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26.07.2016 Business & Finance

Gov’t Seeks Approval Of ¢1.8bn From Parliament

By Ghanaian Chronicle
Govt Seeks Approval Of 1.8bn From Parliament
26.07.2016 LISTEN

…A Full Mid-Year Budget Presented By Seth Terkper

SECTION ONE: INTRODUCTION
1. Mr. Speaker, I beg to move that this Honourable House approves the sum of one billion, eight hundred and eighty-eight million, two hundred and three thousand, and three hundred and eighty-seven Ghana Cedis (GH¢1,888,203,387) as Supplementary Estimates for the 2016 Financial Year.

2. Mr. Speaker, in doing so, I would proceed by first presenting to this august House, a review of the performance of the economy of Ghana for the 2015 and 2016 Financial Year.

3. Right Honourable Speaker and Honourable Members of Parliament, on the authority of the President, His Excellency John Dramani Mahama, the positive review and, in particular, the need for Supplementary Estimates are necessitated by both domestic and global developments.

4. Mr. Speaker, again on behalf of the President, I wish to express our profound appreciation to this august House for your cooperation in the management of the economy. In particular, we wish to show appreciation for the House's pursuit of a very active legislative agenda in the areas of fiscal, financial and monetary management.

5. No doubt, this has contributed to a very clear “turnaround story” that now shines the nation's path to a well-planned bright positive prospects for the economy. Despite a few lingering problems, we will demonstrate in this Statement that the context today is clearly different from the “challenges” that made H.E. President Mahama call on fe

7. Mr. Speaker, the update will highlight the overall positive impact of the President's policies. It will show that several daunting domestic and international challenges did not hinder our determination to change course. More importantly, the strategic focus enabled us to pursue the very active infrastructure and development programmes that the President himself has been presenting in his “Accounting to the People” visits. This is also the basis for the “turnaround” and the course for pursuing a very robust growth agenda for the near-to-medium term.

8. The launch of our “Home Grown” policies, which are now part of the IMF Program, were designed to achieve fiscal consolidation; address short-term vulnerabilities; reduce a high budget deficit that had become harmful to the private sector; as well as stabilize and reverse the rise in the post-HIPC public debt. Mr. Speaker, we are on course to achieving these goals through management of prudent fiscal, financial, sectoral, and monetary policies.

9. Provisional fiscal data up to end-December 2015 show that total revenue and grants were higher than the Budget targets by 5 percent. The overrun in total expenditures, including arrears, narrowed to 2.1 percent above target. These performances resulted in a cash budget deficit of 6.3 percent of GDP, much better than the Budget target of 7.3 percent and 10.2 percent in 2014.

10. Indeed, at 0.2 percent of GDP at the end of 2015, the primary budget balance—that shows our ability to service loans for development—was a surplus for the first time in over a decade.

11. GDP also grew by 3.9 percent at end-2015, better than the projected 3.5 percent. It is getting better, with the economy growing by 4.9 percent in the first quarter of 2016, compared to 4.5 percent for the same period in 2015. In spite of unanticipated shortfalls in price and production of crude oil, GDP growth is projected to end the year at 4.1 percent or better.

12. The nation's public debt level rose rapidly from a very low 26 percent in 2006—with the steepest post-HIPC increase of 31 percent in 2007—to approximately 72 percent by end-2015. We note that HIPC reduced the public debt from over 150 percent of GDP to 26 percent and created significant borrowing space. That era ended with the increase in public debt above sustainable levels.

13. We are proud to note that, for the first time since the declaration of HIPC in 2001 we were able to first, slow down the rate of growth of debt accumulation between 2014 and 2015; and, second, now reverse course, with the debt-to-GDP ratio falling from 72 percent of GDP at end-2015 to 63 percent at end-May 2016. Certainly, this is not the trajectory that will take the nation back to HIPC, as some had predicted only recently. We will persevere in bringing down the level of our public debt.

14. Mr. Speaker, the budget deficit is also narrowing, as we raise more domestic revenues and curtail expenditure overruns. Though the debt level is declining, we are able to continue the rapid expansion of infrastructure through prudent project management.

