Right Honourable Speaker, Honourable Members of Parliament, on the authority of His Excellency, President Nana Addo Dankwa Akufo-Addo, I beg to move that this august House approve the Mid-Year Fiscal Policy Review of the Budget Statement and Economic Policy of the Government of Ghana for the 2021 Financial Year, which I present today, 29th July 2021.
Mr. Speaker, I am performing this function in fulfilment of section 28 of the Public Financial Management Act, 2016 (Act 921).
Mr. Speaker, this statement is an abridged version of the Mid-Year Fiscal Policy Review of the Budget Statement and Economic Policy of the Government of Ghana for the 2021 Financial Year. I respectfully request that the entire Mid-Year Fiscal Policy Review of the 2021 Budget is captured in the Hansard.
Mr. Speaker, in December 2020, the people of Ghana renewed their confidence in the President for another four-year term. Let me take this opportunity to thank His Excellency the President for the confidence he retains in the Ministry of Finance Team, and for the privilege and opportunity to continue in this national service of managing the economy and our public finances for another four years. I also wish to extend my deepest gratitude to Hon. Osei Kyei-Mensah-Bonsu for the outstanding delivery of the 2021 Budget Statement and Economic Policy of Government in March.
Mr. Speaker, I want to personally thank you for your noble and wise leadership over this unique composition of this 8th Parliament and to assure you that Government will continue to work with you and this House to deliver on the priority needs of the people.
Again, permit me to express my heartfelt gratitude to this august House for your patience and forbearance in postponing my vetting and subsequent approval, giving me time to recuperate. I recognise the historic nature of this second term, and as indicated at my vetting, I commit to ensuring the protection of the public purse and the transformation of the economy.
Mr. Speaker, it is my hope that the spirit of partnership that guided our work with the previous Parliament will continue to define our collaboration over this second term for the collective good of the nation.
Mr. Speaker, it is difficult to attempt to normalise the catastrophe that has befallen the world. The devastating impact of the COVID-19 pandemic on lives and the global economy is widely acknowledged. The grim statistics are that over 196 million people have been infected by the virus, 4.19 million dead, and over US$15 trillion spent. In Ghana, we join in mourning with the 823 families who have lost loved ones and pray for the recovery of those afflicted.
The COVID-19 induced global recession has been the deepest since the end of World War II, 76 years ago. The global economy contracted by 3.3 percent in 2020, a 6.7 percent decline relative to the 3.4 percent growth forecast by the IMF back in October 2019. Growth in Sub-Saharan Africa was -1.9 percent.
From the very first day that the novel coronavirus arrived here in Ghana in March 2020, the Government of President Nana Addo Dankwa Akufo-Addo recognised the dire consequences that it would have on our economy, particularly on jobs, and on our ability to raise revenues to meet both the cost of managing the pandemic and Government’s regular spending obligations. If I may quote from the President’s address on 27th March, 2020, where he underlined the challenge and the approach:
? “Should the virus continue to linger for the rest of the year, the effects on our economy would be dire. However, as we have demonstrated over the course of the last three years, where we inherited an economy that was growing at 3.4% and transformed it into one which has grown by an average of 7% over the last three (3) years, I assure you that we know what to do to bring back our economy back to life. What we do not know how to do is to bring people back to life. We will, therefore, protect people’s lives, then their livelihoods.”
Mr. Speaker, therefore, the hardships that COVID-19 pandemic visited on people’s lives, the stress on parents, the frustrations of young people, the negative impact on businesses, for both employers and employees, the worsening of the unemployment situation, the effect on the public debt and the stress on revenue mobilization, was unprecedented but expected. Indeed, no country in the world had prepared for the crisis that unfolded.
Leadership, was, therefore, assessed by the measures that individual countries and their respective leaders took to deal with the crisis. Here in Ghana, we took responsible, innovative, decisive and bold actions to tackle the crisis.
That is why, a year ago, on Thursday, 23rd July, 2020, I came before this House to present what I called “an extraordinary Mid-Year Fiscal Policy Review of the 2020 Budget Statement and Economic Policy”, and secured more funds to provide an immediate and appropriate response to the severe economic impact of the pandemic.
In addition, the 2021 Expenditure-in-Advance-of-Appropriation presented to this House on 28th October, 2020, saw to the uninterrupted delivery of Government business in the first quarter of this year; and, the on-going implementation of the 2021 Budget and Economic Policy of Friday, 12th March, is driving the revitalising the economy in line with our theme of Completion, Consolidation and Continuity.
