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19.02.2009 Business & Finance

Presidency would not constitute burden on taxpayer - Mills

Presidency would not constitute burden on taxpayer - Mills

President John Atta Mills on Thursday said his Administration was making sure the Presidency would not constitute an undue burden on the Ghanaian taxpayer.

In his maiden State of the Nation Address, dubbed: “Rescue Plan for a Better Ghana,” to Parliament in Accra, President Mills announced that he would impose austerity measures throughout Government machinery to ensure to the nation realized savings.

“As part of these measures we will review the decision to purchase two executive Presidential aircraft. Ghana can simply not afford the expenditure at this time and we certainly do not need two Presidential Jets,” the President said, adding, “this is the beginning of the rescue plan for building a better Ghana.”

President Mills' speech to the 228-member parliament, which was in fulfilment of requirements of Ghana's Constitution, reiterated national unity and consensus building among Members of the present Parliament to propel the nation's development agenda.

The President said Government was working on a number of measures and the Finance Minister would announce measures aimed at achieving macro-economic stability in the budget statement to be presented shortly.

The measures would include reducing State Protocol budget by half, reducing official foreign travel budget by half, reducing official seminars and workshops budget by half, close monitoring of targets and dividends of state-owned companies and enterprises, reviewing the exemptions regime and increasing efficiency in revenue collection.

President Mills said the financial meltdown had defied logic and economic rationality and things fell apart, institutions of global economies and financial management had come under enormous stress such that gravity of the crises that no nation could traverse these hard times alone.

No one person or government could be could be blamed for causing global financial crisis and the world needed a radical re-thinking of the rules, institutions and processes for global, social and economic management.

For the developing world, the initial impact has been volatility in commodity prices, reductions in foreign aid and in remittance flows from citizens working abroad who have lost their jobs. There is imminent danger of substantial reduction in economic growth.

President Mills said while the exact impact of these changes the economies of developing countries were yet to be determined, it must be understood that the world had changed beyond recognition and Ghana could not and should not bank on previous arrangements, such as the generosity of donors for its survival.

The President said over the last one month of assuming office, an economic management team had been reviewing Ghana's financial situation thoroughly and the reality as it had been found out called into question the previous assertion that Ghana was doing well in spite of the global economic crisis.

He highlighted the fundamentals of the nation's current economic status and predicament as fiscal deficit of GH¢ 2.5 Billion in 2008, a figure which was over 15% of Gross Domestic Product.

The external deficit or balance of payments for 2008 is estimated at GH¢3.42 billion or 18% of GDP; which meant that Ghana owed its foreign creditors far more than was fiscally prudent for an erstwhile HIPC country.

The rate of inflation accelerated from 12.7 per cent at the end of 2007, to 18.1 per cent at the end of December 2008.

Also, in a space of two years - between 2006 and 2008 - our stock of external debt increased from US$2.2 billion to US$3.9 billion and this contributed to an increase in the overall national debt to US$7.6 billion in 2008, from US$5.3 billion in 2006. This, he said, was in spite of the over US$5.0 billion debt write off enjoyed by the nation from 2001.

Also, over the last few months the cedi had lost substantial value with respect to the US dollar which is attributed to the delayed effect of excessive spending and trade imbalances experienced since 2006.

“We have used up foreign exchange resources which have accrued from various debt relief arrangements to shore up the value of the cedi.

“In recent months as the foreign exchange inflows have dried up the cedi has come under enormous pressure. Indeed, the decline in the value of the cedi is negating benefits which could otherwise have accrued from low world crude oil prices.”

The President said Government had resolved to achieve an early restoration of stability in the foreign exchange market, which required that the nation expanded its exports, cut down on import bill and managed its finances carefully and lived within our means.

“Honourable members must join me in managing this period of economic difficulty. I assure you that we shall all benefit when the good times come, as they surely will. I am optimistic that the burden of sacrifice, if properly shared, will result in great opportunities and progress for the people of this country. I am committed to bringing the fiscal excesses under control. Without it, this country cannot pursue the aim of creating prosperity for our people.”

President Mills announced that Government was negotiating the single spine wages and salaries regime, and commended organized labour for calling for broader consultation on the implementation of the single spine salary structure.

On private sector development, the President said Government saw the private sector as partner in development and wanted that partnership to be built on a shared responsibility where Government provided the conditions necessary for private sector growth and where the private sector became a pro-active partner in development.

He pledged to build a robust economy and address the challenges which the private sector faced in investing, growing and expanding.

In view of the breadth of the challenges, the President said Government intended to build on the multi-sectoral strategic framework for the development of the private sector which should provide the vehicle for driving and delivering the changes so urgently required in making Ghana's private sector locally and globally competitive.

“Given the urgency of this, the private sector development agenda will be driven and monitored at the heart of Government business at the Presidency. This is a promise I made to the private sector and the Government will translate it into action,” the President said.