Ken Ofori Atta
Ken Ofori Atta

Following is the full text of 2020 Budget Statement and Economic Policy, under the theme, “Consolidating the Gains for Growth, Jobs and Prosperity for All”, which was presented to Parliament by Finance Minister Ken Ofori-Atta on Wednesday, on the authority of the President.

INTRODUCTION
1. “Right Honourable Speaker, Honourable Members of Parliament, on the authority of His Excellency the President Nana Addo Dankwa Akufo-Addo, I beg to move that this august House approves the Financial Policy of the Government of Ghana for the year ending 31st December, 2020.

2. Mr. Speaker, on the authority of His Excellency the President, and in keeping with the requirement of Article 179 of the 1992 Constitution of the Republic of Ghana, and Section 21(3) of the PFM Act 2016 (ACT 921), may I respectfully present the Budget Statement and Economic Policies of Government for 2020 to this Honourable House.

3. I also submit before this august House, the 2019 Annual Report on the Petroleum Funds, in accordance with Section 48 of the Petroleum Revenue Management Act, 2011 (Act 815), as amended, and a Report on the African Union 0.2 percent Import Levy.

4. Mr. Speaker, in substance, 2019 has been a very good year for Ghana. This is the year that one can confidently say that God’s blessing of the hard work is beginning to manifest, putting us on a positive trajectory for a proper lift. I say so because:

• We have won some painful but necessary battles for God and country;
• We have quietly but incontestably achieved significant structural changes for the economy;
• We have stabilized greatly the macro-economic turbulence that was all too regular a feature in the management of the national economy;
• We have delivered on our flagship programmes;
• Mr Speaker, the gains made so far are significant.

5. It is proper to put this budget into perspective to understand how far we have come. On Thursday, 2nd March 2017, I had the honour and privilege to present the first budget of President Akufo-Addo to this House. At that time, as you may recall, the economy was in a very bad shape, suffocating under a mixed weight of debts, arrears, very high cost of living, high youth unemployment and the worst growth rate since 1994. Moreover:
• Growth in agriculture was declining;
• Industry growth was in the negative;
• Interest rates were high;
• The banking system was weak;
• Unemployment was rising; and
• Businesses and households were working mainly to pay off their utility bills.

6. Mr. Speaker, this poor state of public finances, weak policy implementation and lack of policy credibility resulted in Ghana requesting an IMF bailout in August 2014. The economic model being practised at the time was a simple, unexamined formula of tax, borrow and spend without a focus on production.

The previous government resorted to some draconian fiscal measures; notably the increase in the tax burden on many items and activities, including condoms, cutlasses as well as ‘kayayie’.

7. Mr. Speaker, a freeze was imposed on the public sector from employing people. There were cuts to a number of areas of spending, most notably were cuts to research allowances for lecturers, nursing training, and teacher training allowances. Yet, the government then was awarding billions of cedis worth of contracts without knowing about how to pay for them. It was a case of living for today and leaving tomorrow to take care of itself.

8. President Akufo-Addo’s maiden State of the Nation Address captured the situation and his Government’s attitude towards it succinctly: “Too much time, energy and resources were spent in the past, in my view, without a deliberate, conscious assessment of their impact on jobs, and whether or not we were spending wisely to improve the lives of the people, communities and businesses.

But, I was not elected by the overwhelming majority of the Ghanaian people to complain. I was elected to get things done. I was elected to fix what is broken and my government and I are determined to do just that.”

9. Mr Speaker, that is exactly what we have done within the last three years. The President had set out his vision and programmes in clear language in his maiden address. He said this within the context of an economy that was seriously challenged; the full extent of which we were yet to discover.

And yet, by January 2017, the nation was hopeful because change had come. In the 2017 Budget, we illustrated the NPP Government’s expectations, aspirations and hope for Ghana’s future, using the miracle of Jesus when he fed 5,000 people with 5 loaves of bread and two fish. We also declared that the budget was going to “sow the seeds for growth and jobs”.

10. Mr Speaker exactly 2 years, 8 months and 12 days later, I stand before you to declare that indeed God has been gracious. His favour has shone on our nation and it is because, in my humble view, we, their new leaders, choose to serve His people rightly and sincerely.

11. Quite apart from the fragile structural policy and worsening macro-fiscal situation passed on to us, this Government had to also address serious contractual commitments. The exorbitant energy bill from expensive, difficult-to-explain ‘take or pay’ of Power Purchase Agreements; a pile up of unpaid arrears and outstanding commitments, mostly accrued from contracts awarded without the slightest care for the public purse.

12. Mr. Speaker, if you add the cost of cleaning the financial sector challenges to the long list of legacy bills that the Akufo-Addo government had to settle, the cost to the Ghanaian tax payer is around GH033 billion.

13. Mr. Speaker, thankfully, we came in with a plan, stayed focused, kept our discipline, kept our promises and managed to strike a balance between maintaining fiscal discipline and supporting businesses and households with tax reliefs, yes, we dared to abolish all manner of nuisance taxes.

Despite the limited resources at our disposal, we implemented our plan which included the introduction of stimulus packages for some viable but struggling businesses; increasing spending significantly on social services, and implemented our flagship programmes.

14. Prof K A Busia said, “The concept of poverty… should be seen not only in terms of cash or the scarcity or underdevelopment of material resources but also in human conditions, in disease, ignorance, lack of training, and education [and[… [t]he first essential requirement for progress is the development of the human being.” That is why, Mr Speaker, President Akufo-Addo would never shy away from the responsibility of investing to prepare our children for their own future.

15. As a result of us introducing the necessary combination of focus, discipline, integrity, creativity, compassion and competence, in just 32 months in office, Mr. Speaker, the Lord has blessed our efforts. The economy has seen a miraculous turnaround, moving now in the right direction. I speak to the data, Mr. Speaker:
• Economic growth rate has doubled under President Akufo-Addo, rebounding strongly from 3.4 percent in 2016 (the lowest GDP growth rate since 1994); averaging 7%;
• Inflation rate has fallen from 15.4 percent in December 2016 to 7.6 percent (new series) in September 2019, registering the lowest rate in 27 years; which makes 2019 the year with the slowest ever rise in the prices of goods and service in Ghana in the entire history of the Fourth Republic– Yes, Mr Speaker, 2019 has been good for Ghana because when inflation slows down everybody benefits;
• The banking sector is on the rise again, recording by mid-year, a year-on-year after tax profit of GH01.67 billion, or 36 per cent, in 2019. This is good for Ghana because when the banks are strong the economy is strong;
• The 91-day treasury bill rate fell steadily from nearly 17 percent in December 2016 and now stands at 14.7 percent. This is good for Ghana because when the cost of borrowing is low businesses expand, jobs are created and spending rises;
• We have contained the fiscal deficit below 5 percent of GDP for three consecutive years, the end-September 2019 deficit amounted to 4.5 percent of GDP;
• On the external front, the trade deficit has improved from US$1.8 billion in 2016 to a surplus of US$2.6 billion in August 2019. This is good for Ghana as it helps to keep our currency stable and our economy strong.
16. Today, we can be proud of ourselves for the progress we have made together as Ghanaians. This competent Government came into office with a plan. And, we are delivering according to plan. In the President, the people of Ghana are clear on
what they voted for: leadership. Strong, assured, decisive, intelligent, focused and compassionate leadership. Election after election, he has been consistent with his vision, focused on his priorities, and unwavering on the path to getting us there. Not even two defeats could shake him away from his convictions.
17. Mr. Speaker, I am proud to stand here and declare that the President has redeemed virtually all the pledges he made to the people of Ghana.

