.
Mr. Speaker, total revenue and grants for the period was GH¢9,043.8 million,
equivalent to 7.9 percent of GDP, against a target of GH¢9,527.9 million,
equivalent to 8.3 percent of GDP. The shortfall in total revenue and grants for
the period was as a result of low disbursement of project grants from our
development partners and lower than
anticipated domestic revenue
collections. In nominal terms, the provisional outturn was 14.3 percent higher
than the outturn for the same period in 2013.
31
2014 Mid-Year Review and Supplementary Estimates
95.
The summary of government revenue and grants from January to May 2014
is presented in Table 12.
Table 12: Summary of Central Government Revenue and Grants
2013 (Jan.-May)
Actual Outturn
Description
2014 (Jan.-May)
Estimate
2014 (Jan.-May)
Provisional Outturn
Amt.
Amt.
(% of GDP)
(% of GDP)
(Million GH¢)
(Million GH¢)
b
a
Total Revenue and Grants
Domestic Revenue
o/w Oil Revenue
Amt.
(Million GH¢)
c
% Deviation
% Change over
2013 May
outturn
(c/b-1)*100
(c/a-1)*100
(% of GDP)
7,912.6
8.5
9,527.9
8.3
9,043.8
7.9
-5.1
14.3
7,476.7
8.0
9,134.6
8.0
8,921.9
7.8
-2.3
19.3
504.8
0.5
535.5
0.5
1,194.7
1.0
123.1
136.7
5,298.8
5.7
7,273.7
6.3
7,076.8
6.2
-2.7
33.6
o/w Oil Revenue
196.8
0.2
219.4
0.2
612.9
0.5
179.3
211.5
Non-Tax Revenue
2,133.2
2.3
1,793.9
1.6
1,756.3
1.5
-2.1
-17.7
o/w Oil Revenue
308.0
0.3
316.0
0.3
581.8
0.5
84.1
88.9
Others
44.7
0.0
67.0
0.1
88.9
0.1
32.7
98.8
Grants
435.9
0.5
393.3
0.3
121.9
0.1
-69.0
-72.0
Tax Revenue
Source: Ministry of Finance
96.
Total tax revenue amounted to GH¢7,076.8 million, 2.7 percent lower than
the budget target of GH¢7,273.7 million. The shortfall in tax revenue
compared to the target was partly due to the slowdown in economic activity,
the delay in the implementation of the change in petroleum excise from
specific to ad valorem, lower than anticipated revenue from excise taxes as
well as the delay in the implementation of the VAT on fee based financial
services. In addition, declining gold prices on the world market and rising
operating cost led to lower corporate income taxes from the mining sector.
97.
In nominal terms tax revenue was 33.6 percent higher than the outturn
recorded for the same period in 2013. The sturdy year-on-year growth in tax
revenue was mainly as a result of the strong performance of oil tax revenue,
which was about 179.3 percent higher than the budget target, and 211.5
percent higher than the outturn for the same period in 2013.
32
2014 Mid-Year Review and Supplementary Estimates
98.
Mr. Speaker, the strong performance of oil revenue was mainly due to the
payment of part of 2013 corporate income taxes in the first quarter of the
year as well as higher oil price and quantities.
99.
Of the total tax revenue, non-oil tax revenue for the period was GH¢6,463.9
million, 8.3 percent lower than the Budget target and 26.6 percent higher
than the outturn for the same period in 2013.
Table 13: Details of Central Government Tax Revenue
2013 (Jan.-May)
Actual Outturn
2014 (Jan.-May)
Estimate
Amt.
(% of GDP)
(Million GH¢)
a
Amt.
(% of GDP)
(Million GH¢)
b
Description
2014 (Jan.-May)
Provisional Outturn
Amt.
(Million GH¢)
c
% Deviation
% Change over
2013 May
outturn
(c/b-1)*100
(c/a-1)*100
(% of GDP)
Total Tax Revenue excluding exemptions
5,036.5
5.4
6,953.1
6.1
6,727.5
5.9
-3.2
33.6
Total Tax Revenue including exemptions
5,298.8
5.7
7,273.7
6.3
7,076.8
6.2
-2.7
33.6
2,306.2
2.5
3,052.7
2.7
3,315.3
2.9
8.6
43.8
986.0
1.1
1,254.9
1.1
1,232.3
1.1
-1.8
25.0
Taxes on Income and Property
o/w Personal Income Tax
o/w Company Taxes
Taxes on Domestic Goods and Services
o/w VAT
731.7
0.8
1,004.3
0.9
1,004.4
0.9
0.0
37.3
1,904.8
2.0
2,755.6
2.4
2,383.5
2.1
-13.5
25.1
1,310.3
1.4
1,891.6
1.6
1,717.7
1.5
-9.2
31.1
o/w Excise
269.6
0.3
487.5
0.4
299.1
0.3
-38.6
11.0
o/w NHIL
258.5
0.3
287.9
0.3
283.7
0.2
-1.4
9.8
o/w CST
International Trade Taxes
66.3
0.1
88.6
0.1
82.9
0.1
-6.4
25.0
1,087.8
1.2
1,465.3
1.3
1,378.0
1.2
-6.0
26.7
262.3
0.3
320.5
0.3
349.3
0.3
9.0
33.2
Exemptions (non-cash)
Source: Ministry of Finance
100. Grant disbursements from our development partners was 69.0 percent lower
than the budget target and 72.0 percent lower than the outturn recorded
during the same period of 2013. The lower than expected outturn of grants
was due to the slow disbursement of project grants from our development
partners resulting from project implementation delays in the signing of mixed
credit agreements.
Expenditure
101. Mr. Speaker, total expenditure, including payments for the clearance of
arrears and outstanding commitments from January to May 2014 amounted
to GH¢13,170.9 million (11.5% of GDP), against a target of GH¢13,587.5
million (11.8% of GDP). The outturn was 3.1 percent lower than the budget
target and 12.6 percent higher for the same period in 2013.
33
2014 Mid-Year Review and Supplementary Estimates
102. The lower than estimated expenditures for the period was mainly as a result
of the delays in the transfers to the statutory funds as well as lower than
anticipated spending on capital.
103. Expenditure on Wages and Salaries for the period totalled GH¢3,802.9 million,
2.2 percent higher than the budget target of GH¢3,720.3 million and 26.2
percent higher than the outturn for the same period in 2013. In addition to
this, an amount of GH¢348.5 million was spent on the clearance of wage
arrears.
104. Mr. Speaker, interest payment for the period totalled GH¢2,832.1 million, 26.0
percent higher than the Budget target of GH¢2,246.8 million and 49.8 percent
higher than the outturn for the same period in 2013. The higher interest cost
in the period was as a result of high domestic interest rates and higher than
estimated domestic borrowing during the period. Domestic interest cost was
35.8 percent higher than the budget target. On a year-on-year basis,
domestic interest grew by 49.5 percent.
105. Capital expenditure from January to May 2014 amounted to GH¢1,767.2
million, against the Budget target of GH¢2,169.9 million. The outturn was
26.9 percent higher than the outturn for the same period in 2013. The
shortfall in capital spending was mainly as a result of lower than estimated
foreign financed-capital expenditure due to the slow disbursement of project
loans and grants.
