Consequently, the assessment by Government is based on a price of US$52.8 per barrel, which is consistent with the IMF forecast. However, following discussions with the oil production companies, oil output is expected to remain unchanged at the 102,033 barrels per day used in the 2015 Budget. The practical implication is that the periodical ceilings given to MDAs and MMDAs are being revised downwards on account of the likely shortfall in petroleum revenues.<\/li>\n<\/ol>\nImpact on Total Revenue and Grants<\/em><\/strong><\/p>\n\n- Speaker, based on the new revenue assumptions, total petroleum receipts for 2015 is estimated at GH\u00a21.5 billion (1.1 percent of GDP), compared with the 2015 Budget estimate of GH\u00a24.2 billion (3.1 percent of GDP). The difference of GH\u00a22.7 billion is 64.4 percent lower than the 2015 Budget target. Of the projected total petroleum receipts, GH\u00a2468.9 million will be transferred to the National Oil Company in line with the PRMA. Hence, the remaining amount of GH\u00a21.0 billion (0.8 percent of GDP), will not be sufficient to cover the Annual Budget Funding Amount of GH\u00a22.5 billion in the 2015 Budget.<\/li>\n
- Among the various sources of petroleum revenues in the PRMA, the significant decline in total petroleum receipt is mainly attributed to substantial decline in corporate income tax from oil companies. This is because the production costs for some of the companies will outstrip their revenues and result in losses.<\/li>\n
- Speaker, in addition to the direct impact on petroleum receipts, the decline in crude oil prices is also likely to impact negatively on the Special Petroleum Tax (SPT). Thus, the revenue yield from the special petroleum tax is estimated to be lower by GH\u00a2185.6 million.<\/li>\n
- Speaker, the fall in crude oil prices\u2014as well as the current energy situation and rapid depreciation of the cedi in 2014\u2014could also have a negative impact on overall output. As a result, it is considered that taxes on domestic goods and services as well as non-oil taxes on income and property could be lower than what the 2015 Budget estimated by GH\u00a2358.7 million.<\/li>\n
- Due to these factors, total domestic revenue for 2015 is now expected to be GH\u00a227.8 billion, resulting in a shortfall of GH\u00a23.1 billion.<\/li>\n
- Speaker, a factor that is expected to minimise the impact of the decline in crude oil prices is enhancement of grant disbursements following staff-level agreement reached with the IMF. Our development partners have pledged to disburse additional grants totalling GH\u00a2381.1 million to fund programmes in the 2015 Budget. Therefore, on a more positive note, this could result in an increase in the estimate for grant disbursements from GH\u00a21.6 billion to GH\u00a21.9 billion.<\/li>\n
- In summary, total revenue and grants for the 2015 fiscal year are now expected to be GH\u00a229.7 billion (22.3 percent of GDP) instead of GH\u00a232.4 billion (24.0 percent of GDP), resulting in a shortfall of GH\u00a22.7 billion (1.7 percent of GDP).<\/li>\n<\/ol>\n
C.\u00a0\u00a0\u00a0\u00a0\u00a0 PRECAUTIONARY STEPS IN IMPLEMENTATION OF THE 2015 BUDGET<\/p>\n
\n- Speaker, the Government has been intensifying the implementation of measures approved in the 2015 Budget. The purpose is to address the revenue shortfalls noted above, ensure the achievement of the objectives of the ongoing fiscal consolidation, and keep borrowing in line with the levels approved in the 2015 Budget.<\/li>\n
- The key measures include an across the board reduction in expenditure ceilings on Goods and Services and Capital by GH\u00a2344.0 million and GH\u00a2868.4 million, respectively, as well as a drawdown from the Ghana Stabilization Fund. However, these measures are designed to protect social spending.<\/li>\n
- Similarly, transfers to the Ghana National Petroleum Company (GNPC) from Government\u2019s carried and participating interest in oil will be reduced to GH\u00a2468.9 million.<\/li>\n
- In summary, the estimate for total expenditure and arrears clearance for 2015 are expected to decline by GH\u00a21.5 billion from GH\u00a241.2 billion (30.5 percent of GDP) to GH\u00a239.7 billion (29.8 percent of GDP).<\/li>\n
- Based on these expected changes in total revenue and grants as well as total expenditure and arrears, the fiscal deficit for 2015 is estimated to be GH\u00a210.0 billion (7.5 percent of GDP), up from the 2015 Budget target of GH\u00a28.8 billion (6.5 percent of GDP).<\/li>\n
- In line with the formula specified in section 12 of the PRMA, it is expected that an amount of GH\u00a2487.2 million would be drawn from the Ghana Stabilization Fund, on a quarterly basis to finance the gap. Mr. Speaker, the drawdown of the GSF is significant in one major respect: it bears testimony to our efforts at building fiscal buffers in our public financial management. It is in times like these that we are able to reap the benefits of making a conscious effort at building the GSF. This underscores the need to build the GSF as was announced in the 2015 Budget.<\/li>\n
- Speaker, it is important to note that the GSF had accumulated in excess of US$590 million both in capital and interest incomes between 2011 and 2014. In similar vein, we expect to see the benefits of other initiatives such as the establishment of the Ghana Infrastructure Investment Fund (GIIF) and the Ghana EXIM Bank.<\/li>\n