18. Mr. Speaker, the numbers, indeed, don’t lie and I have some numbers that make interesting reading:
• 1.2 million Ghanaian students would have had access to secondary education by 2020, justifying the spending of Gh02.2billion. It is gratifying to note that the first cohort of students under the programme numbering about 362,000 are due to graduate in 2020;
• 1.9 million people have directly benefited from the Planting for Food and Jobs programme;
• 97,373 graduates have been given an opportunity under NABCO to better position them for future jobs;
• 83,000 Ghanaians have been recruited under the Forest Plantation Programme to help restore our environment;
• A further 138,026 Ghanaians have been recruited under various programmes to support public sector delivery;
• 55,000 nurses have been recruited to enhance healthcare delivery;
• 3.6 million Ghanaians have been registered under the national ID programmes;
• 1,000 sanitary facilities are under construction to address open defecation;
• 49,000 trainee nurses have been paid Gh0468 million in allowances;
• 48,000 teacher trainees have also been paid Gh0532 million in allowances.
19. Mr. Speaker, to support Industry and Entrepreneurship;
• 181 companies have benefited from support under the 1D1F programme;
• 19,500 start-up businesses have received training support under the Government Entrepreneurship Programme;
• 80 business incubation hubs have been set up across the country to build the capacity of entrepreneurs;
• 20,000 students have been trained under the Student Entrepreneurship Initiative;
• 100 disabled women have been empowered to start businesses;
• Dagbon is finally at peace!
20. Mr. Speaker, in fulfilment of our promise to provide one million US$ per constituency, IPEP has delivered the following:
• 307 Ambulances have been procured for distribution to each constituency and all regional and teaching hospitals to enhance healthcare;
• 200 dams have been completed, and an additional 560 are dams under construction;

• 50 prefabricated grain warehouses have been constructed to reduce post- harvest losses; and
• 50 markets are under construction to enhance trade within our local assemblies.
21. Mr. Speaker, I wish to take this opportunity to express my sincere gratitude to you and Honourable Members, for the wise counsel, support, activism, opposition and cooperation that you have given to the Executive since 2017. Dare I say, our friends on the other side of this House have proven to be very vocal Opposition.
22. Mr. Speaker, the budget I will be presenting today is critical in various respects:
• First, it is an election year budget and we know the history of such budgets;
• Second, it is the first, since 2015, to be done without an IMF programme because of our successful completion of the derailed IMF programme last April; and
• Third, it is the first election year budget to be prepared under the Fiscal Responsibility Act (2018), which places a 5 per cent cap on fiscal deficit in any given year;
23. Mr. Speaker, in 2020, Government will make a strong push on the underlisted priorities in order to consolidate the gains achieved within the last three years and to drive our economic transformation forward in line with the President’s Consolidated Programme and the Ghana Beyond Aid vision:
• Domestic Revenue Mobilization: We will take radical policy and institutional reforms towards raising our tax-to-GDP ratio over the medium term from under 13 percent currently to around 20 percent. The focus will be on efficiency and base-broadening rather than imposing new taxes on our people and businesses. This way, we can raise our domestic contribution to our ambitious transformation agenda, in line with the Ghana Beyond Aid vision;
• Business Regulatory Reforms: A 3-year reform initiative, coordinated by the Ministry of Trade and Industry, will be implemented to make Ghana one of the most transparently and efficiently regulated business environments in Africa. This will empower our local businesses and also help us realise our ambition of making Ghana the Gateway to Business in West Africa;
• Intensified Drive for FDI: We need higher amounts of external private capital to complement Government resources in driving our transformation. So, we will aggressively go after Foreign Direct Investment (FDI). To this end, GIPC will be better resourced with human and financial capital. In addition, Government has establish an Inter-Ministerial Committee to provide coordinated policy guidance and support to the FDI drive;
• Enhanced Financial Support to Local Enterprises: Government will deploy early in 2020 a number of intiative to enhance the access of our business to finance, including medium and long-term capital. These include the new National Development Bank, the Ghana Incentives-based Risk Sharing System

for Agricultural Lending (GIRSAL), the Ghana Commodity Exchange, and a strengthened Venture Capital Trust Fund;
• International Financial Services Centre. Work is progressing steadily on preparations to realise Government vision of establishing Ghana as a regional financial services centre in West Africa. The Concept Note has been approved by Government and work is ongoing to draft an International Financial Services (IFS) Bill for broader stakeholder consultations;
• Digitization: We aim to use digitization to transform our development path in line with the global realities of the 4th Industrial Revolution. We will continue the impressive achievements made over the last three years in using digitization to improve government services and make it more accessible to Ghanaians. We will also intensify efforts to support the development of Fintech and the knowledge economy in Ghana;
• Accelerated Infrastructure Development: We will accelerate financing for infrastructure by actively leveraging innovative sources of finance. To this end, we are strengthening the capacity the Ghana Infrastructure Investment Fund (GIIF) to tap into global financial markets, including blended finance and sovereign wealth funds. Supporting private sector development;
• Science and Technology: The foundation for industrialization is science and technology. Government has therefore resolved to complement our advances in human capital in the education sector with a focused push to develop our national technological capability. To this end, Government, through the Ministry of Science, Environment, Technology and Innovation (MESTI) will establish the Ghana Design and Manufacturing Centre (GDMC). A center of excellence in design, manufacturing and technology commercialization, GDMC will facilitate the incubation of new technological industries and serve as a resource for national research institutions and private industry.
24. Mr. Speaker, 2020 is an election year. I would like to take this opportunity to inform this august House on behalf of the President that all the needed resources required shall be marshalled for the Electoral Commission to ensure that we have credible, free and fair elections. Ghana remains one of the most stable and peaceful countries in the world and we intend to maintain it that way.

25. In spite of the year being an election year, Mr. Speaker, let me repeat that President Akufo-Addo and his Government will ensure that the perennial excessive spending during such periods, will not happen in 2020. We shall work within the 2020 appropriated resource envelop and adhere to the Fiscal Responsibility Act to maintain fiscal discipline.

We will do so, not because we are complacent of our chances. No. We will do so because the nation needs it and we are not prepared to throw away all the sacrifices and gains the people and their Government have made in the last three years. We shall consolidate our macroeconomic gains and offer businesses and households the predictability and stability that they need to manage their lives.
PART A
SECTION ONE: GLOBAL ECONOMIC DEVELOPMENTS AND OUTLOOK
Global Growth

26. The World Economic Outlook (WEO) indicates that global economic growth remains weakened in 2019 after declining sharply in the last three quarters of
2018. Global growth is projected at 3.0 percent for 2019, the lowest on record since 2008-09, and some 0.6 percentage points lower than the 3.6 percent growth recorded in 2018. However, the projection is for global growth to rebound to an average of 3.4 percent in 2020.

27. Growth in advanced economies is projected to slow down to 1.7 percent in 2019 and 2020, compared to the 2.4 percent and 2.2 percent recorded in 2017 and 2018, respectively. Apart from Japan, where economic growth is projected to increase marginally by 0.1 percentage points from 0.8 percent in 2018 to 0.9 percent in
2019, the projected decline in growth in the advanced economies is symptomatic of a general slowdown in economic activity in all the major countries in the economic bloc.

28. For the United States, growth is expected to decline by 0.5 percentage points from 2.9 percent in 2018 to 2.4 percent in 2019, mainly due to weak investment and industrial output resulting from trade tensions with China. In the Euro Area, growth is estimated to decline by 0.7 percentage points from 1.9 percent in 2018 to 1.2 percent in 2019.
29. Mr. Speaker, in emerging market and developing economies, growth is projected to moderate to 3.9 percent in 2019 from the 4.5 percent recorded in 2018. Growth in the region is however expected to pick up to 4.6 percent in 2020, driven primarily by projected recoveries in Turkey, Argentina, and Iran.

However, growth in China has been estimated at 6.1 percent in 2019 compared to the 6.6 percent recorded in 2018, partly linked to escalating tariffs and slowing domestic demand following measures to rein in debt. India’s economy also decelerated in the second quarter of 2019, primarily due to weaknesses in the automobile and real estate sector, as well as uncertainty about the operations of nonbank financial companies. The IMF projects 6.1 percent growth in 2019 for India, relative to the 6.8 percent recorded in 2018.