The currency has been fairly stable; and private sector confidence is bouncing back. All these point to a turnaround and very bright prospects for the economy. As promised when we launched the Home Grown policies, the trend provides us with the opportunity to remove the temporary taxes—the Fiscal Stabilization Levy and the Temporary Import Duty—that helped reverse course, in the near term.

15. Mr. Speaker, notwithstanding these positive developments, there have been a number of challenges in the domestic and global economic environment since the presentation of the 2016 Budget to this august House in November 2015. These developments have affected the assumptions underlying the Budget.

16. First, crude oil prices declined to a low US$28 per barrel (pbl) in January 2016, compared to the US$53.05 pbl used in the Budget. Even though the price has been rising from March 2016, the range of US$45—US$48 pbl, at end-June 2016, is still below the oil price projection used in the 2016 Budget.

Secondly, the defects in the turret bearing of the FPSO Kwame Nkrumah adversely affected crude oil and gas production for the first half of 2016. Thirdly, despite the repairs made to the broken West Africa Gas Pipeline, increased rebel and pirate activities continue to adversely affect the supply of gas to Ghana. This has a negative impact on power supply and, consequently, full recovery of the economy.

17. These developments and, in general, the sluggish commodity prices, will have implications for executing the 2016 Budget. In particular, for the second year running, the Government is compelled to come to the House to revise the allocations made to the Annual Budget Funding Amount (ABFA). On a more positive note, however, the FPSO Prof. Atta Mills docked in April 2016 to signal another significant step in our well laid-out plan to change course for the future.

18. Mr. Speaker, we have reminded MDAs and MMDAs already that the Supplementary Estimates will not result in automatic increases in budget allocation and expenditures. We will continue our focus on completing pipeline projects in all sectors; call for continuing prudence in spending; meet our obligations to contractors and suppliers; and realign our statutory funds to achieve our social intervention policies.

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19. Rt. Hon. Speaker, against this background, I have come to this House to request for Supplementary Estimates of GH¢1,888,203,387, in accordance with Article 179 (8) of the 1992 Constitution and Standing Order 143 of this House.

SECTION TWO: ECONOMIC PERFORMANCE IN 2015 AND 2016
20. Mr. Speaker, we wish to update the House with the macroeconomic performance at the end of 2015 since the 2016 Budget that was read in November 2015 was based on end-September 2015 performance and projection to end-year. For the second time, the Government has produced and published the 2015 Budget Performance Report on its website to provide this information in detail.

21. Also, this speech is a Summary and I entreat the Hansard Department to take account of the full version of the Statement before the House.

Macro-economic Performance
22. The end-2015 results and developments to May 2016 show that the policies of the Government are on track and are gradually yielding the desired results.

23. GDP Growth: As noted, GDP or national output grew by 3.9 percent at end-2015 and by 4.9 percent for Quarter 1 of 2016—better than the 3.5 percent projection for 2015 and 4.1 percent in Quarter 1 of 2015. For Quarter 1 of 2016, Industry declined by 1.1 percent, against a growth rate of 7.2 percent in the same period in 2015.

This is mainly due to the challenges relating to the supply of gas and crude oil from FPSO and the West Africa gas pipeline. However, the Agriculture Sector grew by 2.8 percent while the Services Sector grew by 8.8 percent. These show improvements over the 1.7 and 5.2 percent, respectively, for the same period in 2015.

24. Inflation: Inflation pressures remained high in 2015, ending the year at 17.7 percent. It remains elevated in 2016 due to the continuing pass-through effects of the adjustments in utility prices and, to a lesser extent, petroleum prices.

Monetary and External Sector Developments
25. Money and Capital Markets: The Bank of Ghana (BOG) has maintained the Monetary Policy Rate (MPR) at 26 percent since November 2015—against mixed trends in the money market. The 91 day Treasury Bill rate declined from 25.2 percent in December 2015 to 23.2 percent in April 2016 while the 182-day rate rose from 24.4 percent to 24.6 percent over the same period.

26. Exchange Rate Developments: The Cedi recovered much of its lost value against the US dollar between January and April 2016—on account of tight monetary policy and improved foreign currency flows. The cumulative rate of depreciation slowed to 0.02 percent and 2.7 percent against the US dollar and the Euro, respectively.