With these approvals, we intervened with timely measures to help, particularly, households, schools, hospitals and businesses withstand the impact of the pandemic. Government provided direct transfers to households through food distribution and absorption of water and electricity bills. Tax waivers to frontline health workers and stimulus packages to small and medium-scale enterprises were also provided.
Mr. Speaker, these interventions stabilised the situation, protected lives, supported businesses and preserved jobs which would otherwise have been lost. In fact, although the workload from the public sector had to be reduced in many cases, all through this COVID crisis, Government has never once embarked on any programme of laying off workers. Rather, we have continued to pay all workers and even proceeded to employ more in some critical areas such as Security and Health services.
Mr. Speaker, let me use this opportunity to thank Organised Labour and Employers for their role in concluding wage negotiation with Government in May. The negotiations were marked by a shared understanding of the state of the economy, that we cannot share what we do not have; a collective will to improve productivity, raise more revenue and ensure decent wages in the years to come.
Mr. Speaker, as a result of our competent management of the crisis situation, Ghana’s economy has outperformed its peers, recovering faster. After recording negative growth in the second and third quarters of 2020, the economy rebounded strongly in the last quarter of the year, continuing well into the first quarter of 2021.
The Ghana Statistical Service reports that overall GDP growth for first quarter 2021 was 3.1 percent. The growth was even better excluding oil at 4.6 percent. The Bank of Ghana Composite Index of Economic Activity (CIEA) attests to the strong growth recovery, with the index growing at 33.1 percent at the end of May 2021 compared to a contraction of 10.23 percent at the end of May 2020.
Mr. Speaker, on inflation, we are witnessing one of the lowest numbers on record in about two years. Inflation, which, at the height of the pandemic, hovered around 11.8 percent, dropped to 7.5 percent in May 2021 before inching up slightly to 7.8 percent in June. The Bank of Ghana will continue to implement appropriate monetary policy to maintain inflation rate within the target of 8+-2 percent.
The cedi has been relatively stable in the past four years, and maintained its stability even in this pandemic year. For the first time in the Fourth Republic, the exchange rate did not see a spike after an election year.
Cumulatively, from the beginning of the year to date, the exchange rate has depreciated by 0.6 percent against the US Dollar and appreciating by 3.6 percent against the Euro. This stability is expected to continue as we move towards the close of the year.
The relatively strong performance of the external sector led to an increase in the reserves position to US$11.0 billion, equivalent to 5.0 months of imports, one of the highest on record. This compares well with a reserved position of US$9.2 billion, equivalent to 4.3 months imports cover, in the corresponding period last year.
Mr. Speaker, we are managing the finances of the country with discipline and competence. The fiscal operations for the period January to June 2021 indicate that the overall budget deficit was GH¢22.32 billion, equivalent to 5.1 percent of GDP.
The corresponding primary balance for the period was a deficit of GH¢7.3 billion, equivalent to 1.7 percent of GDP, against a target deficit of GH¢4,797 or 1.1% of GDP. 23. We will continue to pursue our fiscal consolidation agenda to ensure that we remain within the appropriation given by this House.
Mr. Speaker, I would like to note that notwithstanding our elevated debt levels as a result of COVID-19, our inflation rate is lower than it was in 2016, our interest rates are lower than they were in 2016, our exchange rate is more stable than it was in 2016, our foreign exchange reserves are much higher than they were in 2016, and we did not have to lay off any workers, nor cancel teacher and nursing training allowance.
Furthermore, we did not go to the IMF for a bailout programme, neither have we built an interchange for the price of three. This is because we have managed the economy much better than it was managed up to 2016. Let us not forget.
On the back of these and other deliberate policies, our country has attracted more foreign direct investments in the midst of the pandemic. As of end-June 2021, total FDI into the country was valued at US$954.2 million, indicating an increase of 71.2 percent from US$ 557.2 million recorded over the same period last year.
Mr. Speaker, the strong rebound in growth, the low inflation rates, the stable currency, the strong reserve position and FDI flows are clear indicators of economic recovery. Indeed, the strategic investments we collectively made in building strong economic fundamentals in the three years prior to this pandemic as well as the subsequent speed, scope and scale of our socio-economic response to the pandemic is fueling our recovery.
Mr. Speaker, I stand before this august House today to assure the nation that our transformation agenda is very much on course. However, with COVID-19 still with us, it is important to stress that this recovery is only the beginning; a beginning that requires our collective sense of responsibility and action as citizens to guide, protect and participate in the recovery efforts.