30. For sub-Saharan Africa, economic growth in 2019 is projected to remain at the 3.2 percent rate recorded in 2018, but estimated to increase to 3.6 percent in 2020. This growth forecast reflects a challenging external environment, continued output disruptions in oil-exporting countries, and weaker-than-anticipated growth in South Africa. Growth prospects in the medium-term are mixed across the countries in the region. While economies in non-resource-intensive countries are estimated to grow at 6 percent on average, resource-intensive countries are expected to grow at about 2.5 percent in 2019. On the positive side, some 24 countries in the region,

home to about 500 million people, are projected to experience a faster growth in per capita income than the rest of the world. However, on the down side, about 21 countries are projected to record per capita income growth lower than the world average.

31. Mr. Speaker, economic activity in the region’s two largest economies, Nigeria (an oil exporter), South Africa (a non-oil, resource-intensive country), show divergent growth paths in the region. According to the IMF’s October 2019 edition of the Regional Economic Outlook (SSA), Nigeria is projected to grow at 2.5 percent in 2020, up from 2.3 percent in 2019, driven by both the oil and non-oil sectors. South Africa’s growth is projected at 0.7 percent in 2019, before picking up to 1.1 percent in 2020. Despite the growth prospects, the region continued to suffer from weather- related shocks in Angola, Botswana, and Ethiopia, continued security tensions in the Sahel region, and the Ebola outbreak in the Democratic Republic of Congo, where 3,000 new cases have so far been reported 2019.
Global Inflation
32. Mr. Speaker, global inflation remains muted, reflecting softening energy prices and moderation in global growth. Average consumer price inflation in advanced economies is expected to decline to 1.5 percent in 2019 from 2.0 percent last year 2018, but expected to increase to 1.8 percent in 2020. For the USA, inflation is projected to decline from 2.4 percent in 2018 to1.8 percent in 2019, but then increase to 2.3 percent in 2010 while, in the euro area, inflation is expected to drop from 1.8 percent in 2018 to 1.2 percent in 2019, but projected to increase to 1.4 percent in 2020. Japan’s inflation rate of 1.0 percent in 2018 is also projection for
2019, although the projection for 2020 is slightly high at 1.3 percent.

33. Inflation in emerging market and developing economies is expected to inch downwards to 4.7 percent in 2019 from 4.8 percent in 2018, but back up again to 4.8 percent in 2010. China, the largest economy in the bloc, is projected to register inflation rates of 2.3 percent and 2.4 percent in 2019 and 2020, respectively, compared the 2.1 percent recorded in 2018. In the case of India, the inflation rate in projected to increase significantly from 3.4 percent in 2018 and 2019 to 4.1 percent in 2020, and remain elevated at that level into the medium-tern.

34. Mr. Speaker, inflation in the Sub-Saharan Africa region is expected to decrease from 8.5 percent in 2018 to 8.4 percent in 2019 and further to 8.0 percent in 2020. Inflation is forecasted to be lowest in the CFA-franc zone where it is expected to remain below 2.0 percent through 2020. However, for the COMESA and ECOWAS economic blocs, the rate of inflation is projected to remain above the Sub-Saharan average in 2019 and 2010, as was also the case in 2018.

World Price Developments for Ghana’s Key Traded Commodities
35. Mr. Speaker, world market crude oil price averaged US$62.10 per barrel for the first the quarters of 2019, representing a decline of 10.1 percent from the US$69.63 per barrel for the corresponding period in 2018.

For the full year, the World Bank has projected a 12.2 percent reduction in crude oil prices from an average of US$68.30 per barrel in 2018 to US$60.00 per barrel in 2019. A further drop of 3.4 percent to US$58.00 per barrel is expected in 2020, before recovering to an average of US$60.80 per barrel for the medium-term period spanning 2021 to 2024.

36. Statistics from the International Cocoa Organization (ICCO) indicate that world market cocoa price for the first 10 months of 2019 averaged US$2,312.45 per tonne, virtually unchanged from the US$2,313.21 per tonne for the corresponding period in 2018. The projection by the World Bank is for cocoa beans prices to average US$2,312.45 per tonne in 2019, a marginal improvement of 0.81 percent over the 2018 average of US$2,293.80 per tonne. Prices are, however, forecasted to appreciate by 2.1 percent in 2020 to an average of US$2,360.00 per tonne and improve steadily at 2.5 percent annually from 2021 through 2024.

37. Mr. Speaker, according to the October 2019 edition of the World Bank’s Commodity Market Outlook, average gold prices increased in the first three quarters of 2019 by 6.3 percent to US$1,363.00 fine ounce from US$1,283.00 per fine ounce for the comparative period in 2018, On an annual basis, gold prices in 2019 are projected to improve to US$1390 per fine ounce, some 9.5 percent over the outturn of US$1,269.00 for 2018. A further 5.8 percent improvement in gold prices to US$1,470.00 per fine ounce is projected for 2020. Gold prices are, however, forecasted to decline averagely by 1.2 percent over the medium-term from 2021 to 2014.

African Continental Free Trade Area (AfCFTA)
38. Mr. Speaker, Ghana successfully won the bid to host the secretariat of the African Continental Free Trade Area (AfCFTA) on 7th July 2019. The AfCFTA, a flagship project of the African Union’s (AU) brings together the 55 African countries with a combined population of about 1.2 billion people and an estimated 2017 of more than US$2.5 trillion. As at October 2019, 54 out of 55 AU Member States have signed the AfCFTA Agreement out of which 28 have deposited Instruments of Ratification with the African Union Commission (AUC). Only Eritrea is yet to sign.

39. Ghana stands to benefit significantly from the AfCFTA and its anticipated positive impact on growth through a number of channels, including a huge market outlet, high investment, deepened intra-African trade, welfare benefits from lower import prices, production efficiency, increase in outputs, higher value-added jobs and exports, technological specialization, and investment in infrastructure.

40. Mr. Speaker, supporting private sector engagement is critical for championing Ghana’s successful implementation of the AfCFTA and towards taking advantage
of its integrated single market space in Africa. This calls for purposeful dialogue and partnership with the private sector to ensure that Ghana benefits fully from the AfCFTA in realisation of the Ghana Beyond Aid Agenda.
Developments in the ECOWAS Sub-Region
41. Mr. Speaker, the ECOWAS regional economy grew at 3.4 percent in 2018, compared to 2.8 percent in 2017, and it is projected to increase to 3.8 percent in
2019 and 2020. Growth is projected to remain at least 6.0 percent for 2019 and
2020 in Ghana, Cote d’Ivoire, Benin, Senegal, Burkina Faso, Niger, and the Gambia. Growth in the remaining countries is expected to stay above the regional average, with the exception of Nigeria and Liberia.
Table 1: ECOWAS Growth Rates (% annual)
Country
2017
2018
2019
2020
ECOWAS Average
2.8
3.4
3.8
3.8
Ghana
8.1
6.3
7.0
6.8
Cote d’Ivoire
7.7
7.4
7.5
7.3
Senegal
7.1
6.7
6.0
6.8
Guinea
10.0
5.8
5.9
6.0
Burkina Faso
6.3
6.8
6.0
6.0
Benin
5.7
6.7
6.6
6.7
Guinea Bissau
5.9
3.8
4.6
4.9
Mali
5.4
4.7
5.0
5.0
Niger
4.9
6.5
6.3
6.0
Togo
4.4
4.9
5.1
5.3
Cape Verde
3.7
5.1
5.0
5.0
Gambia
4.8
6.5
6.5
6.4
Sierra Leone
3.8
3.5
5.0
7.4
Liberia
2.5
1.2
0.4
1.6
Nigeria
0.8
1.9
2.3
2.5
Source: IMF, AfDB, GSS,
MoF Finance, World Bank

42. The average inflation rate for the ECOWAS region declined from 12.9 percent in 2017 to 9.7 percent in 2018, and it is projected to drop further to 8.9 in 2019 before rising to 9.3 percent in 2020. Inflation remains muted in the CFA-franc Zone countries where it is projected to stay below 3.0 percent in 2019 and 2020.