106. The summary of Government expenditure for January to May 2014 is
presented in Table 14.
Table 14: Summary of Central Government Expenditures
34
2014 Mid-Year Review and Supplementary Estimates
2013 (Jan.-May)
Actual Outturn
2014 (Jan.-May)
Estimate
Amt.
(% of GDP)
(Million GH¢)
a
Amt.
(% of GDP)
(Million GH¢)
b
Description
Total Expenditure and Arrears Clearance
2014 (Jan.-May)
Provisional Outturn
Amt.
(Million GH¢)
c
% Deviation
% Change over
2013 May
outturn
(c/b-1)*100
(c/a-1)*100
(% of GDP)
11,692.4
12.5
13,587.5
11.8
13,170.9
11.5
-3.1
12.6
9,042.7
9.7
12,201.4
10.6
10,978.4
9.6
-10.0
21.4
Compensation of Employees
3,298.5
3.5
4,396.0
3.8
4,130.4
3.6
-6.0
25.2
o/w Wages and Salaries
3,013.8
3.2
3,720.3
3.2
3,802.9
3.3
2.2
26.2
Use of Goods and Services
290.8
0.3
353.3
0.3
342.7
0.3
-3.0
17.8
1,891.2
2.0
2,246.8
2.0
2,832.1
2.5
26.0
49.8
1,623.9
1.7
1,787.7
1.6
2,427.9
2.1
35.8
49.5
30.5
0.0
20.0
0.0
1,728.4
1.8
2,671.9
2.3
-10.0
Total Expenditure
Interest Payments
o/w Domestic Interest
Subsidies
Grants to Other Government Units
Social Benefits
-
0.0
1,555.6
1.4
-41.8
-95.0
0.3
0.0
23.0
0.0
1.2
0.0
411.0
0.4
320.5
0.3
349.3
0.3
9.0
-15.0
1,392.1
1.5
2,169.9
1.9
1,767.2
1.5
-18.6
26.9
Arrears Clearance and Tax Refunds
1,420.8
1.5
1,402.6
1.2
2,004.5
1.7
42.9
41.1
Discrepancy
-1,229.0
-1.3
16.5
0.0
Others
Capital Expenditure
-188.1
-0.2
Source: Ministry of Finance
Overall Budget Balance and Financing
107. Mr. Speaker, the cash fiscal deficit of 3.6 percent of GDP for the period under
review was financed mainly from domestic sources, resulting in a Net
Domestic Financing (NDF) of the budget of GH¢3,234.5 million (2.8% of
GDP). The NDF for the period was 6.5 percent higher than the budget target
of GH¢3,036.9 million.
108. Foreign Financing of the budget was GH¢848.4 million, against a target of
GH¢1,011.5 million. The summary of financing of the cash fiscal deficit from
January to May 2014 is presented in Table 15.
Table 15: Summary of Central Government Financing
2013 (Jan.-May)
Actual Outturn
Description
2014 (Jan.-May)
Estimate
Amt.
Amt.
Amt.
(% of GDP)
(% of GDP)
(Million GH¢)
(Million GH¢)
(Million GH¢)
b
a
Total Financing
% Change over
% Deviation 2013 May
outturn
2014 (Jan.-May)
Provisional Outturn
(% of GDP)
c
(c/b-1)*100
(c/a-1)*100
3,779.8
4.0
4,059.6
3.5
4,127.1
3.6
1.7
9.2
Foreign
583.7
0.6
1,011.5
0.9
848.4
0.7
-16.1
45.3
Domestic
3,412.9
3.7
3,036.9
2.6
3,234.5
2.8
6.5
-5.2
Petroleum Funds & Contingency
-216.8
-0.2
11.2
0.01
44.2
0.04
295.1
-120.4
Source: Ministry of Finance
35
2014 Mid-Year Review and Supplementary Estimates
First Half 2014 Petroleum Revenue Receipts
109. Mr. Speaker, a total of US$410.44 million was received in the first half of
2014, covering the sixteenth to nineteenth crude oil liftings. The sixteenth
lifting was undertaken on 20th December, 2013, but the proceeds were
realised on 20th January, 2014, and is thus credited to the first quarter of
2014. In addition to the revenue received from crude oil liftings, other
petroleum receipts amounted to US$152.04 million, including Corporate
Income Tax, Royalties from the Saltpond Field, Surface Rentals and returns
on undistributed funds in the Petroleum Holding Fund, as shown in Table 16.
The other petroleum receipts, together with the lifting proceeds of US$410.44
million, resulted in total petroleum revenues of US$562.48 million in the first
half of 2014. Of this amount, transfers to Ghana National Petroleum Company
(GNPC) for Equity Financing Cost (US$33.72 million) and its share of the Net
Carried and Participating Interest (US$78.73 million) amounted to US$112.45
million.
Table 16: Petroleum Receipts in the First Quarter of 2014
Source: Ministry of Finance
36
2014 Mid-Year Review and Supplementary Estimates
110. The remaining balance of US$450.03 million was distributed between the
Annual Budget Funding Amount (ABFA) and the Ghana Petroleum Funds
(GPFs), i.e. US$204.54 million and US$245.49 million, respectively, in
accordance with the provisions in the PRMA. Of the amount allocated to the
Ghana Petroleum Funds, the Ghana Heritage Fund received US$73.65 million,
while the Ghana Stabilisation Fund received US$171.84 million.
111. The 2014 Budget placed a cap of US$250 million on the Ghana Stabilisation
Fund, in line with Section 23(3) of the Petroleum Revenue Management Act.
The excess over the cap of US$250 million was to be used to set up the
Contingency Fund (using the equivalence of GH¢50 million) and for debt
repayment. By the end of the first quarter of 2014, a total of US$426.49
million had accrued in the Ghana Stabilisation Fund, giving an excess over the
cap of US$176.49 million. In line with the 2014 Budget proposal, and in
consonance with the PRMA, the equivalence of GH¢50 million of the excess
over the cap was used to establish the Contingency Fund and the remaining
US$159.06 million transferred into the Debt Service Account for debt
repayment.
DEVELOPMENTS IN PUBLIC DEBT
112. Mr. Speaker, provisional public debt stock as at end-May 2014 stood at
GH¢62,861.72 million (US$21,661.52 million), representing 54.8 percent of
GDP compared to the same period end-May 2013 of GH¢38,593.77 million
(US$19,977.11). This is made up of GH¢34,331.22 million (US$11,830.19
million) and GH¢28,530.50 million (US$9,831.32 million) for external and
domestic debt respectively.