Mr. Speaker, this Mid-Year Fiscal Policy Review that I am presenting does not come with a supplementary budget, and our revised fiscal framework for 2021 is kept within the fiscal target of 9.5 percent of GDP. We are staying within the 2021 Appropriation.
Respectfully, Mr. Speaker, let me repeat. I am not here today to ask for more money. I have not come to ask for more taxes. I have come to update the House on the performance of the economy for the first halfyear of 2021 and our plans for the unexpired term of the year, consistent with section 28 of the PFM Act.
One of the serious impacts of the COVID-19 pandemic has been the loss of jobs, which has exacerbated the unemployment problem, particularly among the youth. As such, Government is ready with a comprehensive programme to tackle this intractable problem. The goal is to create employment opportunities for a million of our young people over the next two and a half years by igniting a high spirit of entrepreneurship. We will count on the support of this august House.
Our focus on taxes is to collect what is due the Republic. To this end, we are building a robust framework to expand Domestic Revenue Mobilisation to focus on compliance and enforcement nationwide. We have established the Revenue Assurance and Compliance Enforcement (RACE). The remit of RACE is to identify and eliminate revenue leakages in areas such as petroleum bunkering, gold and minerals export, port operations, transit goods, warehousing, border controls and free zones operations, to name but a few.
Mr. Speaker, I will now present an assessment of the programmes we have and continue to implement in line with our strategy for Completion, Consolidation and Continuity which is the theme for the 2021 Budget and Economic Policy. These programmes address the concerns of our fellow Ghanaians, especially our youth and demonstrate our commitment to create sustainable and inclusive opportunities for all.
Mr. Speaker, in fulfilment of our Completion pledge, we have completed a number of projects and activities including but not limited to:
the four-tier interchange at Pokuase, the first of its kind in West
Africa, to ease travel constraints and enhance our productivity;
the 85-bed Central Gonja District Hospital, located in Buipe, to improve access to quality healthcare;
key strategic factories to provide jobs and accelerate our industrialisation agenda, including the:
new factory of Premium Foods Limited, at Ejisu in the Ashanti Region, one of the leading agribusinesses in Ghana;
Nano Foods Limited, a pineapple juice processing factory at Nsawam;
Phase I of B5 Plus steel plant in Larpleku in Ningo-Prampram, which when fully completed will become the biggest steel factory in West Africa;
Toyota Tsusho Vehicle Assembly Plant, in Tema;
successfully securing the removal of Ghana from the Financial Action Task Force (FATF) grey-list which has enhanced access to global markets and finance for our businesses; and
the signing of seven (7) Implementation Compacts under the Ghana CARES ‘Obaatanpa’ programme (GhanaCARES).
Mr. Speaker, towards Consolidating the gains made, we have, amongst others:
pursued prudent macro-fiscal policies that puts us back on track to restore economic stability and growth;
fostered a resilient financial ecosystem, under GhanaCARES, by establishing the building blocks for stronger and catalytic collaboration between institutions such as Ghana Incentive-based and Risk Sharing Scheme for Agricultural Lending (GIRSAL), Ghana Commodity Exchange (GCX), Venture Capital Trust Fund (VCTF) and the restructured Ghana Enterprises Agency (formerly NBSSI) to anchor a new age of entrepreneurship, job creation and wealth building for our post-COVID transformation;
issued the historic foreign currency-denominated zero-coupon bond in our financing mix, thus creating the fiscal space to build our financial resilience; and
revamped the energy sector to further stabilise electricity supply for households and businesses.
Mr. Speaker, our pledge on Continuity has also driven us to:
Continue to implement the Phase II of the GhanaCARES ‘Obaatanpa’ programme to revitalise our economy, after a successful execution of the Stabilisation measures in Phase I;
continue to implement our key flagship programmes, including Free SHS, PFJ, 1D1F among others to enhance the quality of life of our people and further advance our transformation agenda;
continued our Environmental Agenda by embarking on a war against illegal mining (galamsey) to preserve our water bodies and protect the environment; and
continue Government’s historic partnership with Labour and Employers, and also with the Faith-based organisations.
Mr. Speaker, in addition to the above, we have continued to provide the needed resources, equipment and personnel to maintain security and peace within our borders. We are on course to transform the security services to enable them to adequately respond to emerging national and sub-regional threats.
In line with Government’s agenda to enhance our global stature, Ghana placed a bid and was elected as a non- permanent member of the United Nations Security Council for the 2022-2023 term.