Three countries, all belonging to the Anglophone bloc — Liberia, Nigeria, and Sierra Leone — are projected to remain in the double-digit inflation corridor through to 2020. Ghana is, however, projected to register inflation rates close to the ECOWAS regional average in 2019 and 2020, just as it did in 2017 and 2018.

Table 2: ECOWAS Consumer Price Inflation (annual averages)
Country
2017
2018
2019
2020
ECOWAS Average
12.9
9.7
8.9
9.3
Togo
-0.2
0.9
1.4
2.0
Benin
1.8
0.8
-0.3
1.0
Burkina Faso
0.4
2.0
1.1
1.4
Cape Verde
0.8
1.3
1.2
1.6
Cote d’Ivoire
0.7
0.4
1.0
2.0
Guinea Bissau
1.1
1.4
-2.6
1.3
Senegal
1.3
0.5
1.0
1.5
Mali
1.8
1.7
0.2
1.3
Niger
0.2
2.7
-1.3
2.2
Gambia
8.0
6.5
6.9
6.5
Guinea
8.9
9.8
8.9
8.3
Ghana
12.4
9.8
9.3
9.2
Liberia
12.4
23.5
22.2
20.5
Nigeria
16.5
12.1
11.3
11.7
Sierra Leone
18.2
16.9
15.7
13.0
Source: IMF, AfDB, GSS, BoG, MoF, World Bank

Performance on rationalized ECOWAS Convergence Criteria Primary Criteria
43. Mr. Speaker, with respect to performance for the ECOWAS convergence criteria benchmarks in 2018, the situation deteriorated slightly for the criterion on budget deficit (including grants) as a percentage of GDP, with five countries meeting the standard in 2018, compared to seven in 2017.

In contrast, improvements were recorded in respect of the criteria for inflation and Central Bank financing of the budget deficit by additional one country each, bringing the total number to 12 countries and 14 countries, respectively. The performance on the gross external reserves remained stable in 2018 with 14 countries, as was the case in 2017.

Secondary Criteria in 2018
44. As regards the performance on the secondary criteria in 2018, the performance of Member States improved with respect to nominal exchange rate stability. Two additional countries met the criteria, bringing the total number of countries to 14. Compliance with the public debt criterion remained unchanged with 12 countries meeting the standard in 2017 and 2018.

45. Mr. Speaker, regarding the performance on macroeconomic convergence, significant improvements are expected in 2019, particularly in the areas of the budget deficit criterion. Twelve countries are expected to meet the Community
standard on budget deficit in 2019, 13 countries are expected to meet the criterion on inflation in 2019, compared to the 12 recorded in 2018 and the performance on gross foreign reserves criterion is expected to remain at the same level as in 2018, with 14 countries meeting the criteria. With regard to the criterion on budget deficit financing by the Central Bank, all countries are expected to meet the criterion in 2019.

46. On the whole, 10 Member States are expected to meet all the primary criteria in 2019. With reference to the secondary criteria, the projections show eight countries will meet all the criteria in 2019.