Figure 4: Public Debt 2010 to May 2014 (Millions of US$)
37
2014 Mid-Year Review and Supplementary Estimates
30,000.00
60.00%
25,000.00
50.00%
20,000.00
40.00%
15,000.00
30.00%
10,000.00
20.00%
5,000.00
10.00%
2010
2011
2012
External Debt
6,254.55
7,652.95
9,153.58
Domestic Debt
5,682.76
7,697.13
9,997.20 12,559.45
Total
11,937.31 15,350.08 19,150.78 24,021.16 21,661.52
Public debt/ GDP
37.81%
39.67%
48.03%
2013
MAY2014
0.00%
11,461.71 11,830.19
55.77%
9,831.32
54.80%
Source: Ministry of Finance
External Debt stock
113. Mr. Speaker, Ghana’s total external debt stock, amounted to GH¢24,871.90
million (US$11,461.71 million) at the end of December 2013, and increased to
GH¢34,331.22 million (US$11,830.19 million) by end May 2014. The high
Ghana Cedi equivalent of the end-May figure is as a result of the depreciation
of the Ghana Cedi. Total external debt as a percentage of GDP stood at 29.93
percent at the end of May 2014, but in terms of its share of total public debt
was 54.61 percent.
Domestic Debt Stock
114. Total domestic debt stock, which stood at GH¢27,254.00 million
(US$12,559.45 million) in December 2013, increased to GH¢28,530.50 million
(US$ 9,831.32 million) by end-May 2014. The low US Dollar equivalent of the
end-May figure is as a result of the depreciation of the Ghana Cedi. As a
percentage of GDP, total domestic debt was 24.87 percent at the end of May
2014, against 29.16 percent at the end of December 2013.
Status of China Development Bank Loan Facility
115. As at June 2014, three years after the Master Facility Agreement (MFA) and
other finance documents under the facility were signed, only two out of the
38
2014 Mid-Year Review and Supplementary Estimates
twelve projects anticipated under the facility have been financed by CDB.
These are the Western Corridor Gas Infrastructure Project (WCGIP) (US$800
million) and the ICT enhanced Surveillance Project for the Western Corridor
Oil and Gas enclave (US$150 million).
116. The facility was to be disbursed under two tranches: A and B, of US$1,500
million each. Both projects currently underway are tranche B facility projects.
The status of the facility as at June 2014 are as follows:
Tranche A:
 No activity
Tranche B:
 Total principal amount of the facility - US$3,000 million
 Total Amount disbursed to date – US$597.3 million
 Total Amount disbursed in 2014 – US$50.8 million
 Total number of projects underway – two
 Total Amount of additional projects CDB has agreed to sign for – two
(Coastal Fishing Landing Sites and AMA intelligent Traffic Management)
117. CDB has introduced a new condition precedent to the effectiveness of the
subsidiary agreement for the two additional projects, namely a side
agreement to amend some of the terms of the MFA, the Five Party Agreement
and the Account Agreement.
118. The Side Agreement is to primarily ensure that starting from the 10th
shipment of crude oil to Unipec Asia, in support of the facility, GoG will
transfer an amount equal to 49 percent of the price of the shipment into the
debt service account to ensure that GoG has sufficient funds to service the
debts when
principal repayments become effective in 2015; and the CDB
facility is recognised as an oil-backed transaction contrary to the agreed
position between CDB and GoG during the initiation of the transaction that
the facility is not an oil-backed facility.
39
2014 Mid-Year Review and Supplementary Estimates
119. Cabinet in June 2014 approved GoG’s capping of the facility at US$1,500
million to accommodate three additional projects. In addition, it also
authorised the submission of the Side Agreement to Parliament for approval.
40
2014 Mid-Year Review and Supplementary Estimates
SECTION FOUR: STATUS OF IMPLEMENTATION OF KEY POLICY
INITIATIVES
120. Mr. Speaker, in presenting the 2014 Budget, we outlined a number of policy
initiatives and fiscal measures aimed at:
 resolving our short-term imbalances from the 2012 Budget over-runs; and

consolidating and sustaining our Lower Middle Income status.
121. These measures also prepare us for managing traditional volatilities and
policy setbacks; and deal with the challenges of financing and accelerating
our development. We hereby present an update on the implementation of
these measures.
Addressing Ghana’s International Reserves to Restore the Value of
the Ghana Cedi
122. Mr. Speaker, there is no doubt that the Ghana Cedi has lost value in recent
months. However, we are working to stabilise the value of our currency.
There are a number of factors that have contributed to this phenomenon:
 The loss of foreign exchange from the rapid fall in world commodity
prices, especially gold and cocoa in the 2013 fiscal year;
 The loss of foreign exchange from the sharp decline in grants from our
Development Partners from 2012 to date;
 Speculative activities of some Banks, Financial Institutions and foreign
exchange bureaux that are allowed to retain foreign exchange; and
 Our growing and insatiable appetite for the consumption of imported
goods which is putting a strain on available foreign exchange reserves.
123. While this depreciation could be positive for exporters, its impact has to some
extent affected fixed income earners, inflation, interest rates and economic
activities.
124. Consequently, Government has, and will continue to design and implement
appropriate responses including the following:
 continuing review and clarification of the Bank of Ghana foreign exchange
measures to stop its unintended consequences, especially those that affect
41
2014 Mid-Year Review and Supplementary Estimates
business confidence, and introduce further measures intended to boost
the flow of foreign exchange into the economy;
 increasing the production of crude oil and gas to reduce the reliance on
imported light crude oil for the generation of power, thereby reducing the
demand for forex. This coupled with expected reversals in the low world
commodity price of cocoa would improve the foreign exchange position of
Government;
 enforcing H.E. the President’s directive for all MDAs and MMDAs to
patronize Made-in-Ghana products to preserve foreign exchange;
 addressing the annual seasonality of our foreign exchange inflows by
effectively arranging the smooth use of our international reserves through
interventions including swaps, especially for the period after the cocoa
season;
 continuing with on-going discussions with the business community that is
allowed to retain significant foreign
exchange to channel those funds
through the Bank of Ghana and our domestic banks;
 ensuring compliance with Customs import valuation which tends to
undermine our tariff policies and makes imported goods cheaper in
relation to domestic goods on our market;
 enforcing Government’s directive for MDAs and MMDAs to award contracts
only in Ghana Cedis;
 at the same time, checking the illegal practice of dealing in forex
transactions on a large and often speculative scale without licence; and
 implementing the directive of Cabinet to review our laws and generous
incentive packages to make retentions commensurate with the risk
associated with doing business.
125. Mr. Speaker, these measures will assure Ghanaians, especially the business
community, that we can manage rapid shortfalls in commodity prices;
implement compliance and regulatory measures without affecting business
confidence and foreign exchange flows; and use additional future flows of
foreign exchange for investment, not consumption and wage payments.
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2014 Mid-Year Review and Supplementary Estimates
Automatic Fuel Price Adjustment and Mitigating Measures
126. Mr. Speaker, the recent queues at the filling stations arising from delayed
adjustments of fuel prices and speculations grossly affected business activities
and caused a lot of personal discomfort for Ghanaians.
127. In the same vein, the recent significant ex-pump fuel price increase was
equally disruptive for the average Ghanaian and as with similar past
increases, affects the effective planning by the business community.
128. The implementation of a gradual and automatic adjustment to ex-pump fuel
price within tolerable price bands and the establishment of an effective
over/under recovery mechanism that will avoid wide swings in prices.