- Speaker, besides the drawdown from the Stabilization Fund, the fiscal deficit will be financed from domestic and foreign sources.<\/li>\n
- Domestic financing of the Budget is estimated at GH\u00a26.4 billion, lower than the 2015 Budget estimate. It is expected that this will free up more resources for the private sector and reduce government\u2019s domestic interest costs burden.<\/li>\n
- Foreign financing of the deficit is estimated at GH\u00a23.0 billion. Of this amount GH\u00a21.7 billion will be sourced through the issue of a Eurobond (in addition to an estimated US$500 million that is expected to be used to refinance the 2007 Eurobond). We will come to this august House to seek approval for the issuance of the said Eurobond, in line with the two-year market policy approved by the House in the 2014 Budget.<\/li>\n<\/ol>\n
Other steps being implemented by Government<\/em><\/strong><\/p>\n\n- Speaker, we will continue to strengthen the Public Financial Management system and deepen structural reforms in the public sector as part of the overall objective of ensuring transparent and accountable economic governance.<\/li>\n
- To make the reduction in expenditures effective and ensure the achievement of our fiscal objectives, the Ministry of Finance has issued Budget Implementation Instructions to all MDAs to ensure that the following measures are implemented:<\/li>\n
- Transfers to Statutory Funds will continue to be aligned to central government programmes. Furthermore, Statutory Funds are to continue limiting the award of new contracts and focus on the clearance of existing commitments in accordance with Government policy;<\/li>\n<\/ol>\n
\n- The expenditure ceilings are being enforced through implementation of quarterly budget allotments on MDAs budgets. In this regard, expenditures will be prioritized by the MDAs based on the budget allotments. Requirements for Specific Warrants and Commencement\/Continuation Certificates under the GIFMIS will ensure that capital expenditures are within the new limits;<\/li>\n<\/ol>\n
\n- Continuation of the policy on limit on the award of new contracts by MDAs as well as the curtailment of extensions and variations in ongoing projects will be enforced; and<\/li>\n<\/ul>\n
\n- Government has started disallowing the award of MDA and MMDA contracts with provisions that allow for indexation in foreign currency. Also some of these institutions denominate local costs in foreign currency. In exceptional circumstances where contracts need to be awarded in foreign currency, prior approval must be obtained from the Ministry of Finance. In this regard, companies which have existing contracts denominated in foreign currency and who incur foreign exchange losses are reminded to claim such losses as allowable expenses under the income tax laws. This is also in line with accounts prepared under International Financial Reporting Standards (IFRS) and International Public Sector Accounting Standards (IPSAS). Consequently, no claims for forex losses will be entertained.<\/li>\n<\/ol>\n
\n- Speaker, as noted in the 2015 Budget, the weaning off of some subvented agencies from Government payroll has begun. Three agencies, namely; the Energy Commission, the Environmental Protection Agency (EPA), and the Driver and Vehicle Licensing Authority (DVLA), which have the capacity to be financially independent based on their Internally Generated Funds (IGFs) have been identified for weaning off this year. Nine other agencies are being reviewed for implementation in subsequent years.<\/li>\n
- Speaker, the Controller and Accountant General\u2019s Department in collaboration with the Ministry of Finance and other agencies continue to implement reforms to address the payroll and HR challenges in the public service. These reforms are being implemented to check the size of the compensation bill which is being gradually brought within budget constraints, thereby providing funding for other important national priorities. Government commits to tighten control of the payroll.<\/li>\n
- Following the Ho Forum on the sustainability of the Single Spine Pay Policy, a number of pay roll and Human Resource (HR) measures have been put in place to address existing weaknesses. In addition, Cabinet has constituted an Inter-Ministerial Committee on payroll clean-up to identify areas for improvement in the payroll and Human Resource administration and to recommend measures to address them. Payroll reforms which are currently being implemented include:<\/li>\n
- The provision of monthly Payroll reports to all Sector Ministers for verification and validation. The exercise is aimed at informing Sector Ministers and heads of MDAs of the status of their payroll to ensure that they check the payroll and HR management issues in their various units;<\/li>\n<\/ol>\n
\n- The CAGD has also initiated an exercise to update the bank account details of employees on the mechanized payroll system as part of reforms to clean the mechanized payroll data. The names of employees with zero bank accounts numbers were identified and suspended from the payroll system. As at the end of February 2015, 44,496 names out of the total number of 47,186 employees were validated by the Audit Service and restored onto the payroll. The records of the remaining 2,690 employees who did not submit the required documents were suspended from the payroll permanently and are to be investigated for appropriate sanctions to be applied;<\/li>\n<\/ol>\n