Additionally, H.E. The President was also elected unanimously for a second term as Chairman of the Authority of Heads of State and Government of the Economic Community of West African States (ECOWAS). President Akufoaddo remains Co-Chair of the United Nation's (UN) Sustainable Development Goals (SDG) Advocate group, with Norway's prime minister, Erna Solberg. He is also the AU Champion for both Financial Institutions and Gender Affairs.
As a result of the increased international visibility and the exemplary leadership of the President during this pandemic, Government has been able to procure and administer 1,271,393 doses of COVID-19 vaccines. While 865,422 people have received the first dose, 405,971 have been fully vaccinated, as at the end of June this year.
Mr. Speaker, our diplomatic efforts are yielding results and we are expecting to receive, through the COVAX facility, 1.2 million Pfizer vaccines from the United States of America and 249,600 AstraZeneca vaccines from the United Kingdom. In addition, Government has committed itself to purchase, through the African Medicine Supply Platform, 17 million Johnson & Johnson single dose vaccines. Furthermore, the President has set up a committee dedicated to facilitating our domestic capacity to manufacture COVID-19 vaccines, beginning with the process of fill and finish.
Mr. Speaker, on the economic front, the additional policies and strategies outlined in the Gh¢100 billion GhanaCARES ‘Obaatanpa’
Programme will be vital in our journey towards economic recovery and transformation. Our strategy to place the private sector at the heart of this endeavour is to accelerate competitive import substitution and export expansion to generate sustainable jobs for our teeming youth (under 35 years), who make up about 71% of the population.
Mr. Speaker, the unemployment situation in our country has been exacerbated by the COVID-19 pandemic. This is a situation which we will confront aggressively. Indeed, it is an issue that will be at the forefront of our national discourse. The future of our young people and their livelihoods are of utmost importance to us as a nation.
It requires urgent action and the President has directed that we consolidate and implement new programmes and projects to address it. It is crucial to our destiny.
Mr. Speaker, over the course of this year, like many of my colleagues in Government and in this House, I have travelled around the country, engaged with the people, especially young people. We have listened to them and heard their concerns. Eight (8) weeks ago, I visited Tamale and Sunyani and interacted with thousands of our young people, drawn from various universities and tertiary institutions as part of the “Springboard Foundation” programme. I also participated in both the Accra “Springboard” and NUGS Annual Leadership Training programmes.
These interactions provided me with yet another opportunity to experience at first hand, the expectations and aspirations of our young people. Our responsibility as Government is to accelerate our response.
In connection with that, I have had extensive discussions with my colleague Ministers of Employment & Labour Relations, Youth & Sports and Lands & Natural Resources. New programmes will be introduced and existing ones scaled-up and refocused to meet the aspirations of our youth.
We will work together to sensitise and connect the youth to the numerous opportunities being made available by Government, including the strategy to create job and business opportunities for 1 million Ghanaian youth by 2024. So far, we have developed five new programmes, including YouBanC.
Mr. Speaker, the good people of Ghana have given us another fouryear mandate to manage the country, mitigate the impact of COVID-19 and pursue our transformation agenda of equal opportunities and prosperity for all. We are in the 7th month of the journey and executing the mandate with diligence, integrity and faith and we determined to overcome the challenges that confront the nation.
Let us join hands to build a more inclusive, confident and hopeful society. COVID-19 has caused enough havoc, but we are resilient and confident people and should not allow ourselves to be defeated by the negatives.
As 2 Timothy 1:7 tells us, that God has not given us the spirit of fear: but of power and of love and a sound mind”, we should have courage, hope, and resolve to work hard and expect that the Almighty God whom most of us believe and serve will look kindly on us and bless the work of our hands.
Mr. Speaker, I now proceed to give details of developments for the first half-year of 2021 and will conclude with the outlook for the rest of the year.
GLOBAL GROWTH
Mr. Speaker, since the presentation of the 2021 Budget to this august House in March this year, global growth recovery has generally strengthened, supported by the ongoing mass vaccinations and the general relaxation of Covid-19 restrictions as well as continued policy support.
However, the emergence of new Covid-19 variants and potentially third waves in parts of the world, as well as disruptions of the vaccination efforts across Emerging Market and Developing Economies, is creating some uncertainty and threatening to undermine global recovery efforts. Economic recovery in most Emerging Markets and Developing Economies is expected to slow down, mainly due to continuous non-availability of vaccines.