129. In addition, interventions in the areas of support for public and urban
transportation will be pursued to ensure alternative options for the most
vulnerable in society. In this regard, an estimated 450 buses are expected
soon to contribute to this process.
130. Government will also review the fuel pricing structure and the method of
assessing foreign exchange losses and subsidies to reduce the overall fiscal
deficit.
Sustaining the New Pay Policy
131. Mr. Speaker, one of the major policy challenges to align the budget since
2010 is the implementation of the Single Spine Pay Policy (SSPP).
Government is therefore implementing a number of initiatives to ensure the
sustainability of the Single Spine Pay Policy towards our goal of achieving a
wage to tax revenue ratio of 35 percent by 2017. These measures include:
 Public Sector Wage Negotiations: Mr. Speaker, in line with the
conclusions reached at the Ho Forum on the sustainability of the SSPP,
wage adjustment for 2014 was moderated through the wage negotiation
process resulting in the introduction of 10 percent Cost of Living Allowance
(COLA) effective May 2014 to cushion workers. Government will work
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2014 Mid-Year Review and Supplementary Estimates
closely with Organised Labour and Employers’ Associations towards the
completion of the 2015 wage negotiations before the presentation of the
2015 Budget to Parliament.
 Weaning off Sub-vented Agencies from Government payroll: As at
June, 2014, the Sub-Committee on Sub-vented Agencies held preliminary
meetings with eight (8) out of the twelve (12) identified Sub-vented
Agencies to assess their capacities and readiness to be weaned-off
Government subvention. The issues that are being considered include:
I. The need to amend laws that established the institutions;
II. Irregular review of fees, levies and charges on the goods and
services they provide, which is preventing them from making
sufficient income/revenue;
III. The need to complete on-going projects before weaning-off. These
would require Government support.
 Recruitment and Replacement: Government is also implementing the
following measures on recruitment and replacement to control the wage
bill:
i. enforcement of policy of institutions seeking financial clearance
before recruitment and replacement of staff;
ii. imposition of sanctions on heads of institutions who flout the policy
on financial clearance;
iii. payment of arrears of newly recruited staff not exceeding 3 months
until auditing is done by the Auditor-General for the rest of accrued
arrears;
iv. justification of request for replacement of staff by MDAs/MMDAs at
the Public Services Commission or the OHCS for initial approval, in
addition to a final approval by the Ministry of Finance; and
v. strict enforcement of expiry of financial clearance at the end of
each year.
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2014 Mid-Year Review and Supplementary Estimates
 Market Premium: Mr. Speaker, in line with Section 3.5 of the
Government’s white paper on guidelines for the determination of Market
Premium under the Single Spine Pay Policy, the Fair Wages and Salaries
Commission is to determine Market Premium for the attraction and
retention of critical but scarce skills in the Public Service within the budget
constraints of relevant MDAs. To this end a labour market survey is being
conducted to identify critical but scarce skills to form the basis for the
determination of Market Premium for such skills. Consistent with Section
4.2 of the white paper, Market Premium shall not apply to all jobs within a
particular service classification or be granted across board. The newly
determined Market Premium shall come into force in 2015 at which stage
the payment of interim Market Premium will cease.
 Public Service-Wide Performance Management System: Mr.
Speaker, the following activities have so far been completed under the
Public service–wide performance management system at the end of June.
These are a:
i. working document or blueprint to guide the roll out of the Public
Service-Wide Performance Management Monitoring and Evaluation
System;
ii. policy document and proposal for sourcing funds;
iii. performance management monitoring and evaluation instrument;
iv. monitoring and evaluation framework; and
v. national roundtable conference on productivity.
 Categories 2 and 3 Allowances: Mr. Speaker, the ongoing work on
harmonization and standardisation of Categories 2 and 3 is at advanced
stages. Consistent with the outcome of the Ho Forum on the sustainability
of the Single Spine Pay Policy, government has indicated that the
implementation of the recommendations by the PSJNC and its subcommittee on the subject matter will be subject to budget constraints.
 National Research Facility: Mr. Speaker, in the 2014 Budget Statement
and Economic Policy, Government indicated its decision to review the
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2014 Mid-Year Review and Supplementary Estimates
existing system of payment of Book and Research Allowance and replace it
with a research and innovation facility with a seed funding of GH¢15
million, which has been created and funded. The Professor Mireku Gyimah
Committee
was
mandated
to
make
recommendations
on
the
operationalisation and establishment of the National Research Facility.
They have submitted their report and implementation will commence
soon.
 Human
Resource
Management
Policy:
Mr.
Speaker,
the
Comprehensive Human Resource Management Policy Framework and
Manual has been approved by Cabinet. Training of selected public service
organizations for the policy framework and manual will begin in August
2014. Furthermore, the Human Resource Management Information
System (HRMIS) is being implemented to strengthen controls around
entrance, progression and exit of public service employees, link HR
information to budget preparation and payroll processing.
Nine MDAs – Public Services Commission (PSC), Office of the Head of Civil
service (OHCS), Local Government Service (LGS), Ghana Education Service
(GES), Ghana Health Service (GHS), Ministry of Food and Agriculture
(MoFA), Ghana Police Service and Ghana Prisons Service, which constitute
about 80 percent of the total workforce in the public service, have been
selected to pilot the project.
 Payroll Upgrade: The upgrade of the IPPD2 payroll system has been
completed and has been used to run the payroll from February 2014 to
date. The upgraded IPPD2 has resulted in the correction of inherent errors
in the old payroll calculations as well as distortions to individual monthly
salaries.
 Integration of Payroll: The upgraded payroll system has been
integrated into GIFMIS. This will facilitate budgetary control over payroll
costs. With this, heads of institutions now have direct responsibility for
managing the payroll budget as they do for other items of expenditure.
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2014 Mid-Year Review and Supplementary Estimates
 Electronic Salary Payment Vouchers (ESPV): The ESPV system
provides online access to heads of management units and human resource
managers to approve staff to be paid for a particular month as well as the
amounts to be paid to them. With the 24-hour access to the payroll data,
the manager has adequate time to continuously review the payroll report.
As at the end of June, the system had been deployed to 73.3 percent of
management units in the Greater Accra Region. The validation of the June
payroll of these management units has resulted in the deletion of 266
names and blocking for investigation of 2,531 staff. The total estimated
payroll cost of the 2,797 staff is GH¢36.7 million per annum. Projecting
this result to the entire mechanised payroll and discounting it by 40
percent generates an estimated savings of GH¢414 million per annum or
GH¢172.5 million for the rest of the year.
 Electronic Pay Slips System (E-pay slip): At the end of June 2014,
about 385,000 government employees on the mechanised payroll
representing 75 percent with a geographical coverage of 90 percent have
registered on the E-Pay slip system. The verbal complaints by employees
on salaries have minimized because the system provides information to
employees as well as an avenue for channelling of complaints. Registration
onto the system is ongoing and it is expected that all staff will be
registered by the end of 2014.