However, it appreciated by 1.6 percent against the Pound Sterling. These compare favourably with cumulative depreciation rates of 16.9 percent, 16.3 percent and 9.2 percent against the Dollar, Euro and Pound Sterling, respectively, for the same period in 2015.

27. External Sector Developments: On average, the volatilities in global commodity prices has had adverse consequences on the economy. The deficit in the provisional trade balance from January to April 2016 was US$972.78 million, compared to US$542.71 million for the same period in 2015.

Gross Foreign Assets (GFA) increased by US$66.26 million, from US$5,884.74 million to US$5,950.99 million at the end of December 2015. This was sufficient to cover 3.3 months of imports as at end-April 2016, compared to 3.4 months at the end of December 2015.

Fiscal Performance
28. Total revenues: Tax revenues amounted to GH¢10.3 billion and were 6.4 percent below the budget target of GH¢11.0 billion. However, grants have been broadly on target, with a negative deviation of 0.1 percent. The shortfall in tax revenue is mainly due to the decline in commodity prices, notably crude oil prices.

29. Oil revenues: Owing to low production from the FPSO, there was only one crude oil lifting by Ghana by May 2016 although there were flows from an additional lifting made in December 2016. The lifting proceeds from the 1.90 million barrels amounted to US$66.23 million. Additional petroleum revenues (from corporate tax, surface rentals, gas receipts, etc.) amounted to GH¢20.92 million—compared to a half year target of US$484.79 million in the Budget.

30. In line with the decision taken by Parliament under the PRMA, US$22.77 million of the amount was allocated to GNPC as Equity Financing Cost while the balance of US$64.38 million was transferred as ABFA (70 percent) and to the Ghana Petroleum Funds (30 percent).

31. Expenditures: Total expenditures, including arrears, amounted to GH¢17.6 billion against a target of GH¢18.4 billion. Interest payments remain subdued, reflecting lower borrowing costs than anticipated. In general, expenditures are being contained to take account of the likely shortfalls in oil revenues but there were slight overruns of GH¢182.6 million on the wage bill.

32. Budget or Fiscal Deficit: Mr. Speaker, the provisional data for January to May 2016 indicates that the cash fiscal deficit was 2.5 percent of GDP against a 2.2 percent. This performance compares to a budget deficit of 2.2 percent of GDP during the same period in 2015.

33. The practical meaning of the annual declining deficits is that Government is living within its means. Therefore, is borrowing less from the banks and capital markets and putting less pressure on interest rates. This also makes more credit or loans available to the private sector to reduce the cost of doing business and contributing better to growth in national output.

34. Financing and BOG zero-financing: Domestic financing of the deficit (including non-resident participation in our local bonds) amounted to GH¢4.3 billion while foreign financing resulted in net repayment of GH¢128.9 million. It is important to note that this is the first time in our country's history that financing of the budget deficit, approved by this august House, is not benefitting from any credits or overdrafts from the Bank of Ghana to date.

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35. Our ability to cope without BOG financing coincides with a major policy shift in fiscal management: the exploration of alternative sources of mobilizing funds, including the first-time use of the Ghana Stock Exchange (GSE) to sell, refinance and buy GOG 3-year and 5-year Bonds. This is gradually replacing the traditional use of BOG auctions—which we continue to use for Treasury and other short-term bills.

36. Mr. Speaker this august House has also been assessing these financing policies and other vital PFM issues under two Bills before the House: the consolidated PFM Bill and the Bank of Ghana (Amendment) Bill.

37. Public Debt Performance (January-May 2016): Rt. Hon. Speaker, as noted, the fast pace of accumulating public debt, since the declaration of HIPC, has started to slow down. The provisional data to end-May 2016 shows that Public Debt has decreased from about 72 percent of GDP at the end of 2015 to about 63 percent at the end of May 2016.

The total comprises 26 percent domestic debt and 37 percent foreign—a mix that also shows the need for judicious balance between these two sources of raising funds for development.

38. Mr. Speaker, let's be clear on the progress we are making. This is the first time in our post-HIPC era that we have slowed the rate of growth of accumulating public debt—as measured by the internationally-accepted Debt/GDP ratio. Moreover, we have achieved this feat against the background of enormous economic pressures, which resulted in the growth of GDP (the denominator in the ratio) actually dipping for four successive years.