47. Mr. Speaker, I am happy to report that Ghana achieved five out of the six ECOWAS Rationalized Convergence Criteria in 2018 as presented in the Table 3. Ghana met three out of the four Primary Convergence Criteria in 2018, namely, the average annual inflation, the gross international reserves cover of at least three months of imports, and the Central Bank Financing of the budget deficit of not more than 10 percent of the previous year’s tax revenue.
48. Concerning the Secondary Convergence criteria, Ghana met both criteria on debt- to-GDP ratio of not more than 70 percent of GDP, and the nominal exchange rate variation of within ±10 percent band.
Table 3: ECOWAS Rationalized Convergence Criteria
S/N
Convergence Criteria
Target
Number of Countries that met criteria- out of 16 including Ghana
Ghana: status in 2018
Primary Criteria
1
Budget deficit (including grants and on commitment basis)/GDP)
< 3% 5 3.5%: Not achieved 2 Average annual inflation < 10%; long term goal of < 5% by 2019 12 9.4: Achieved 3 Gross reserves > 3 months of imports
14
3.6 months: Achieved
4
Central Bank financing of b
< 10% of previous year's tax revenue 14 No Central Bank Financing: Achieved Secondary Criteria 5 Public debt/GDP < 70% 12 57.9%: Achieved 6 Nominal exchange rate variation ± 10% 14 -8.4%: Achieved ECOWAS Trade Liberalization Scheme (ETLS) 49. Mr. Speaker, the ECOWAS Trade Liberalisation Scheme (ETLS) is the main ECOWAS operational tool for promoting the West African regional bloc as a Free Trade Area for member countries. It is the mechanism for ensuring the free movement of goods in the ECOWAS region without the payment of customs duties and other charges with equivalent effect on Community originating imports. 50. Enterprises in Ghana continue to take advantage of the Preferential Scheme, with provisions for tariff reductions on unprocessed goods, handicraft and industrial products of community origin, albeit with some challenges. Since January 2019, the National Approvals Committee have approved 40 enterprises to benefit under the ETLS. 51. The success of the ETLS requires concerted efforts of Member States to implement the Protocol. There is also, the need to strengthen and build domestic capacity to effectively carry out the operational mandate of the ETLS, including settlement of disputes at the borders. Going forward, Government remains committed to support sensitization programmes that aim at educating and informing businesses and enterprises about the benefits of the ETLS. Implementation of ECOWAS Common External Tariff (CET) 52. Mr. Speaker, the Authority of the Heads of State and Government of ECOWAS, at the conclusion of its Extraordinary Session held on October 25, 2013 in Dakar, urged member states to implement the ECOWAS Common External Tariff (CET) from January 1, 2015. As of 1 June 2019, fourteen (14) Member States are applying the ECOWAS CET at varying degrees of implementation. 53. Ghana began the implementation of the ECOWAS CET in February 2016 and presently applies the 2017 version of the ECOWAS CET. The adoption of a uniform regime of customs and related charges is intended to address the problem of cross-border smuggling, combat dumping, and also bring economic benefits to the people of the sub-region. 54. Mr. Speaker, the CET offers greater protection to the agricultural sector than other sectors. Ninety percent of the products in the 35 percent tariff band are agricultural products, and no agricultural product is exempted from common external tariffs. ECOWAS Single Currency Programme 55. Mr. Speaker, Ghana is committed to the ECOWAS Single Currency Programme, which will help remove trade and monetary barriers, reduce transaction costs, boost economic activity, and raise living standards in ECOWAS member states. Ghana will continue to actively participate in all the meetings on ECOWAS Single Currency Programme, and to support and contribute its quota to the realisation of the Single Currency Programme objectives. 56. Mr. Speaker, even though there remain some challenges to be addressed by member countries, some significant milestones have been achieved in the implementation of the road map for the Single Currency. The following decisions have been taken to support the implementation of the ECOWAS single currency programme: • Adopted a fast-track approach where countries that are ready and meet the convergence criteria in 2020 will begin the single currency programmes for other countries to join later; • Established a special fund for financing of programmes in the revised Roadmap for the ECOWAS Single Currency Programme; • Adoption of the flexible exchange rate regime together with a monetary policy framework concentrated on inflation targeting; and • Adopted the "ECO" as the name of the ECOWAS single currency. 57. Mr. Speaker, Ghana is committed to the ECOWAS Single Currency Programme and will continue to prioritise it under the country's regional integration agenda. Economic Partnership Agreement (EPA) 58. Mr. Speaker, cooperation between the European Union (EU) and Ghana has been underpinned by constructive policy dialogue and negotiations, based on Ghana's evolving development agenda, national priorities, and the principles of aid effectiveness, ownership and harmonization. Ghana ratified the Ghana-EU Stepping Stone Economic Partnership Agreement (commonly referred to as the Interim Economic Partnership) in August 2016 to enable Ghanaian exporters continue to enjoy uninterrupted duty-free quota-free (DFQF) EU market access. The Agreement received approval of the European Parliament on 1st December 2016, and entered into provisional implementation on 15th December 2016. 59. The EPA covers goods and development cooperation and related issues such as Customs Cooperation, Trade Facilitation, and Sanitary and Phyto-Sanitary Measures. The EPA entails 100 percent tariff liberalization by the EU Side and gradual removal of 80 percent tariff liberalization by Ghana within 15 years. 60. The EPA Accompanying Measures Strategy (AMS) that provides the roadmap and strategic framework to ensure that Ghana fully maximizes the opportunities and meets the challenges of implementing the EPA has been developed. 61. Under the EPA-AMS, liberalization of Category "A" products are expected to commence in 2020, after Ghana's Cabinet and, subsequently, Parliament have approved the tariff schedule and liberalisation calendar. Implications of Global Developments for Ghana's Economy 62. Mr. Speaker, according to the August 2019 edition of the World Trade Monitor, current trade barriers and threats have taken a toll on Sub-Saharan Africa's export growth. This has been exacerbated by trade and technology tensions between US and China, which have increased in the past months. These developments could incraese volatility in financial markets, lower investment, disrupt global supply channels, and stifle global growth. This would likely lower commodity prices, adversley affecting resource dependent countries, including Ghana. 63. China and the Euro area account for about 20 percent and 30 percent of Ghana's total trade, respectively. Given the anticipated slowdown in growth in China and the Euro area, demand for Sub-Saharan Africa commodity exports could fall, which could impede economic growth in countries that export to these two destinations. Although the impact would differ across countries, Ghanaian exports are very likely to be affected. 64. Mr. Speaker, Sub-Saharan Africa has experienced frequent and intensified natural disasters over the past 30 years. The incidence of floods, for example, rose sixfold from the 1980s to the 2000s in the region. For most countries in the region, heavy reliance on rain-fed agriculture makes the region susceptible to weather- related disasters, including floods and droughts. Ghana could be exposed to the natural disasters risks. 65. Mr. Speaker, the smooth implimenation of the AfCFTA will, no doubt, accelerate the development of value chains which could promote Africa's industrialization drive and improve her growth prospects. The IMF estimates that Sub-Saharan Africa's ratio of value added to total exports is about 20 percent, much lower than that of Europe and Asia. Under the context of AfCFTA, value chains could expand through value addition and deeper intra-African trade, leading to stronger competition across firms, improved productivity, export competitiveness, and lower consumer prices. SECTION TWO: MACROECONOMIC PERFORMANCE FOR JANUARY-SEPTEMBER 2019 Overview of Macroeconomic Performance 66. Mr. Speaker, I will now provide a report on the performance of the economy for the first nine months of 2019. However, if available, I will also present information on the key macroeconomic indicators beyond the first three quarters of the year. 67. Mr. Speaker, the Ghanaian economy has continued to demonstrate strong resilience, as evidenced by the performance of the key macroeconomic indicators. In addition to sustaining the gains made on macroeconomic stabilisation and maintaining the growth momentum, we successfully completed, and brought to closure, the IMF's Extended Credit Facility (ECF) programme which started in 2015. 68. Mr. Speaker, Government has instituted measures to ensure irreversibility of the macroeconomic gains achieved even after successfully completing the IMF Programme. These measures include: • the strict enforcement of the Public Financial Management (PFM) Act, 2016 (Act 921) and its companion PFM Regulation, 2019 (LI 2378) to promote transparent and credible management of our public finances; • the passage and implementation of the Fiscal Responsibility Act, 2018 (Act 982) to cap the fiscal deficit at 5 percent of GDP, while also posting a positive primary balance as part of measures to ensure fiscal prudence and debt sustainability; • the establishment and operationalisation of the Presidential Fiscal Responsibility Advisory Council to advise the President on transparent, accountable, and credible fiscal management; • the establishment and operationalisation of the Presidential Financial Stability Advisory Council to strengthen and reinforce the stability of the financial sector, as well as to coordinate regulation and supervision of the sector; and • The establishment and operationalisation of the Fiscal Risk Unit at the Ministry of Finance to identify key fiscal risks and propose mitigating measures to contain such risks. 