 Payroll Audit: Mr. Speaker, the Internal Audit Agency conducted a pilot
audit on GES staff in the Shai Osudoku District of the Greater Accra
Region. This exercise was to validate staff strength and determine
whether adequate controls existed over the management of the payroll
and personnel records to confirm payroll data. The audit has been
completed and it was observed that 40 teachers representing 4.7 percent
of the staff strength who were on the GOG payroll were neither on the
nominal payroll of their management units nor sighted during the
headcount. We have taken action to block the salaries of the 40 teachers
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2014 Mid-Year Review and Supplementary Estimates
whilst measures are being taken to expand the audit to cover other
districts and also recover illegal payments.
 Biometric Registration: Validation of the current Biometric database is
in progress to isolate duplicate names. A total of 1,656 employees data
have been identified as duplicates for further interrogation with an
estimated payroll cost savings of about GH¢6.5 million. The biometric
registration function will be merged with that of the National Identification
Authority.
Implementation of Provisions and Review of the PRMA
132. Mr. Speaker, the approved downward revision of the 40 percent share of the
Net Carried and Participating Interest to 30 percent has since been
implemented. The retention of the 70 percent allocation of the benchmark
revenue for ABFA and 30 percent of the Ghana Petroleum Funds (GPFs) has
also been implemented.
133. The Ghana Stabilisation Fund has been capped at US$250 million consistent
with Section 23(3) of the PRMA. As at May 2014, an excess of US$176 million
had been realized. Out of this amount, US$16 million (GH¢50 million) was
lodged into the newly established Contingency Fund and the difference of
US$159 million is being used for debt repayment.
134. The legislative review of the Petroleum Revenue Management Act (PRMA)
which may affect provisions related to the petroleum benchmark revenue and
Public Interest and Accountability Committee (PIAC) membership, among
others, is on-going and will be presented to Parliament shortly.
Resource Mobilization Initiatives
135. Mr. Speaker, a number of tax measures were introduced in the 2014 Budget.
The status of implementation of these measures are as follows
136. A compliance exercise has started to compare customs data on importers with
the domestic records of taxpayers. Additionally, GIFMIS systems data is being
used to confirm the accuracy of withholding taxes deducted and paid by
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2014 Mid-Year Review and Supplementary Estimates
withholding agents to GRA. This data will also be used to review domestic tax
obligations relating to filing and issuing of tax clearance certificates.
137. These assessments are based on revelations that include discrepancies
between what taxpayers import and pay as import duties and the
corresponding domestic tax payments.
Also either withholding taxes
deducted are not being paid to GRA or lower withholding tax rates are being
used to calculate the payments. It is also clear that many taxpayers do not
declare their TIN or the tax office code where they are registered.
138. Most tax defaulters invited have accepted their liabilities without objection
and have started paying their liabilities. Within 2 weeks of the exercise
GH¢6.8 million tax liability has been uncovered by the Medium Tax Offices
and GH¢20 million from the Large Taxpayers Office.
139. All the statutory compliance and enforcement tools, including tax audits and
investigations, are being employed in this exercise by GRA.
140. The Ministry of Finance has since directed the GRA that Tax Identification
Numbers and tax office codes should form part of declarations made by
taxpayer for external (import and export) and domestic tax transactions.
141. The Customs Division of GRA has put in place additional measures to enforce
compliance. Among others, it has set up a task force to mount road blocks to
detect and arrest vehicle owners who have not paid the correct taxes on the
vehicles. GRA is collaborating with DVLA to detect fake vehicle registration. In
that regard, a portal has been created for buyers to text to a short code to
verify their vehicle’s status. This exercise is important as revenue from taxes
on vehicles form about 18 percent of customs revenue. In the first week of
operation, 23 arrests and detention were made in Accra and 18 in Kumasi and
Ho.
142. Special warehousing audits are being undertaken. Free zones audit will begin
in August. These audits will emphasize on detection of misclassification, misdescription, wrong rates application, and under declaration of quantities and
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2014 Mid-Year Review and Supplementary Estimates
values of goods as well as verifying the tax liabilities of Free Zones enterprises
in respect to their income tax, VAT/NHIL and other domestic taxes. Sanctions
will be applied on affected importers/declarants. Post clearance monitoring
has also been intensified.
143. To improve tax compliance, with the aim of achieving the revenue target for
the year, technical assistance has been sought to use a consulting firm and
an expert local technical group made up of former GRA staff, private tax
experts, staff from the Tax Policy Unit of the Ministry of Finance among
others to undertake Corporate Income Tax auditing and reconciliation, Pay As
You Earn (PAYE) reconciliation and enforcement, VAT reconciliation and
auditing and Customs Valuation and Examination.
144. Specifically, under the Customs Division of the GRA, the exercise will among
others include:
 valuation, with the aim of reducing undervaluation of imported goods and
to confirm import prices, quality and quantities;
 examination, to confirm the classification of imports for tax purposes. It
will also help confirm quantity and quality of imports under valuation;
 rationalization and review of the free zones regime to ensure activities of
firms within the free zones align with regulations governing them;
 enforcement of warehousing regime to ensure that goods taken into the
warehouse are only released on payment of relevant taxes. There will be
strict enforcement of accounting of goods stored in warehouse to track
leakages of goods into the local market without payment of due taxes;
and
 development and application of systems to ensure goods in transit actually
exit the country with sanctions applied for any infringement of the rules.
145. Mr. Speaker, under the Domestic Tax Revenue Division, activities will include:
 support in reconciling the input-output relationship in the VAT mechanism
throughout the import/manufacturing/wholesale and retail chain to
enhance the audit process;
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2014 Mid-Year Review and Supplementary Estimates
 building capacity to ensure monthly withholding taxes by companies are
reconciled and payments made on time; and
 support in corporate income tax auditing and reconciliation.
Public Debt Management
146. Mr. Speaker, the Debt Management Strategy that Cabinet and Parliament
approved acknowledges our limited access to grants and concessional loans
after attaining LMIC status. The measures outlined in the strategy are
consistent with the anticipated rapid growth in our national output and will
lead to higher per capita income in the next decade. In this regard, the
strategy seeks, among others to:
 establish an effective mechanism, through the Ghana Infrastructure
Investment Fund (GIIF), to ensure repayment of loans and grants for
commercially viable projects, notably those implemented by State-Owned
Enterprises (SOEs);
 support the GIIF with an allocation from the ABFA to leverage the capital
markets for infrastructure development;
 channel grants and concessional loans to finance social infrastructure
projects;
 channel commercial loans to finance commercially viable projects—with
on-lending and escrow mechanisms to ensure their recovery; and
 restructure expensive short-term and high-interest bearing debt, including
domestic debt with hybrid holdings by extending their repayment period
and/or lower interest costs.
Ghana Infrastructure Investment Fund (GIIF)
147. Mr. Speaker, government has started the process of setting up the Ghana
Infrastructure Investment Fund (GIIF)—originally proposed as Ghana
Infrastructure Fund (GIF) in the 2014 Budget. The purposes include the
treatment of commercial projects on capital market basis, with recovery
mechanisms that will lead to classifying elements of the Public Debt
guaranteed by Government as Contingent Liability.