\n- The CAGD has also begun another exercise to suspend the salaries of employees on the mechanized payroll without Social Security numbers. Opportunity has been provided to employees on the mechanized payroll to update their record by end\u00a0 of March after which the names will be permanently expunged;<\/li>\n<\/ol>\n
\n- Following the success in using the E-Switch for public sector wage payments, the exercise has been extended to the payment of allowances of National Service Personnel and will be extended to all employees on the mechanized payroll. The aim of this exercise is to validate employees using the E Switch database. For the month of February 2015 the National Service Secretariat paid its personnel on E-switch cards. The exercise will ensure a single identity for each employee on the payroll;<\/li>\n<\/ol>\n
\n- In line with government policy to use ICT to drive business processes in the public service, the CAGD has developed and deployed an Electronic Salary Payment Voucher System (E-SPV) for use by heads of MDAs and MMDAs. Validation and certification through the E-SPV system has now become a pre-condition for payment of salaries to employees. The automation has addressed the delays in updating the payroll and in particular the deletion of separated staff from the payroll. Unit heads, thus, determine who should be paid for a particular month. The E-SPV System has been deployed in 4 regions, namely Greater Accra, Ashanti, Brong Ahafo and Northern regions. Nationwide rollout of the E-SPV system is expected to be completed by June, 2015;<\/li>\n<\/ol>\n
\n- These measures are designed to decentralize the payroll management to the district and unit level. The aim is to empower Heads of MDAs and MMDAs to have full access to their payroll data to enable them exercise control over their payroll cost; and<\/li>\n<\/ol>\n
\n- Integration of the payroll system into GIFMIS Financials and GIFMIS Hyperion has been completed. This is to facilitate monitoring and strengthen budgetary control over payroll. Furthermore, the integration with the HRMIS is ongoing and expected to be completed in June 2015.<\/li>\n<\/ol>\n
\n- Speaker, the emphasis on payroll and HR is important because it constitutes the largest single item in the Budget and as is well known has been plagued with many problems in the past.<\/li>\n<\/ol>\n
D.\u00a0\u00a0\u00a0\u00a0\u00a0 UPDATE ON PROGRAMME WITH THE INTERNATIONAL MONETARY FUND<\/p>\n
\n- Speaker, permit me to provide a brief update on the status of the negotiations with the IMF for a Fund programme. We have been in negotiations with the IMF and subsequently held four rounds of negotiations with the IMF. During the last visit of the Fund mission to Ghana from 19th<\/sup> to 26th<\/sup> February 2015, Government reached staff-level agreement with the Fund subject to approval by IMF Management and the Executive Board.<\/li>\n
- The programme will be supported by a three-year Extended Credit Facility (ECF) arrangement.\u00a0 The proposed access to Fund resources which is for Balance of Payment support could total SDR 664 million (about US$940 million), or 180 percent of Ghana\u2019s IMF quota.<\/li>\n
- Hon. Speaker, I am happy to inform you that the IMF Executive Board is scheduled to meet in early April to consider and approve Ghana\u2019s programme with the Fund.<\/li>\n<\/ol>\n
E.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 CONCLUSION<\/p>\n
\n- Hon. Speaker, as noted in the 2015 Budget, the medium term prospects of the economy remain bright. This is supported by expected additional oil and gas production, enhanced services sector performance, and improvements in agriculture, among others.<\/li>\n
- Speaker, I wish to conclude by emphasizing that government will continue to work tirelessly to ensure that these positive prospects as well as our macroeconomic stability and socio-economic objectives are not derailed by external and domestic shocks. Our resolve to address the impact of these shocks has once again been demonstrated by our quick reaction in putting in place remedial measures to address, where necessary and as presented to you today. Mr. Speaker, may I repeat that it is the fiscally prudent and responsible thing to do\u2014and in line with the regular reporting or briefing that this House deserves.<\/li>\n
- Speaker, it is our conviction that the measures we have put in place to address the impact of these shocks will yield the intended benefits and significantly contribute to the achievement of our short-to-medium term fiscal consolidation objectives.<\/li>\n
- Speaker, in the course of this year, I will on behalf of H.E the President come back to this august House for a mid-term review of the 2015 Budget.<\/li>\n
- Hon. Speaker, I wish to thank you and members of the House for granting me the privilege to address the House.<\/li>\n<\/ol>\n
\u00a0–<\/strong><\/p>\nBy: Marian Efe Ansah\/citifmonline.com\/Ghana
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