69. Mr. Speaker, the Ghana Statistical Service (GSS) continues to improve its operations to enhance data credibility and transparency. After rebasing the GDP series in 2018 to provide more reliable GDP data to inform policy, the GSS also successfully rebased the Consumer Price Index (CPI) series and subsequently released the August 2019 CPI series based on the new data to better reflect price movements in the economy. Thus, the GSS, through the rebasing of GDP and CPI exercises now provides more credible and reliable statistics to inform policy. 70. Mr. Speaker, to put the assessment of the performance of the economy for the first nine months of 2019 in perspective, we will like to re-state the macroeconomic targets set for 2019 as presented in the 2019 Budget and 2019 Mid-Year Review documents as follows: • Overall real GDP growth rate of 7.1 percent; • Overall non-oil real GDP growth rate of 6.0 percent; • End-period December inflation of 8.0 percent; • Overall budget deficit (measured on cash basis) of 4.5 percent of GDP; • Primary balance of 1.1 percent of GDP; and • End-period December stock of Gross International Reserves to cover at least 3.5 months of imports of goods and services. 71. Mr. Speaker, provisional data available on the performance of the economy as at the end of September 2019 show that the targets for most of the macroeconomic indicators have been realised. A summary of this performance is as follows: • Overall real GDP grew at an average of 6.2 percent in the first half of 2019 (6.7percent in quarter one and 5.7 percent in quarter two) against 5.4 percent in same period in 2018; • Non-Oil real GDP grew at an average of 5.2 percent in the first half year of 2019 (6.0 percent in quarter one and 4.3 percent in quarter two) compared to 4.6 percent in the same period in 2018; • End-period inflation was 7.6 percent in September, 2019 compared to 9.8 percent at the same period in 2018. Mr. Speaker, the September 2019 inflation rate is based on a rebased Consumer Price Index series released by the GSS in August 2019; • The overall budget deficit on cash basis was 4.5 percent of GDP in September, 2019 against a target of 4.1 percent of GDP and an outturn of 2.8 percent in the same period in 2018; • The primary balance recorded a deficit of 0.3 percent of GDP at the end of September 2019, against a targeted surplus of 0.1 percent of GDP and a surplus outturn of 0.7 percent in the same period in 2018; • The current account balance registered an estimated deficit of 1.2 percent of GDP in September, 2019 compared with a deficit of 1.5 percent in September 2018; and • The stock of Gross International Reserves amounted to US$8.1 billion at end- September 2019 to cover 4.1 months of imports, compared to the US$6.8 billion or 3.6 months import cover recorded in the same period of 2018. 72. Mr. Speaker, detailed performance on the various sectors of the economy is presented below. Real Sector Performance Overall GDP Growth 73. Mr. Speaker, provisional estimates from the GSS show that average overall real GDP growth for the first half-year of 2019 was 6.2 percent, compared with 5.4 percent in same period in 2018. Over the same period, overall non-oil growth was 5.2 percent, compared with 4.6 percent in 2018 as shown in Figure 1. Figure 1: Real GDP growth in Ghana (Oil and Non-Oil) 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2014 2015 2016 2017 2018 2018 2019 H1 H1 Average Average ^?Overall GDP growth ^—Non-oil GDP growth Source: GSS, 2019 74. Mr. Speaker, the overall real GDP growth (year-on-year) was 6.7 percent for the first quarter of 2019, and 5.7 percent for the second quarter. Non-Oil GDP growth was 6.0 percent and 4.3 percent for the first and second quarters respectively, compared with 4.2 percent and 5.0 percent for the same periods in 2018. Sectorial Growth Performance Agriculture 75. Mr. Speaker, the average overall growth in the Agriculture Sector was 2.6 percent in the first half of 2019 compared with 4.7 percent for the same period in 2018. 76. Mr. Speaker, growth in the Agriculture Sector was 2.2 percent and 3.1 percent in the first and second quarters respectively, compared with 4.7 percent and 4.8 percent in the corresponding quarters in 2018. In the first quarter, the Livestock subsector had the best growth performance of 5.5 percent, followed by the Crops subsector with 2.4 percent. This trend continued in the second quarter with the Livestock subsector growing at 5.7 percent, and Crops at 4.0 percent. However, the Forestry and Logging and Fishing subsectors contracted in both periods as shown in Figure 2. Figure 2: Growth in Agriculture and Agriculture sub-sectors 15.0 10.0 5.0 15 2016 2017 2018| 2019Q1 2019Q2 Half 1 201 Industry 77. Mr. Speaker, the industry sector recorded an average growth of 7.2 percent in the first half of 2019 compared with 10.8 percent in the first half of 2018. The Industry sector grew by 8.4 percent and 6.1 percent in the first and second quarters respectively, compared with 10.4 percent and 11.1 percent in the corresponding periods in 2018. In the first quarter the leading growth performer was Mining and Quarrying which grew by 20.9 percent, followed by Electricity with a growth rate of 11.1 percent. In the second quarter, Mining and Quarrying was again the best performing subsector with a growth rate of 14.0 percent, followed by Manufacturing with 7.4 percent as shown in Table 4. Table 4: Growth in Industry Sector and Sub-Sectors Sector/Sub-Sectors 2014 2015 2016 2017 2018 2018 H1 Ave 2019 H1 Ave INDUSTRY 1.1 1.1 4.3 15.7 10.6 10.8 7.2 Mining and Quarrying 5.4 -8.3 -0.2 30.8 23.3 24.7 17.3 o.w. Oil*** 6.8 2 -15.6 80.3 3.6 18.0 19.6 Manufacturing -2.6 3.7 7.9 9.5 4.1 4.0 6.5 Electricity 1.3 17.7 -5.8 19.4 5.5 5.1 1.8 Water and Sewerage 5.9 13.9 -11.8 6.1 -3.6 -1.0 -7.1 Construction -0.4 9.5 8.4 5.1 1.1 0.6 -8.5 Source: GSS Services 78. Mr. Speaker, the Services Sector, in the first half of the year, recorded an average growth rate of 6.9 percent compared with 0.9 percent recorded in the same period of the preceding year as shown in Table 5. The Sector recorded an increase in growth from 1.4 percent and 0.5 percent in the first and second quarters respectively in 2018, to 7.2 percent and 6.5 percent for the same period in 2019. Growth was largely driven by performance in the Information and Communication (37.0 percent) and Health and Social Work (22.1 percent) sub-sectors in the first quarter, and Information and Communication (52.8 percent) and Real Estate (14.9 percent) in the second quarter. Table 5: Growth in Services and Service Sub-Sectors Sector/Sub-Sectors 2014 2015 2016 2017 2018 2018 H1 Ave 201 9 H1 Ave SERVICES 5.4 3.0 2.8 3.3 2.7 0.9 6.8 Trade; Repair of Vehicles Household Goods 2.0 0.5 -0.4 8.2 2.8 0.1 2.4 Hotels and Restaurants 1.5 4.1 2.3 7.6 3.2 3.2 7.6 Transport and Storage 5.8 2.6 1.1 8.9 1.1 -1.1 3.4 Information and communication 29.7 11.9 5.6 4.2 13.1 15.4 44.9 Financial and Insurance Activities 21.4 12.9 8 -17.7 -8.2 -12.6 1.8 Real Estate -0.3 3.1 3.2 3.8 -6.5 -1.7 12.1 Professional, Administrative & Support Service activities 6.8 1.4 -4.2 2.9 0.3 -5.8 6.4 Public Administration & Defence; Social Security -3.5 -2.6 8.9 4.2 4.3 4.1 0.2 Education -0.3 -0.5 2.3 6.3 3.9 3.0 8.7 Health and Social Work 2.7 -4.4 4 14.1 22.6 25.8 16.2 Other Service Activities 1.4 2.7 -0.1 5.3 3.1 3.0 1.6 Source: GSS Structure of the Ghanaian Economy 79. Mr. Speaker, the Services sector continues to occupy the largest share of the economy. However, the share of Agriculture declined in 2018 at the expense of Industry, as shown in Figure 3. Figure 3: Sectorial Distribution of Nominal GDP 120.0 100.0 80.0 41.4 39.8 43.2 46.7 46.0 46.3 60.0 40.0 20.0 0.0 36.9 38.1 34.6 30.6 32.7 34.0 21.7 22.0 22.1 22.7 21.2 19.7 2013 2014 2015 2016 2017 2018 Services 41.4 39.8 43.2 46.7 46.0 46.3 ? Industry 36.9 38.1 34.6 30.6 32.7 34.0 ? Agriculture 21.7 22.0 22.1 22.7 21.2 19.7 Source: GSS Price Developments 80. Mr. Speaker, as alluded to earlier, the Ghana Statistical Service (GSS) rebased the Consumer Price Index (CPI) series in August 2019 as part of the GSS's continuous commitment to improve the quality of her products. The rebased CPI series used 2018 as the base year compared to the previous base year of 2012 for the old series. The number of items in the basket also increased from 267 in the old basket to 307 in the new basket to make the basket of goods more representative of consumer purchases. In addition, the the points of data collection increased from 42 markets in the old basket to 44 markets in the rebased basket. 81. Mr. Speaker, we are certain that the rebased CPI basket adequately captures consumption habits and patterns in Ghana, since the rebased series has taken into account changes in consumption pattern over time. One major change in the new series is the adoption of the 2018 Classification of Individual Consumption by Purpose (COICOP) for the re-classification of items in the basket, hence capturing the movement of items across Divisions and Groups. 82. Mr. Speaker, the CPI-based inflation has generally trended downwards in 2019, following the pattern established since January 2017. The decline in inflation has been driven largely by non-food inflation, supported by the tight monetary stance taken by the Bank of Ghana. 