39. The point we are making is that, regardless of challenges that are often beyond our control, we keep transforming the economy through superior strategies and programs.

40. Despite these improving and, in many cases, impressive performances, we are not about to be complacent. The public debt-to-GDP ratio will continue to vary, in line with factors such as new loans, disbursements, value of the Cedi, and growth of Output or GDP. However, our focus is clear: to make our debt ratio sustainable and consistent with our B ratings in capital markets. We will continue with our “smart” borrowing programs, in particular, to increase infrastructure development.

41. The Government's New Debt Management Strategy include

—to redeem our debt over the term of some loans, when they trade favourably on the capital markets.

42. In particular, we are improving the debt and treasury functions to make the public debt sustainable. In the last two Bond issues, we achieved long tenors or maturity periods of 12 and 15 years respectively, thus stretching our maturity profile to 2030. This provides us with a unique opportunity to implement these programmes and we must not fail to do so.

43. Another goal is to make guarantees mean what they say: as “contingent liabilities” and not events that increase our public debt automatically. These are relatively more advanced forms of “smart” borrowing approach—not “intoxicating” methods—that advanced and middle income economies use to simultaneously borrow and pursue infrastructure development.

44. Mr. Speaker, therefore, in the medium term, the plan of Government remains focused on managing the public debt at the lowest cost and at prudent levels of risk. The plans include conducting and publishing Debt Sustainability Analysis (DSA) and revising the Medium Term Debt Strategy (MTDS) to guide borrowing. The proposals from these reports are what inform our debt policy decisions, which are leading to a reduction in the debt burden. We must keep at it, beyond the focus on oscillations that arise from factors such as exchange rate depreciation.

SECTION THREE: STATUS OF IMPLEMENTATION OF KEY POLICY INITIATIVES

45. Mr. Speaker, not too long ago, our economy was confronted with major structural and macroeconomic imbalances caused by domestic and external shocks. While some of these were the result of failed policy choices, the situation was exacerbated by factors we could not control, in particular, the near collapse of commodity prices (for us, minerals, cocoa, and crude oil) on the international market. We also had the prolonged disruption in power supply.

46. We have been implementing several broad policy initiatives to address the imbalances; deal wit

49. We have made significant progress in implementing these transformational initiatives that continue to change lives enormously in all sectors. Mr. Speaker, permit me to provide an update to the House.

Ghana Infrastructure Investment Fund (GIIF)
50. The Ghana Infrastructure Investment Fund (GIIF) was established with the passage of the GIIF Act (Act 877), 2014—as an instrument for long term financing and development of commercial projects, in particular. Hence, GIIF is expected to mobilize and provide financial resources to manage, coordinate, and invest in a diversified portfolio projects. The Board and Advisory Council are established, while the Management and Staff are being put in place.

51. While the pace of boosting the Fund was affected by the fall in commodity prices, GIIF is poised to deliver on its mandate—a Sovereign Wealth Fund (SWF), with a key role in the nation's long-term transformation agenda. In the shorter term, GIIF will invest in projects such as fuel-tanks—as part of our strategic crude oil and petroleum products management while reviewing various commercial infrastructure proposals.

Public Private Partnership (PPP)
52. Mr. Speaker, the PPP Bill is before this august House and its passage will facilitate the creation of a framework for PPPs, enhance the delivery of PPP projects, and boost the confidence of private sector entities to patronize our PPP projects. The implementation of PPP policy as an alternative source of financing development is expected to curtail the need to borrow to finance the infrastructure deficit.

53. Currently, a number of PPP projects from various sectors are at different stages of preparation and twelve (12) of them are expected to reach financial close in the short-to-medium term. For instance, the Ghana Ports and Harbours Authority (GPHA) has received Expression of Interest from twelve (12) firms for the Dry Dock Terminal under the Takoradi Port Expansion project. The Accra Metropolitan Assembly (AMA) has also launched Request for Proposals (RFP) for projects that include the redevelopment of markets; a car park; and a convention centre.