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2014 Mid-Year Review and Supplementary Estimates
148. Mr. Speaker, we are pleased to note that we are making significant progress
on this important initiative, with support from this august House with respect
to the consideration of the GIIF Bill. Immediately upon passage, Government
will put the necessary institutional structures in place to make the Fund
operational.
Self-Financing and On-Lending policies
149. Mr. Speaker, an important element of the Government’s New Debt
Management Strategy is to recover loans that are used to support commercial
projects (or projects that have underlying fees and charges). To date the
Ministry of Finance has undertaken the following actions:
 consultation with the Attorney General’s Department, which has since
advised that such loans should be approved by Parliament, unless
otherwise stated;
 completed the drafting of a standard On-lending Agreement for use by all
MDAs and MMDAs;
 prepared Guidelines on Escrow and Debt Service Account arrangements,
with the CAGD advising BOG to open local currency and foreign exchange
(US$) Debt Service Accounts; and
 organization of meetings with State-owned Enterprises (SOES) on the
concept and starting a reconciliation exercise with these entities: to be
followed by meetings with MDAs and MMDAs.
150. Mr Speaker, when operational, the process will link conceptually to the GIIF
mechanism for all commercial projects—through a revolving fund that can be
used to do more projects and alleviate the burden of quasi-public debt on the
Budget and taxpayers.
Debt Refinancing and Financing the Capital Budget
151. Mr Speaker, as noted in the 2014 Budget, a major feature of our Public Debt
is their relative short-term nature and high-interest cost. To address this
situation, government proposes to use a portion of the 2014 Sovereign Bond
to refinance existing short-term domestic debt.
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2014 Mid-Year Review and Supplementary Estimates
152. Mr. Speaker, following approvals by Parliament and the completion of other
procurement processes, the Ministry of Finance has appointed local and
foreign experts to assist with the 2014 Bond issue. The advice of the experts
will determine the exact period for conducting “road shows” and floating the
bond.
Managing Foreign Exchange Losses
153. Mr. Speaker, as part of the debt management policy approved by this House,
government set up a foreign currency debt service account to minimize
exposures to foreign exchange risks and potential default risks. Government
has directed all MDAs/MMDAs to issue contracts and undertake transactions
using the local currency, the Ghana Cedi. In cases where this is not possible,
approval will have to be sought from the Ministry of Finance.
Public Investment Programme and Public Private Partnership
154. A policy and law on Public Investment Management to provide appropriate
legislative framework to guide the delivery and management of public
investment have been developed and will be submitted to Cabinet shortly.
155. A Bill to regulate Public Private Partnership (PPP) has been submitted to
cabinet for approval and subsequent submission to Parliament.
Boost for SMEs, Stimulus for the Private Sector and Support to Local
Industries
156. Mr. Speaker, Export Development and Agricultural Industrial Fund (EDAIF)
has allocated a financial stimulus package for exports, pharmaceuticals,
poultry, textiles and garments, SMEs and agro processing sectors to enhance
their competitiveness for growth and job creation. During the period under
review, 5 pharmaceutical companies that produce essential drugs were
identified under this programme and so far, one application has been
approved for funding. The other 4 applications are under consideration and
funding will be approved shortly. The Ghana Cedi equivalent of US$10 million
and GH¢9.7 million has been earmarked to facilitate the stimulus package for
the Pharmaceuticals and poultry industries, respectively. An amount of GH¢10
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2014 Mid-Year Review and Supplementary Estimates
million has also been set aside by EDAIF for the Youth Entrepreneurial
Development Programme.
157. Funding has also been released by EDAIF to Irrigation Development Authority
(IDA) for preliminary works to expand irrigation facilities for selected and
other export crops in areas such as Tanoso, Nasia/Ligba, Okyereko, Tamne,
Kamba, Sabare, Keta, Ho (Kpeve) Kpli, Amate and Mprumen to support small
holder farmers. As part of government’s measures to reduce rice importation,
EDAIF has allocated GH¢20 million to the Ministry of Food and Agriculture to
support local rice production. One thousand small scale farmers in Bawjiase
and Nsawam will be supported to increase production of fruits.
Financial Sector Reforms
158. Mr. Speaker, Government is currently preparing SOE's for the capital market
to enable them access affordable medium to long-term financing. Apart from
education and awareness of potential SOEs, government is working with
Development Partners to provide rating services for SOEs. The draft ToR has
been developed to procure a consultant to assist with the study of the SOE
sector to inform a technical support.
159. H.E. the President engaged Stakeholders in the Mortgage Finance Sector in
response to the Housing initiative indicated in the State of the Nation’s
address. He has directed the Chairman of the Ghana Association of Bankers
to submit a paper on innovative housing financing products to help address
the country's housing deficit of approximately 1.2 million. In addition,
government is developing a Ghana Housing Finance Initiative (GHFI) which
seeks to increase housing supply and develop affordable loan products.
Banking Sector Reforms
160. Mr. Speaker, with the view to consolidating the Banking Act and its related
amendments, strengthen the framework for consolidated supervision and
address gaps in the Act, the Bank of Ghana has prepared the Banks and
Special Deposit-Taking Institution Bill. In addition, Bank of Ghana has
prepared the Ghana Deposit Protection Bill which seeks to boost the
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2014 Mid-Year Review and Supplementary Estimates
confidence and trust of financial consumers. The Bills are currently under
consideration for submission to Cabinet.
Social Intervention Initiatives
161. Mr. Speaker, the process for the construction of 200 new Community Day
Senior High Schools is in progress. The contract of the first batch of 50
schools has been awarded. Cabinet and Parliament have approved a loan to
finance the construction of additional 23 Senior High schools and upgrade
facilities in another 125 Senior High schools. These projects are expected to
improve the quality in secondary education. Under the secondary education
improvement project about 10,400 students will also receive special
scholarships.
162. Mr. Speaker, government will support 5,651,342 pupils with Capitation Grants
and 500,000 pupils will receive free school uniforms this year. Government
will also continue to subsidise the Basic Education Certificate Examination
(BECE) and the West African Senior Secondary Certificate Examination
(WASSCE).
163. Mr. Speaker, the Bill on the proposed public university in the Eastern Region
will soon be laid before this august House.
164. Right Honourable Speaker, on 10th June this year in Geneva, Switzerland,
Ghana was recognized by the International Telecommunication Union (ITU)
and given the 2014 World Summit on the Information Society (WSIS)
PROJECT PRIZE AWARD in Rural Telephony. Our rural telephony project
targets underprivileged and deprived Ghanaian communities with population
of less than two thousand people. The latest community to benefit from this
intervention was Tuluwe in the Northern region. The following towns are the
next in line to benefit from the rural telephony project – Drobonso, Mafia,
Boinzan, Agyemadiem, Wansapo, Kwasi Fanti, Aidoo Suazo, Essase, Sekesua,
Akarteng among others.