83. The Bank of Ghana's main core measure of inflation, which excludes energy and utility prices, was 6.3 percent in September 2019. The headline inflation, which includes movements in energy and utility prices, also stood at 7.6 percent in September 2019 84. In the outlook, inflation is forecast to remain close to the Central Bank's central path of 8 percent at end-2020, barring any unforeseen shocks. Monetary Sector Performance Monetary Aggregates and Credit Developments 85. Mr. Speaker, annual growth of broad money supply (M2+) generally reflected a downward trend over the review period, consistent with the tight monetary policy stance. The growth in M2+ moderated from 24.09 percent in September 2018 to 16.51 percent in September 2019. The observed moderation was mainly on account of a slower pace of growth of Net Domestic Assets (NDA) which was moderated by increased growth in the Net Foreign Assets (NFA). 86. Mr. Speaker, annual growth in banks' outstanding credit to public and private institutions in September 2019 increased marginally, relative to that of the comparative period in 2018. The nominal annual growth rate of outstanding credit increased from 13.01 per cent in September 2018 to 14.88 percent in September 2019. As at end-September 2019, total outstanding credit stood at GH047,247.04 million compared with GH041,126.62 million in September 2018. 87. Mr. Speaker, the increase in the total outstanding credit was on account of significant expansion in public sector credit. Growth in private sector credit, however, moderated from 17.24 per cent in September 2018 to 12.62 per cent in September 2019. In real terms, bank credit expanded by 6.77 per cent from 2.9 per cent over the same comparative period. Interest Rate Developments 88. Mr. Speaker, on interest rate developments, money market rates have broadly remained unchanged since the beginning of the year. The 91-day Treasury bill rate has remained steady at 14.7 percent since January 2019. Similarly, the 182-day instrument has also stabilized at around 14.1 percent. Rates on the secondary bond market remained stable for the 7-year, 15-year bonds have remained steady at 16.3 percent and 19.8 percent respectively. However, the rate on the 10-year bond increased to 19.8 percent from 17.5 percent at the beginning of the year. 89. Mr. Speaker, average lending rates of banks have moved in line with the Monetary Policy Rate. Lending rates have moved within a range of 22.0 percent and 24.0 percent in the first nine months of the year. The Ghana Reference Rate, which serves as the base rate of the commercial banks, was virtually flat over the review period remaining at 16.1 percent at end-September 2019 (Figure 4). Figure 4: Trend in average lending rate 35 30 25 ra 20 +?» u £ 15 10 5 Source: BoG GSE Composite Index Performance 90. Mr. Speaker, in the stock exchange market, the key market performance indicator, the Ghana Stock Exchange's (GSE's) Composite Index (GSE-CI), trended downwards, contracting by 26.53 per cent (796.22 points) in September 2019, compared with a growth of 29.02 per cent (674.92 points) in the corresponding period of 2018. 91. Mr. Speaker, the contraction was mainly on account of decline in stock values in some sectors including finance, agriculture, distribution, and information technology, as well as the food and brewery subsectors. The decline in the GSE- CI resulted in a 14.87 per cent decrease in market capitalization on year-on-year basis, as a significant number of stocks recorded losses. The GSE-CI is expected to recover in the ensuing months on account of waning financial sector uncertainties and easing pressures on the domestic currency. External Sector Developments Exchange Rate Developments Update on excess capacity challenges in the energy sector 92. Mr. Speaker, as part of the Mid-Year Fiscal Policy Review, Government announced its intention to rationalize commercial agreements in Ghana's energy sector - including, reassessing all take-or-pay contracts and imposing a moratorium on the signing of new agreements in the energy sector - with a view to establishing a managed transition to overcome the unsustainable excess supply situation that continues to pose a grave risk to the country's economic progress. 93. Consequently, the Ministry of Finance and the Ministry of Energy, on 26 August 2019, hosted Ghana's Independent Power Producers and Gas Suppliers at a stakeholder forum, during which Government reiterated the urgent need for these energy sector interventions and outlined Government's intended approach to implementing them. 94. As well, Government invited our IPPs and Gas Suppliers to partner and collaborate with Government in this crucial exercise, as Government seeks a thoughtful and managed transition from the onerous Take-or-Pay paradigm towards a balanced contractual relationship capable of delivering fair, enduring energy solutions that reflect reality and offer long-term sustainability for Power Purchase Agreements (PPAs) and Gas Supply Agreements (GSAs) in Ghana. 95. Subsequently, on 28 October 2019, Government inaugurated a Steering Committee under the Energy Sector Recovery Task Force, whose purpose it is to take responsibility for the collaborative, bilateral consultation process between Government and each Independent Power Producer (IPP) and Gas Supplier (GS), designed to help Government and its energy sector partners achieve a managed transition towards more balanced, long-term relationships and sustainable energy partnerships. 96. Mr. Speaker, this collaborative, bilateral consultation process, which has, so far, been welcomed by the investor community, will provide a forum for stakeholders to contribute to Ghana's energy strategy, which is fundamental to the country's industrialization and sustainable growth. 97. In this regard, Mr. Speaker, I am pleased to inform this august house that Government Negotiating Teams have been constituted and are now close to completing the first round of bilateral consultation meetings with several IPPs, as well as project sponsors. Significantly, Government views these collaborative, bilateral consultations as an essential exercise, which not only limits downside risks to investors over the medium to long term, but also demonstrates Government's full commitment to progressively restoring confidence in the energy sector as well as across other key sectors in our rapidly growing economy. 98. Mr. Speaker, it is also worth highlighting, that in line with these energy sector interventions and to ensure the success of the bilateral consultation process, Government, in line with the decision taken in the July Mid-Year Review, has formally instructed sector Ministries, Departments and Agencies (MDAs) as follows: • to suspend with immediate effect all ongoing negotiations on PPAs, and GSAs, LNG Sale and Purchase Agreements (LNG SPAs), or any other long term Take-or-Pay contracts for power or gas (Long Term Take-or-Pay Contracts) until further notice; • that Government has placed a complete moratorium on the signing of new PPAs, GSAs, and Put-Call Option Agreements (PCOAs), and hereby instructs ECG, GNPC, GNGC, and VRA to abstain from entering into any new PPAs, GSAs, LNG SPAs, Long Term Take or Pay Contracts and PCOAs until further notice; and • that all future PPAs, and GSAs, LNG SPAs and Long Term Take or Pay Contracts shall be subject to competitive and transparent procurement procedures, and Government will, henceforth, not entertain or accept any unsolicited proposals. 99. Government intends to enforce these interventions and expects strict compliance by all affected MDAs and potential investors. In this regard, Government will notify MDAs on a case by case basis, of any applicable exceptions with regard to the objectives of the Energy Sector Recovery Programme (ESRP), a roadmap jointly developed by the Government of Ghana and the World Bank, which delineates immediate, near-term, and medium-term actions needed to achieve Government's aim of bringing the sector into balance in the medium- term. 100. Mr. Speaker, we expect this to be a gradual but challenging process with many potential complexities however, Government remains undeterred and will spare no effort to ensure that it is fully prepared financially, organizationally and with the requisite technical wherewithal to confront these challenges head-on. 101. Additionally, as part of the rationalization process, the Karpowership has been relocated to the Western Region and retrofitted to use gas, instead of HFO. Karpowership will thus become the key off-taker for the take or pay Sankofa gas. This will generate substantial savings for Government. 102. Indeed, unlike in the past, this Government recognizes that a focused, disciplined and coordinated approach is required to resolve the substantial challenges in the energy sector. 103. In this regard, Government aims, through this consultation process, to, among other things, create a standardized, sustainable framework for future PPA and GSA contracting, which all new IPPs and Gas Suppliers who wish to participate in Ghana's energy sector will be required to adopt in the future. 104. Truly, Mr. Speaker, the staggering costs and negative macro-fiscal impact of Ghana's excess power and gas supply problem, necessitates the full force and uninterrupted focus of Government in the execution of this all-important exercise. And Mr. Speaker, this is precisely what we intend to do. 105. Mr. Speaker, as we all know, on July 30, 2019, Government suspended the Power Distribution Service (PDS) concession, following Government's detection of fundamental and material breaches of PDS's obligations in the provision of payment securities for the transaction and related matters. After further investigations and extensive consultations with relevant stakeholders, Government, on October 19, 2019 announced its decision to terminate the PDS concession. 106. Regardless, Government is fully committed to private sector participation in ECG and is focused on moving forward with urgency to find a suitable replacement for the PDS arrangements. Moreover, we are prepared to review the transaction structure and indeed, recognize the need to improve significantly the management of ECG, by bringing in world-class private sector expertise and attracting adequate private capital. 