Budget targets growth after seven-year stability

The government has announced a number of far-reaching measures to accelerate growth and ensure stability of the economy.

The measures, outlined in the 2008 Budget and Government Economic Policy Statement, dubbed, "A Good and Brighter Future", include enhancing agricultural financing, a national transportation policy, policies to promote alternative energy sources, improving the regulatory structures for doing business and the establishment of a school feeding fund.

Others include a stabilisation fund, initiatives to develop the market for long term borrowing (bonds market), promoting financial literacy, deepening the insurance industry to do long-term investments, as well as the implementation of the biometric smart card project to facilitate the inclusion of the informal sector in the financial system.

The Minister of Finance and Economic Planning, Mr Kwadwo Baah-Wiredu, who announced these measures in the 2008 Budget to Parliament Thursday, said the stabilisation fund would serve as a cushion for external shocks.

For instance, he said, had such a fund been in place in previous years, the rising energy crisis would have had little impact on the economy, as the fund would have helped to mitigate the effects of expenditure not budgeted for during such surprises.

Mr Baah-Wiredu explained that "the fund will be invested to ensure protection, as well as its growth".

He said the school feeding fund would take its proceeds from the National Lotteries Authority, as well as funds from donor sources under the Multilateral Debt Relief Initiative (MDRI).

The Finance Minister also announced the abolition of import duty and import VAT on all mobile phones to be replaced by an excise tax on mobile phone airtime, which he described as "a more effective means of taxing mobile phone usage".

"Consequently, the government proposes to impose a specific excise duty per minute of airtime use," he stated.

It is on record that a lot of mobile phones enter the country without duties being paid on them, as importers declare and disguise them as accessories.

The move is therefore, expected to go a long way to bring in a lot of revenue lost through tax evasion.

To ensure that the country's oil find is a 'blessing' and not a 'curse', the government would set up an oil task force to examine the social and economic implications of the country becoming an oil-producing country and make recommendations to the government, the minister said.

"This is to ensure that the oil revenue will be used for economic diversification for the benefit of all Ghanaians and minimise the potential social and economic dislocations associated with oil wealth," MrBaah-Wiredu said.

Following the recent flooding in northern Ghana and the prolonged gap in development between the northern part of the country and the south the government would introduce a medium to long-term development strategy next year to transform the economy and society of northern Ghana, he said.

With seed money of GH¢25 million, the government would set up the Northern Ghana Development Fund, into which development partners would be encouraged to contribute, Mr Baah-Wiredu stated.

According to the budget statement, the strategy would harness the competitive advantages of the northern sector in food production and add value to agro-processing to boost private sector confidence and improve the incomes and general living conditions of the people in the north.

To enhance the financing of agriculture, which had been dwindling in recent times, the government would introduce a number of measures, including tax incentives, to encourage financial institutions to increase credit to the sector and also reduce the interest rate from the current average of five to 10 per cent.

The incentives would also aim at encouraging the financial institutions to lengthen the term maturities of credit to agriculture from five to 10 years.

There would also be the establishment of the Agricultural Investment Fund and/or the Farm Credit Corporation to provide a variety of services, including working capital financing, term loans, insurance and leasing with full focus on the agricultural sector, the finance minister stated.

The targeted real Gross Domestic Product (GDP) of 7.0 per cent in 2008 is to be propelled by an average of 5.0 per cent growth in agriculture, which normally accounts for 35 per cent of growth and employs about 60 per cent of the population.

The GDP growth is also expected to be powered by a 9.2 per cent growth in industry and a 7.3 per cent growth in services.

To further deepen the bonds (long-term borrowing) market, the minister announced the issue of a 10-year domestic bond next year.

The nation recently raised $750 million from the international capital market through a sovereign bond issue.

With the Insurance Act passed last year, the finance minister said further policy initiatives would be implemented next year to encourage life insurance companies to engage in long-term investments in areas such as real estate and mortgage industries.

The fair wages and salaries reform process, which started this year, would continue well into next year, with the Fair Wages and Salaries Commission beginning consultations with key stakeholders and also educating public sector workers, employers' associations and organised labour on its recommendations.

Mr Baah-Wiredu said that would facilitate the implementation of the new conditions of service, including pay policy, saying, "The government will ensure that the real income of workers is protected."

To encourage the public to take up interest in issues of finance, the government again would trigger a financial literacy campaign to raise awareness of the range of products and services in the economy and also help people to better manage their financial resources.

"The proposed Financial Literacy Week will be a co-operative effort of the Ministry of Finance and Economic Planning, regulatory agencies, industrial associations and consumer groups," he stated.