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2014 Mid-Year Review and Supplementary Estimates
165. As part of this year’s celebration of Girls in ICT Day which is aimed at
empowering disadvantaged girls to adopt ICT as a major tool for
development, series of activities involving hands-on ICT workshops to
encourage the study of technology-related disciplines were held at various
Community Information Centres (CICs) in the Eastern Region. 411 girls have
so far benefitted from the training and sensitization workshops being
conducted at the Community Information Centres. In 2013, 16 more
Community Information Centres in Tepa, Kuntanase, Mehame, Mpohor
Wassa, Half Assini, Yagaba, Damongo, Zebilla, Hlefi, Dzodze, Tegbi, Akatsi,
Mepe etc were completed. This year, funds have been made available for the
construction of 21 more Community Information Centres.
The beneficiary
towns include, Effiduase, Asuogyaman, Twifo Atti Morkwa, Bodi, Ngleshie
Amanfro, Pantang, Keta, Battor, Drobonso, Sagnarigu, Nalerigu, Talensi,
Pusiga, Lambussie, Wellembelle, Nandom, etc.
166. The dilapidated PWD warehouses near Kwame Nkrumah Circle are being
converted into Business Process Outsourcing Grade A facility with ‘Plug and
Play’ features for prospective investors and employees. The project when fully
operational is estimated to generate 10,000 direct and indirect jobs.
167. The 780km Eastern Corridor optic fiber project to provide broadband
infrastructure for over 120 towns and communities along the route from Ho to
Bawku, with link to Tamale from Yendi, is being vigorously constructed. So far
over 405km have been covered.
168. The 120 beneficiary towns include: Garu, Nakpanduri, Gushiegu, Nakpachei,
Bokpaba, Bimbila, Kpasa, Menuso-Nkwanta, Kadjebi, Jasikan, Hohoe, e.t.c.
The Ghana Revenue Authority together with the Controller and AccountantGeneral’s Department will monitor revenue generation and public expenditure
respectively through this strategic infrastructure to ensure optimization of our
limited resources.
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2014 Mid-Year Review and Supplementary Estimates
169. The US$97million eTransform project currently before parliament is expected
to
enhance
eJustice
including
the
Attorney
General’s
Department,
eParliament, eImmigration, eEducation and eHealth among others.
170. Mr. Speaker, works on the first phase of the 110MW Kpone Thermal Plant and
the 110MW Tico Expansion project are ongoing and scheduled for completion
by December 2014. The Tumu-Han-Wa 161kV Transmission Line Project is
60% complete and is also expected to be completed by December 2014.
171. The Electricity Access rate as at December 2013 was 72% and is now 76%.
202 communities out of a target of 490 communities in 9 regions under SHEP
have been completed and connected to the national grid. All 302 communities
under the Upper West Electrification project have also been connected to the
national grid. Furthermore 77 communities under the Northern Regional
Electrification project have been connected to the grid out of the 500
communities while 30 communities are ready for commissioning. 90
substations have been completed and customer service connections and are
on-going in communities under the Upper East Regional Project.
172. Mr. Speaker, under the Self-help Electrification Project, 40 new communities
were connected to the national grid during the period under review in all
regions. The Ministry of Energy and Petroleum set up a database of solar
lantern promotion and has begun the free distribution of 200,000 solar
lanterns under the Kerosene Lantern Replacement project.
173. Under the Rural LPG programme, 50,000 6kg LPG cylinders and cook-stoves
produced locally were distributed at Derma in the Tano South District of the
Brong-Ahafo Region during the programme launch.
174. Mr. Speaker, over 4,000 used refrigerators were turned in and replaced with
new ones under the Refrigerator Rebate Programme. New and realistic rebate
amounts (GH¢200 and GH¢300 for 2 star and 3-5 Stars respectively) have
been proposed for adoption under the programme.
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2014 Mid-Year Review and Supplementary Estimates
175. Mr. Speaker, with respect to the LEAP programme, data on 4,674 households
is ready to be enrolled. Data collection on 23,000 is on-going. The common
targeting Mechanism will be used by the National Targeting office to collect
data in the Upper West Region to increase the LEAP households to 150,000.
This process will lead to the creation of the Single Registry for the Social
Protection called the Ghana National Household Registry.
Additional Policy Measures
176. Mr. Speaker, the Ministry of Finance in consultation with the National
Petroleum Authority (NPA) and the Public Utilities Regulatory Commission
(PURC) will submit proposals for a thorough review of the basis (i.e.
cost/price build up) for calculating all subsidies and the treatment of forex
losses.
177. In the 2013 and 2014 Budgets, the Ministry of Finance decentralised payment
of utilities to MDAs and allocated funds in the budget for these payments.
This policy will be pursued and implemented fully in the 2015 Budget.
178. With immediate effect, Government will begin the process of enforcing the
International Financial Reporting Standards (IFRS) rule with respect to all
routine foreign exchange losses involving government transactions. Under this
rule, businesses must report foreign exchange losses as legitimate business
expenditure in their financial statements and in their GRA tax returns. In this
regard, any recoveries made through payments must be reported as a gain.
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2014 Mid-Year Review and Supplementary Estimates
SECTION FIVE: REVISED 2014 MACROECONOMIC TARGETS,
FISCAL FRAMEWORK AND REQUEST FOR SUPPLEMENTARY
BUDGET
179. Mr. Speaker, developments in both the global and domestic economic
environment have necessitated a revision of the macroeconomic framework
and assumptions underlying the 2014 Budget that was presented to this
august House in November, 2013. The current energy challenge, rising
inflation and interest rates, as well as exchange rate depreciation pose a
strong downside risk to the achievement of the growth target for the year.
Based on the revisions to the macroeconomic framework, the 2014
macroeconomic targets have been revised as follows:
 overall real GDP (including oil) growth revised from 8.0 percent to 7.1
percent;
 non-oil real GDP growth revised from 7.4 percent to 6.6 percent;
 an end year inflation target revised from 9.5 ±2 percent to 13.0±2
percent;
 overall budget deficit target revised from 8.5 percent of GDP to 8.8
percent; and
 Gross International Reserves of not less than 3 months of import cover of
goods and services.
180. Mr. Speaker, as a result of the revisions made to the macroeconomic
framework arising from developments in both the domestic and global
economic environment and the fiscal performance for the first five months of
the year, the 2014 revenue and expenditure estimates have been revised to
reflect these developments.
181. Mr. Speaker, some of the developments in the domestic economy that have
necessitated the revisions to the fiscal framework are as follows:
 decline in gold prices;
 challenges in the implementation of some of the revenue measures
announced in the 2014 Budget;
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2014 Mid-Year Review and Supplementary Estimates
 slowdown in economic activity due to the energy crisis and exchange rate
depreciation;
 rising interest rates leading to higher interest costs;
 implementation of the 10 percent Cost of Living Allowance (COLA) to
Government employees, effective May 2014;
 slower-than-expected implementation of utility and petroleum price
adjustments; and
 exchange rate depreciation.
Revisions to Total Revenue and Grants
182. Mr. Speaker, as a result of the exchange rate depreciation, the exchange rate
assumption for the Budget has been revised. Consequently, all Budget inflows
denominated in foreign currency have been revised upwards.