National Infrastructure Plan (NIP) 54. Mr. Speaker, to place Ghana on the path of long-term transformation and national development, the National Development Planning Commission (NDPC) is preparing the National Infrastructure Plan (NIP). When completed, it will outline the Government's vision and strategic direction for infrastructure development, including the investment principles and priorities over the next 30 years.

The NIP is expected to deliver economic, social, and environmental benefits to the country through the production of a defined investment framework. The preparation of the plan is programmed to be completed by the end of the year 2016.

Financial Sector Initiatives
55. Mr. Speaker, we are on course to deepen the financial system through key initiatives that were launched in the past three years.

56. Ghana Export-Import (EXIM) Bank: Mr. Speaker, this august House passed the Ghana Export-Import (EXIM) Bank Act (Act 911), 2016—in line with the plans announced in the 2015 Budget Statement and Economic Policy. Ghana's EXIM Bank is expected to promote a more diversified and export-led economy, to make us more competitive in global marketplace.

Mr. Speaker, H.E. President John Mahama inaugurated the Board for the Bank on Wednesday, July 20, 2016. We expect the Board to prove His Excellency right on this transformational vision and policy for the nation.

57. The Ghana EXIM Bank is a development bank with a trade focus and, therefore, its main target is a private sector that is expected to benefit from the Bank's credit and guarantee programmes. Further, in conjunction with institutions such as the Standards Authority, Food and Drugs Authority, and Export Promotion Authority, the Bank will also assist exporters promote their products and services and meet the rigorous export standards in the international market-place.

58. The House will recall that the transitional arrangements in Act 911 include integration of the three institutions into the Ghana EXIM Bank's operations. These are the former Export Trade, Agricultural and Industrial Fund (EDAIF), Exim Guaranty Company Limited, and the Export Finance Company Limited.

59. Capital Market Development: Mr. Speaker, the Government has been successfully shifting the issuing, refinancing, and redemption of our medium term Bonds (e.g., 3-year/5-year Bonds) to the Ghana Stock Exchange (GSE). Since its launch in November 2015, Government has successfully issued 4 medium term bonds, each of them oversubscribed, at relatively more competitive coupon rates on the Exchange.

60. Under this initiative, the Ministry introduced the more competitive “Book Building” approach in allocating issuances to potential investors. This process is similar to what is used for the Eurobond on the International Capital Market. The essence is to ensure a more active engagement between Government and its Book Runners or Advisers as well as large institutional investors such as pension funds, insurance companies, and mutual funds.

61. The advanced and middle-income countries rely on these fund managers to raise long-term funds for the capital budgets and many infrastructure projects. Indeed, we are assessing the use of the GSE to issue Corporate Bonds to support the ongoing energy-sector SOE debt restructuring program.

62. Ghana Fixed Income Market (GFIM): Additionally, as part of measures to enhance secondary-trading of all fixed income securities, Government assisted in the establishment of the Ghana Fixed Income Market (GFIM).

The goal is to ensure greater efficiency, better and competitive pricing, increased liquidity, and greater transparency in the securities market. We envisage that GFIM will be ideal for supporting the Government's “buy-back” program for public debt instruments. The GFIM is currently operational and its Governing Committee is exercising its oversight responsibility for the secondary trading of fixed income securities.

63. Ghana Deposit Protection Scheme: The Ghana Deposit Protection Act seeks to establish a Deposit Protection Scheme to protect small depositors from losses incurred from the occurrence of currently uninsured events. It will definitely result in the development of a sound and stable financial system in Ghana by boosting investor confidence. Mr. Speaker, we are grateful to the House for passing this Bill last month (June 2016) to enable Bank of Ghana establish a Deposit Protection Fund and Deposit Protection Corporation to manage the Scheme for the country.

64. Non-Bank Financial Institutions Program: Mr. Speaker in recent times, non-bank financial institutions and, in particular, Micro-Finance institutions have come under intense public scrutiny. Often, they operate schemes that erode the deposit base of micro-finance, rural and community banks, by offering customers very high and unsustainable interests rates on deposits. The practice adversely affects Government's financial inclusion programs and soundness of the financial system.

65. Measures are being taken to clamp down on the activities of unauthorized financial institutions, as well as those that have failed to follow licensing requirements. Besides the Bill in Parliament to regulate the practice, Government plans to set up an Apex Institution ensure better supervision of the operations in the non-bank financial institutions sector—including programs for large non-bank institutions.