DOMESTIC MACROECONOMIC PERFORMANCE FOR 2021
52. Mr. Speaker, to put the assessment of the performance of the economy for the first half of 2021 in perspective, permit me to re-state the macroeconomic targets set for 2021 as presented in the 2021 Budget as follows:
Overall real GDP growth of at least 5.0 percent;
Non-Oil real GDP growth of at least 6.7 percent;
End-period inflation of 8.0 percent;
Fiscal deficit of 9.5 percent of GDP;
Primary deficit of 1.3 percent of GDP; and
Gross International Reserves to cover not less than 4.0 months of imports of goods and services.
Summary of macroeconomic performance
53. Mr. Speaker, even though the second quarter 2021 Gross Domestic Product (GDP) data is yet to be released by the Ghana Statistical Service, provisional data for the first quarter 2021 showed that, the recovery process from the Covid-19 pandemic is gaining some momentum and the targets for most of the macroeconomic indicators are largely on track.
Fiscal developments
Mr. Speaker, I now present highlights of the 2021 half-year fiscal performance. The implementation of the 2021 Budget has been successful so far. We remain fully committed to achieving the fiscal deficit target of 9.5 percent of GDP for the year in order not to derail from the objective of returning to the Fiscal Responsibility Act (FRA) fiscal deficit and primary balance thresholds of 5 percent of GDP and positive primary balance, respectively, by 2024.
Mr. Speaker, the provisional fiscal data for Jan-June 2021 show that Total Revenue and Grants amounted to GH¢28.3billion, equivalent to 6.5 percent of GDP, against a programmed target of GH¢32.4billion or 7.5 percent of GDP. For the same period, Total Expenditure, including the clearance of arrears, amounted to GH¢50.6billion, equivalent to 11.7 percent of GDP, against a programmed target of GH¢55.1billion or 12.7 percent of GDP.
Mr. Speaker, the fiscal deficit for the period was financed from both foreign and domestic sources. Net Foreign Financing of GH¢15.2billion constituted 68.3 percent of the total financing and included inflows from Eurobond proceeds. On the other hand, Total Domestic Financing amounted to GH¢7.1billion, representing 31.7 percent of total financing.
Public debt development
Mr. Speaker, the total public debt stock, as a percentage of GDP, increased from 76.1 percent at the end of December 2020 to 77.1 percent of GDP at the end of June 2021. This stock includes the financial and energy sector bailouts.
Excluding the Financial Sector Bailout, the nominal debt stock as percentage of GDP is 72.9 percent. The increase in the debt stock was mainly because of the Eurobond issuance in April 2021, COVID19 pandemic effect, contingent liabilities, and front-loading of financing to meet cash flow requirements for the first half of the year.
COVID-19 IMPACT AND MITIGATING MEASURES
Health Impact
58. Mr. Speaker, the loss of human capital as a result of COVID-19 continues to be devastating. The reported steady decline in weekly average infections which stood at 379 by the week of 5th March, 2021 was sustained to 60 cases by the week of 20th June, 2021. Since then, however, the detection and spread of the delta variant has largely driven up reported cases. As of 25th July, 2021, overall COVID-19 infections since the first confirmed case on 12th March, 2020 has reached 103,019. There are currently 4,983 active cases; 97,213 recoveries and against all efforts, 823 persons have died due to COVID-19 over the same period.
Economic impact of the pandemic
Mr. Speaker, improving regional and global supply chains and rising demands led to total exports reaching US$2.5 billion in the first two months of 2021. By June, this had significantly increased to US$7.6 billion.
In addition, the COVID-19-related regulatory reliefs and policy measures introduced by the Bank of Ghana continued to promote bank lending activities.
From the beginning of the year to June 2021, new advances reached GH¢16.0 billion, marginally above the advances of GH¢15.8 billion during the same period in 2020. It is expected that as economic activities rebound and lending rates drop further, private sector credit will pick up.
Mr. Speaker, proactive and pragmatic policies have ensured that the tourism and hospitality industry which had perhaps endured its most difficult year in 2020 is on a rebound. Tourist arrivals into the country as at the end of 2020 was about 370,000, as against a revised target of 400,000 for 2020. With the re-opening of the Kotoka International Airport in September 2020, arrivals at the end of the second quarter of 2021 were 231,000, representing 65 percent of the full year arrivals in 2020.
Mr. Speaker, there are also other positive trends from this pandemic, as digital technology is assuming a more significant role in the operations of businesses. Almost 9 out of 10 firms are now leveraging digital platforms to market their products. Similarly, mobile money, door-to-door delivery via courier services and internet usage for business operations also increased by 77 per cent.
Updates on Government’s Mitigating Measures to the Pandemic
Health-related Measures
Mr. Speaker, since the onset of the Read Full Story
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