BUDGET FOR A BRIGHTER FUTURE

Friday, 16 November 2007

By Edmund Mingle & David Adadevoh

THE 2008 financial statement dubbed "A Brighter Future Budget", is focused on pursuing growth through massive infrastructural development.

More funds are to be pumped into the development of the roads, water and energy sectors which the government believes are critical to the economic take-off of the country.

Presenting the statement yesterday, Kwadwo Baah-Wiredu, Finance and Economic Planning Minister, said the government will fund all 166 districts to construct and tar 15km of roads in the districts during the year.

The criteria for selection of the roads, will be developed by the end of this year so that implementation of the programme can start at the beginning of 2008.

A projected amount of over GH¢199.2million has been allocated for this initiative, while the financial institutions will be encouraged to pre-finance the projects.

"In addition, an amount of 200 million dollars from the 750 million dollar sovereign bond will be used for the road sector including the dualisation of the Accra-Kumasi highway." He added that 90million dollars from the sovereign bond has already been allocated to build the western corridor of the railway network.

On the water sector, he said, five communities in each of the 166 districts will be provided with good drinking water through various potable water projects estimated at over GH¢7,470,000.

For the energy sector, he said that medium and long term measures have been initiated and 2008 will see the vigorous implementation of those measures.
These include the operationalisation of the Osagyefo Power Barge at Effasu, the execution of the Bui Hydro Electric Power Project and the execution of Hemang and Awisam Hydro Electricity Power on the Pra River.

Others, are the execution of the Hydro Electric Power project on Ankobra River, the Tanoso Hydro Electric Power on the Tano River and The Juale Hydro River on Oti River.

An amount of 460 million dollars out of the sovereign bond proceeds will be spent on the energy sector with focus on the transmission and distribution network, he said.

In addition, government will provide electricity to five communities in each of the 166 districts of the country at an estimated cost of GH¢613,042,980.

Other areas the budget focused on include the management of the potential oil reserves for which a taskforce is to be set up to prepare a master plan for the emerging oil industry.

"The task force will examine the social and economic implications of Ghana becoming an oil-producing country and present proposals that will, among others, ensure that oil revenues will be used for economic diversification for the benefit of all Ghanaians, and to minimise the potential social and economic dislocations associated with oil wealth," he said.

Mr. Baah-Wiredu also announced that the government will in 2008 design a Stabilization Fund to insulate the economy from external shocks, specifically the unpredictability of export earnings from the country’s major exports namely cocoa, gold, timber, and oil in the near future.

The fund, he said, will be invested to ensure its protection as well as its growth.

As part of the objective to develop the long term investor segment of the domestic capital market in order to lengthen the yield curve of the national debt, he said the government will issue, for the first 10-years domestic bond in 2008.

In addition, the government will rationalise the issuance calendar to achieve issue predictability and to encourage secondary trading between issues.

On measures to expand the tax net, the Minister said that the government has decided to abolish import duty and import VAT on all mobile phones and introduce a more effective means of taxing mobile phone usage.

"Consequently, government proposes to impose a specific excise duty per minute of airtime use on mobile phones," he said.

Touching on the challenges the budget is likely to encounter, he said that although the government has made major strides in maintaining macroeconomic stability, continued efforts are still needed to sustain the stability posed by the challenges in maintaining debt sustainability as part of debt management strategy; public sector reform and high wage demands; unpredictability of fuel prices and supply constraints in power.

The minister gave the assurance that as the Fair Wages and Salaries Commission will begin the necessary consultations with key stakeholders and also educate public sector workers, employers association, and organised labour on its recommendations on pay reforms, "the government will ensure that the real income of workers is protected."

He said that measures would be introduced next year to address the problem of decreasing flow of credit to the agricultural sector in recent times.
The measures include tax incentives to financial institutions to increase the flow of credit to the sector and reduce interest rates on agricultural loans to the five per cent ten per cent range as well as lengthen the maturity term of loans to between five and ten years.

Additionally, an Agricultural Investment Fund/Farm Credit Corporation with 100 per cent focus on agriculture to provide a range of financial services such as working capital and long-term loans, insurance, and leasing to the sector would be established.

Touching on spending for the upcoming 2008 general election, he said, the government is resolved not to overspend but ensure discipline and prudence in fiscal management to ensure that the nation does not derail her accomplishments for electoral benefits.

Giving the projections for next year, he said the macroeconomic framework for the 2008 projects a real Gross Domestic Product (GDP) growth of at least seven per cent; an end period inflation rate of between six and eight per cent; an average inflation of seven per cent; accumulation of international reserves of the equivalence of at least three months of import cover; and an overall budget deficit of four per cent of the GDP.