66. Unclaimed Assets Scheme: The Unclaimed Asset Scheme Program to be launched soon is a program for managing assets or funds that are presumed to be “abandoned” or “stranded” and remain “unclaimed” by their owners. The unclaimed funds include balances on lost or dormant accounts with banks and other deposit-taking institutions; dividends; bond interest and redemption proceeds; insurance premium; pension entitlements etc.

67. Under the program, these funds will be transferred into an independent fund and managed effectively till they are “united” with their rightful owners. As practiced in many advanced and middle-income countries, the Unclaimed Assets Law will establish an Authority which will proactively take measures to manage these assets and proactively locate beneficiaries or next-of-kin for these funds.

68. In May 2016, Cabinet approved a Concept Note and Action Plan for the establishment of the Scheme. A Taskforce was constituted and has consulted several stakeholders, resulting in a draft Unclaimed Assets Bill. Currently the Bill is with the Attorney General's Department for final drafting. In due course, it will be submitted to Cabinet and, subsequently, laid before Parliament.

DEBT MANAGEMENT STRATEGIES
69. Mr. Speaker, we have come to the end of the HIPC era when, as a result of the debt relief we got from bilateral and multilateral sources, we were able to borrow significant amounts for our nation's development. Moreover, our MIC status also mean that we will gradually lose the benefit of grants and concessional borrowing and move to what are variously called “hybrid”, “harder” or “market” terms in borrowing for our development.

70. As noted, we have been changing course successful under a Debt Management Policy that enables us borrow modest amounts; improve on recoveries (especially from commercial projects); slow down and reverse the rate of growth of our borrowing and debt stock; and yet invest in unprecedented infrastructure projects. The status of some of these new debt management strategies are as follows:

71. On-lending and Escrow Arrangement: Mr. Speaker, the policy of on-lending and escrow initiatives is to ensure that State-Owned Enterprises (SOEs) and entities (including MDA/MMDAs) that engage in commercial projects should use the proceeds from these projects pay for borrowed or guaranteed loans that will be “on-lent” to them.

72. The purpose is to forestall the situation where these loans or guarantees increase the public debt and Government has to use taxpayer funds accruing to the budget to service these SOE and project debt. Through continuous engagement with SOEs, Government has signed 28 on-lent agreements with SOEs and other entities to recover the full or partial amount of the loans borrowed on their behalf.

73. Sovereign Guarantees and Partial Risk Guarantee: Mr. Speaker, as part of efforts to ensure that SOEs, Joint Ventures and other Special Purpose Vehicles (SPVs) continue to borrow on the strength of their own balance sheet, Government is moving away from issued “unfettered” sovereign guarantees to a project-backed financing and guarantee approach.

74. We are also “de-risking” or minimizing the fiscal risk to Government by using the Put-and-Call Option Agreements (PCOAs) to replace the call for Government Consent and Security Agreement (GCSA). Finally, Government is scrutinizing the terms and conditions in Power Purchase Agreements (PPAs) to achieve the same goal.

75. Interest Rate and Commodity Price Hedges: Mr. Speaker, to mitigate any potential risks arising from fluctuations in the LIBOR and other floating rates on our debt books, Government is taking measures to hedge interest rate through swap arrangements to allow for predictability of debt service. The Ministry is currently reviewing proposals from international hedging counterparties. This policy move will complement the existing commodity price hedge programme.

76. Sinking Fund and “Buy-Back” Policy: Mr. Speaker, we recall that the House approved the setting up of a Sinking Fund in 2015, from funds above the cap on the PRMA's Stabilization Fund. The purpose of the Fund is to periodically redeem our external and domestic debt, especially current bullet loans. As at April 2016, an amount of about US$100.0 million had accumulated in the Sinking Fund.

77. Under our Eurobond “buy-back” program (repurchase of outstanding bonds under favourable market conditions), Government has used a portion of the Sinking Fund proceeds to redeem US$30.0 million of the Sovereig

79. Sovereign Bond Advisers' Mandate: Given the risk posed by a likely unsuccessful roll-over or buy-back of the 2007 Bond—and further by follow up events in 2017 (Budget presentation), after the elections—the Ministry of Finance has recommended the extension of the 2016 Bond issuance advisers to 2017. This will make our engagement with markets continuous to the end of 2017 and assure investors of our commitment to the markets, despite political events in the country.