107. Mr. Speaker, considering ECG's current distribution systems losses of 24% - comprising 13% commercial and 11% technical losses - Government is truly motivated by the urgent need to reduce these losses and improve service quality through the effective deployment of modern technology and world-class technical expertise, with a view to creating a financially viable power distribution sector that is sufficiently equipped to meet the current and future needs of Ghanaian households and businesses. 108. Mr. Speaker, as we crystalize plans for the future of ECG, Government is also enthused by the critical need to ensure the transfer of skills with a view to building local capacity as well as introducing international best practices to enhance the operational, technical, commercial and financial wherewithal of our national electricity distribution utility. 109. Against this backdrop, Mr. Speaker, I am pleased to announce that Government intends to initiate an accelerated tender process to select a new private partner for ECG in the coming months. It is indeed Government's intention to make relevant adjustments to enhance the existing bid documents and tailor the process to optimize the selection from companies having a track record of managing and operating a comparable utility, so as to achieve a fair, transparent and expeditious closure of the transaction. 110. Mr. Speaker, we cannot overstate the importance of learning from past mistakes if we are to make sound decisions going forward. However, we have no doubt that a well-executed partnership between ECG and the "right" technical and financial partners, will certainly improve our distribution capabilities and enhance end-user experiences. 111. In this regard, heightened scrutiny will be brought to bear in the design and implementation of the financial and technical evaluation criteria to ensure that interested bidders not only have credibility and extensive experience in operating and managing a comparable electricity utility, but also possess the financial wherewithal to make the requisite investments in ECG to achieve significant reductions in technical and commercial losses, as well as drive operational efficiency to deliver sustained service reliability for the benefit of all Ghanaians. 112. Mr. Speaker, while restoring private sector participation in the management, operation and financing of the required investments in ECG's distribution assets, Government will make every effort to avoid the pitfalls that the PDS concession encountered and institute broad Ghanaian institutional participation, as well as democratize local equity participation, with an eventual listing on the Ghana Stock Exchange. 113. Indeed Mr. Speaker, let me be clear, that the decisions we take in respect of this transaction, will continue to affirm our time-honoured reputation as a business- friendly nation that respects the rule of law, and expects to remain an attractive destination for Foreign Direct Investment. 114. Mr. Speaker, while on the subject, Ghana remains committed to its relationship with the Millennium Challenge Corporation (MCC). Indeed, Government fully respects and is committed to the essential principles underlying the relationship between the MCC and the Government of Ghana, as well as the overall bilateral relationship between Ghana and the United States 115. Moreover, Government remains committed to the energy sector reforms, as envisioned under both the MCC Compact and the Energy Sector Recovery Program (ESRP), developed with the support of the World Bank. Fiscal Performance for 2019 116. Mr. Speaker, Government remains committed to safeguarding the macro-fiscal gains that we have achieved over the last three years in the management of the nation's public finances. The implementation of the Fiscal Responsibility Act, the establishment and operationalisation of the Fiscal Responsibility Advisory and Financial Stability Councils, have complemented several other institutional and structural reforms to strengthen fiscal discipline and ensure irreversibility of policies. 117. Mr. Speaker, in 2019, the overall fiscal deficit which is the primary anchor will remain within the Fiscal Responsibility Act threshold of not more than 5 percent of GDP at year-end while the Primary Balance also remains in surplus. 118. Mr. Speaker, to demonstrate this commitment, Government, during the review of its fiscal policies in July this year, moved swiftly to introduce some fiscal measures with the help of this august House, aimed at mitigating risks emanating mainly from the underperformance in revenue mobilisation, faster rate of expenditure execution relative to revenue mobilization, and the crystallization of energy sector IPP payments which were not originally programmed into the 2019 Budget and medium-term macro-fiscal strategic framework. These fiscal measures included the upward adjustment in the Communication Service Tax (CST) rate from 6 percent to 9 percent, and the upward adjustment in the Energy Sector Levy (ESL) with respect to the Power Generation and Infrastructure Support Levy, the Road Fund Levy, and the Price Stabilization & Recovery Levy. 119. Mr. Speaker, these developments, together with the need to take precautionary measures in response to the emerging security concerns within the sub-region, informed the revision to the fiscal framework to accommodate an overall budget deficit amounting to 4.5 percent of GDP, up from the 4.2 percent that was originally programmed for 2019. Summary of 2019 Q1-Q3 Fiscal Developments 120. Mr. Speaker, over the first nine months of the 2019 fiscal year, provisional fiscal data indicates that the fiscal deficit arising from Government's fiscal operations was 4.5 percent of GDP on cash basis. This compares to a deficit target of 4.1 percent of GDP for the period as shown in Table 6. The higher-than-programmed fiscal deficit resulted mainly from revenue underperformance which, in the year-to- date, achieved an execution rate of 86.4 percent. Although expenditures were also below target, the expenditure execution rate of 92.5 percent outstripped the revenue execution rate by a significant 6.1 percentage points. Table 6: Summary of Central Government Fiscal Operations - 2018/2019 Indicators (in GH0 mn) 2018 2019 (Q1-Q3) Budget Revised (Q1-Q3) Outturn Budget Prog. Prov. Outturn Dev GH0 Dev % Total Revenue & Grants 33,201 58,905 58,897 41,963 36,250 -5,714 -13.6 % of GDP 11.0 17.0 14.2 12.1 10.5 Total Exp. (incl. Arrears clearance) 41,625 73,441 74,612 56,126 51,921 -4,205 -7.5 % of GDP 13.8 21.2 21.6 16.2 15.0 Budget Balance -8,424 -14,536 -15,715 -14,163 -15,672 -1,509 10.7 % of GDP -2.8 -4.2 -4.5 -4.1 -4.5 Primary Balance 2,111 4,110 3,883 202 -916 -1,118 % of GDP 0.7 1.2 1.1 0.1 -0.3 Source: MoF Revenue Performance 121. Mr. Speaker, Total Revenue and Grants for the period, amounted to GH036.3 billion (10.5% of GDP). The outturn represents a per annum growth of 9.2 percent despite a 13.6 percent shortfall relative to the target of GH042.0 billion (12.1 percent of GDP) as shown in Table 7. 122. Mr. Speaker, out of the Total Revenue and Grants, Non-oil Tax Revenue, which comprises taxes on Income and Property, Goods and Services and International Trade, constituted about 75 percent of the entire revenue portfolio and amounted to GH027.2 billion. The outturn represents a per annum growth of 12.1 percent, slightly less robust when compared to the 15.9 percent per annum growth recorded during the same period in 2018. 123. Mr. Speaker, a few factors contributed to the general underperformance of non-oil Tax Revenue. Firstly, taxes on International Trade, which consist of Import Duty and Levies, External VAT, and Customs National Health and GETFund levies continued to be negatively impacted by lower import volumes, high admittance of imported goods into the zero-rated and/or tax-exempt import brackets and the lower tariff bands, up to the 10 percent tariff levels. 124. As a result of these dynamics, the anticipated increase in revenue yield from import volumes following the reduction in the benchmark values of import duties, has not materialised. The reduction in the benchmark values of import duties is part of ongoing reforms at the ports which is expected to make Ghana's port an attractive destination for international trade over the medium-term. 125. Secondly, shortfalls emanating from taxes on Income and Property constituted about 49 percent of the total shortfall in non-oil Tax Revenue. This was mainly on the back of a rather weak performance from Corporate Income Tax collections in the third quarter due to the non-revision of assessment by most-large taxpayers as anticipated, as well as the non-realisation of an expected growth in personal emoluments from the private sector. Lastly, taxes on Goods and Services were impacted mainly by shortfalls in Excise Duty and to lesser extents, Domestic VAT and Communications Service Tax (CST). Despite recording a 0.8 percent deviation from target, Domestic VAT recorded a remarkable 29 percent per annum growth, following the introduction of the VAT withholding policy which requires selected VAT traders to deduct and pay to the Ghana Revenue Authority (GRA), a percentage of VAT payable to suppliers. 126. Mr. Speaker, non-Oil Non-Tax Revenue, which comprises MDAs' IGF Retention, IGF lodgements, fees and user charges, Dividends from SOEs, and other NonTax sources, amounted to GH03.4 billion. The outturn was 16.1 percent below the programmed target of GH04.1 billion. The shortfall is mainly due to the general under performance by IGF-generating institutions which affected the expected yield from the capping of the MDAs IGFs, and the non-materialisation of programmed fees from Mineral Exports. 127. Mr. Speaker,

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