183. Due to a combination of factors such as the slowdown in economic activity,
delays in the implementation of some revenue measures announced in the
Budget and the declining gold prices which have impacted negatively on taxes
on domestic goods and services as well as taxes on income and property,
total non-oil tax revenue have been revised downwards by GH¢948.0 million
to GH¢18,712.3 million, equivalent to 16.3 percent of GDP. The revised nonoil tax revenue for the year represents an increase of 38.1percent over the
outturn for 2013.
184. Due to the exchange rate depreciation, oil revenue have also been revised
upwards by GH¢707.1 million to GH¢2,416.5 million and grants have been
revised upwards from GH¢1,130.7 million to GH¢1,390.8 million. The positive
ongoing discussions with DPs suggest that they will disburse some
commitments.
185. In summary, total revenue and grants for the 2014 fiscal year have been
revised upwards from GH¢26,056.5 million to GH¢26,230.3 million, equivalent
to 22.9 percent of GDP. The revised revenue and grants for the year
represents an increase of 34.7 percent over the outturn for 2013.
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2014 Mid-Year Review and Supplementary Estimates
Revisions to Expenditures
186. Mr. Speaker, the estimate for total expenditure and arrears clearance have
been revised upwards by GH¢1,331.1 million from GH¢35,027.3 million to
GH¢36,358.3 million (31.7 percent of GDP) mainly on account of higher
wages and salaries, interest payments, foreign-financed capital expenditures
and subsidies.
187. Wages and Salaries have been revised upwards from GH¢8,967.8 million to
GH¢9,218.9 million as a result of the COLA that was approved for public
sector employees.
188. On account of higher interest rates and the depreciation of the cedi, interest
payments have been revised upwards from GH¢6,178.6 million to GH¢7,884.7
million.
189. Due to the exchange rate depreciation, foreign-financed capital expenditure
has been revised upwards from GH¢4,525.8 million to GH¢4,748.7 million.
190. Mr. Speaker, as a result of the slower-than-expected implementation of utility
and petroleum price adjustments, the provision made for subsidies in the
2014 budget have been revised upwards from GH¢50.0 million to GH¢618.8
million.
191. Based on the revisions made to the estimates for VAT revenue and total tax
revenue in general, transfers to the National Health Insurance Fund, the
Ghana Education Trust Fund and the District Assemblies Common Fund are
estimated to be lower than earlier projected by GH¢21.8 million, GH¢27.4
million and GH¢54.0 million, respectively.
192. Due to the higher estimated revenue from oil and in accordance with the
Petroleum Revenue Management Act (Act 815), transfers to GNPC from the
oil revenue have been revised upwards from GH¢423.7 million to GH¢599.0
million.
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2014 Mid-Year Review and Supplementary Estimates
193. Mr. Speaker, as a result of the estimated higher spending on wages and
salaries, interest payments and subsidies, estimated spending on Goods and
Services have been revised downwards from GH¢1,550.0 million to
GH¢1,085.0 million and domestic financed capital expenditure have been
revised downwards from GH¢1,491.5 million to GH¢1,241.5 million.
Expenditure Efficiency Measures
194. In order to ensure achievement of the revised expenditure targets the
following procedures will be enforced:
 the GIFMIS will be used to ensure strict compliance with established
commitment control procedures and apply appropriate sanctions against
officers that flout these procedures;
 the revised MDAs expenditure estimates resulting from the mid-year
review will be strictly enforced to avoid any expenditure overruns;
 Ministry of Finance will engage MDAs to ensure that they focus on only
critical programmes and operations for the rest of the year;
 Ministry of Finance will take measures to strictly link the elements of cash
ceilings, releases, payments and reconciliations to minimise delays
between releases and payments experienced in the first half of the year.
This will also minimise the amount of outstanding payments at CAGD;
 enforce guidelines on use of IGFs and improve their contribution to the
programme objectives of MDAs and MMDAs; and
 statutory funds must implement their own moratorium on new projects
and stick to their core business to ease the pressure on those funds.
Revised Overall Budget Balance and Financing
195. On the basis of the revised revenues and expenditures estimates, the revised
2014 budget will result in an overall budget deficit of GH¢10,128.1 million,
equivalent to 8.8 percent of GDP, against the earlier estimate of GH¢8,970.8
million, equivalent to 8.5 percent of GDP.
196. The revised budget deficit will be financed from domestic and foreign sources
as well as the excess amount from the stabilisation fund for debt repayment.
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2014 Mid-Year Review and Supplementary Estimates
Foreign financing of the deficit is estimated at GH¢5,936.3 million whilst
domestic financing of the Budget is estimated at GH¢3,856.4 million. An
amount of GH¢385 million from the Stabilisation Fund will be used to repay
debt.
Request for Approval for Supplementary Estimates
197. Mr. Speaker, as mentioned earlier on in this presentation, the aim of this
Supplementary Estimate is to seek Parliamentary approval to commit
additional resources outlined in this report to fund additional expenditures
resulting from the revisions made to the 2014 budget. We are requesting
approval for a total amount of GH¢3,196,855,671 as Supplementary
Expenditures.
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2014 Mid-Year Review and Supplementary Estimates
SECTION SIX: CONCLUSION
198. Right Honourable Speaker, notwithstanding the current temporary challenges,
we are poised to achieve our goal of a fully-fledged middle income country
with opportunities for all. The medium term prospects of Ghana are bright.
The last time I addressed this august House, I highlighted on behalf of H.E,
President John Dramani Mahama, key measures to improve the situation. The
measures are far reaching and transformational in nature. They are aimed at
injecting stability while changing the structure of our economy. As the
President noted recently, some of the measures will be painful in the short
term but will no doubt be beneficial in the long run.
199. Despite the major setbacks in 2013, we are determined to see through the
implementation of these measures and those outlined in this Supplementary
estimates as a major step towards the attainment of the President’s
transformational
agenda.
We
are
incorporating
the
key
and
major
recommendations of the Senchi Consensus in our overall economic
management agenda.
200. We are blessed with rich human and natural resources. We are determined to
transition into full Middle Income status and this is supported by bold
paradigm shifts such as the enactment of the PRMA, proposals for the
establishment of the GIIF, promoting the consumption of Made In Ghana
Goods through revamping the Komenda Sugar factory, increase funding for
poultry and rice production and increased support to the Pharmaceutical
industry and SMEs in general.
201. Mr. Speaker, I beg to move for this august House to approve the 2014
Supplementary Estimates of GH¢3,196,855,671 million in compliance with
Article 179 (8) of the Constitution and Standing Order 143 of this House.
202. Mr. Speaker, the Appropriation Bill covering this Supplementary Estimates will
be submitted to this august House in conformity with Article 179 (9) of the
Constitution of the Republic of Ghana and Standing Order 144 of this august
House.
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2014 Mid-Year Review and Supplementary Estimates
203. Mr. Speaker we will be relentless and resolute in our efforts to building a
better Ghana for all. We trust that in this endeavour we can count on the
support of all. God Bless Us All, God Bless Our Homeland Ghana.
204. Mr. Speaker, I beg to move.
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