80. On the domestic debt instruments front, as at end-June 2016, an amount of US$257.26 million (GH¢986.1 million) of the 2015 Eurobond was used to pay down (repurchase) our short term domestic debt instruments. This is part of the plan to restructure domestic debt, by extending the maturity profile to allow for a more realistic buy-back and “bullet” debt reduction program. Already, the plan has seen yields on short term domestic debt instruments declining since October 2015.

81. Mr. Speaker, the lesson for the nation is obvious: we must give full support to the Government's Sinking Fund, “Buy-Back”, Debt Service Reserve, and Amortization (principal plus interest) policies to avoid the situation where we face significant “roll-over” risks in the future.

This is a healthier way of financing development over a sustainably long time on the capital markets—which is the practice in Middle-Income and Advanced countries. Accordingly, the FAA's Sinking Fund provisions are being enhanced in the proposed PFM Bill that is currently before this House.

82. Refinancing of Energy Sector SOE Debt: Mr. Speaker, Government achieved another debt restructuring goal by assisting VRA and TOR management to engage major commercial banks to improve the terms for part of the debt on the Authority's Balance Sheet.

It also involved the first use of the Energy Sector Levy Act 2015 (Act 899) passed by this House to make the energy and banking sectors more stable—and, further, as we move more confidently into the gas era (especially under the OCTP Agreement).

83. The plan involved the restructuring and repayment of about GH¢2.2 billion over 3-to-5 years, with an upfront payment of GH¢250 million from the levies. Other features of the deal included to re-open the credit lines to enable VRA establish Letters of Credit (L/Cs) again to support its imports of light crude and other items—in particular, for its Thermal and other plants. Hence, this will contribute substantially to the ongoing resolution of nation's power problems.

REVENUE MOBILIZATION AND ADMINISTRATION
85. Mr. Speaker, we have made significant progress in revenue mobilization and administration. At the same time the tax effort continues to be constrained by a number of factors including the high tax exemptions regime, collection leakages, low compliance, inadequate taxpayer information, and weak linkages among public agencies. Mr. Speaker, in our effort to address these challenges, Government introduced a number of tax policy initiatives that include the following:

86. Review of Tax Laws: Mr. Speaker, the following tax laws have been significantly improved, rationalized and harmonized: a) Value Added Tax Act 2013 (Act 870); b) Customs Act 2015 (Act 891); Excise Duty Act 2014 (Act 878); Excise Tax Stamp Act 2013 (Act 873); and Income Tax Act 2015 (Act 896). We are grateful to the House for the success of these enactments—of laws that were too old for effective tax administration and compliance. Indeed, the Regulations for the Value Added Tax Act, the Excise Duty Act and the Income Tax Act have been laid in this House, while the Customs Regulations will be laid soon.

87. Revenue Administration Bill: Mr. Speaker, the administrative provisions that existed separately in each of the old tax laws have also been harmonized into a single Revenue Administration Bill. This forms part of the efforts at integration, notably between the previous VAT and Internal Revenue Services, as well as improve tax administration and compliance. We are grateful to this August House for passing the Bill which is being prepared for Presidential Assent.

88. National Single Window (NSW): Mr. Speaker, the National Single Window Project was introduced in September 2015 to (a) reduce the time and cost of Customs clearance and, in general, that of doing business in the country; (b) put all customs operations notably classification, valuation and inspection under the GRA; and (c) improve Government revenues through the harmonization and simplification of international trade processes and procedures.

89. Mr. Speaker, the success of the first phase has greatly facilitated information flow by simplifying and integrating processes among different agencies. Importers who submit compliant information receive their Customs Classification Verification Reports within 48 hours and in some cases within 2 ho, compared to average two weeks in the past.

90. The second phase comprises need and gap analysis as well as development of blue print for the implementation of the Ghana National Single Window (GNSW). It was launched in December 2015 and has also been completed. The third phase involves the roll out of the blue print and will focus on the integration and interfacing of all services related to customs clearance. A GNSW Strategic Plan has also been launched to guide implementation and is expected to reduce the cost of doing business in the economy.

91. Common External Tariff: As part of measures to promote free trade and ensure greater economic integration within the ECOWAS region, the CET Law was passed by this august House in December last year and became effective in February 2016. Hence Ghana joins eight (8) ECOWAS countries in implementing the CET.

The expectation is that CET will help address problems with cross-border smuggling, combat dumping, and bring economic benefits to the sub-region. The Ministry and GRA management continue to monitor implementation of the CET to ensure sensitive sectors are not disadvantaged.

Review of Tax Exemptions
92. Mr. Speaker, despite the important role of tax incentives in creating an enabling investment climate, the existing system, which average around 2 percent of GDP, is fraught with abuses and denies Government of revenues. Measures being implemented to reduce the adverse impact of exemptions include: (a) limiting the use of 'permits' to clear goods from our ports; (b) improving coordination between MoF and GIPC, which involve further review of laws; (c) Reviewing the free zones regime following recent amendments; (d) revalidating existing exemption documents; and (f) improving VAT Refund and warehousing processes, including use of electronic processes.

EXPENDITURE MANAGEMENT
93. Mr. Speaker, in addition to the focus on domestic resource mobilization, Government has started implementing several public expenditure initiatives and reforms to address significant and unsustainable budget overruns. They are related to the Single Spine Pay Policy (SSPP) and other anomalies in payroll; non-wage arrears; interest payments; and subsidies on petroleum products and utilities.

The other Public Financial Management (PFM) or Ghana Integrated Financial Management Information System (GIFMIS) reforms include the launch of an electronic Human Resource Management Information System (HRMIS) and streamlining of the government's financial accounting and budget processes.

94. GIFMIS (Budget and Accounting Reforms): Government launched its ambitious PFM reforms to manage the budget estimates and actual expenditures more efficiently. Some key elements include:

95. Some benefits of the GIFMIS system are that the Ministry of Finance has eliminated the use of “paper releases” in processing

expenditures; it is in the process of establishing electronic controls to prevent MDA/MMDAs from exceeding their budget allocations; and CAGD is now able to validate payroll electronically at the management unit to prevent fraud such as inserting “ghost names” for processing.

96. Improvements in the Cash
—that constitute the Consolidated and, where relevant, other public funds—into one account. It will prevent these funds remaining dormant or idle while Government borrows (sometimes its own funds) to finance the budget. So far, about 11,500 bank accounts have been identified, out of which, 5,500 were at BoG while 6,000 were at commercial bn

risk of carrying bulk cash as well as improve record keeping for imprests. The e-Fuel Card is currently being piloted with MoF and CAGD official vehicles. When fully rolled-out to all MDAs and MMDAs, it will help ensure effective administration and management of fuel allocation to Government officials.

97. Improvements in Public Sector Compensation: Mr. Speaker, we have been implementing several measures to make management of Compensation, comprising wages and salaries, allowances and pensions more efficient. This is important because the amount paid to public servants and retirees is the largest of our budget expenditures. The measures include the following:

The purpose is better management of the public sector payroll, not control of human resources in these agencies. Four out of 19 subvented organizations were migrated as at the end of 2015 and plans are far-advanced to interface or integrate the payroll modules and processes for the remaining 15 with the IPPD. ' existence periodically and will constitute another useful step in eliminating ghost workers.

98. Alignment of Statutory Fund Expenditures and Weaning-off Subvented Agencies: Government's plan to realign expenditures to the Statutory Funds and Internally-Generated Funds (IGFs) in the 2016 budget remains on course. Some expenditure items which are in line with the objectives for setting up the statutory funds have been offloaded to the Funds. Government will continue to engage the fund and, in the next few years, streamline the policy for the consideration of Cabinet and Parliament.

99. Similarly, to gradually reduce the dependence of some subvented organizations on GOG, the Driver and Vehicle Licensing Authority (DVLA); Environmental Protection Agency; Energy Commission; Data Protection Commission; Gaming Commission; and Securities and Exchange Commission are being gradually weaned-off Government subvention. Given the progress made Government will now focus on weaning-off the remaining 6 agencies, as planned for 2016.

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