Full text: 2017 ‘Asempa’ budget presented by Finance Minister

Finance Minister Ken Ofori-Atta has presented the first budget of the governing New Patriotic Party (NPP) to Parliament, Tuesday at a time when there are high expectations.

Christening it the “Asempa budget,” the Minister itemised five programmes of President Nana Addo Dankwa Akufo-Addo that will be started in 2017.

Below is the full statement presented:
SECTION ONE: INTRODUCTION
1. Rt. Hon. Speaker, Honourable Members of Parliament, on the authority of President Nana Addo Dankwa Akufo-Addo, I beg to move that this Honourable House approves the Financial Policy of the Government of Ghana for the year ending 31st December

2017.
2. On the authority of the President, and in accordance with Article 179 of the 1992 Constitution, permit me to present to this august House, the maiden Budget of the President of the Republic of Ghana.

3. This presentation is an abridged version of the 2017

Budget Statement and I would like to request the Hansard Department to capture the entire Budget Statement and Economic policy

4. I also submit before this august House the following reports:

· The 2016 Annual Report on the Petroleum Funds, in

accordance with Section 48 of the Petroleum Revenue

Management Act, 2011 (Act 815), as amended;
· The 2016 Annual Debt Report, in accordance with Section

72 of the Public Financial Management Act, 2016 (Act 921);

and
· The 2016 Energy Sector Levies Report, in accordance with

Section 6 of the Energy Sector Levies Act, 2015 (Act 899).

5. Mr. Speaker, let me first thank you and the house for approving my nomination as Finance Minister. My profound gratitude to both sides of the isle. Thanks for the dry run of 3 hours 45 minutes; I pray that I will be let off sooner this time. Mr Speaker, I also stand here humbled by the President’s courage and confidence to elevate me to this very weighty and high office of Finance Minister of the Republic of Ghana, a nation with a manifest destiny for greatness, a nation with very high expectations for President Akufo-Addo’s government, a nation that is 60 years old, remains a diamond in the rough and therefore needs more than a shine.

6. Mr. Speaker, it is at this providential point in our history that I have been given this grave but exciting responsibility to participate in sending Ghana beyond aid and to realise our birth right as the Black Star of Africa. I, Mr. Speaker, accept this role with all the solemnity and reverence that it deserves.

7. Mr. Speaker, I would like to assure this house as I also did with the Finance Committee that I will work with members with utmost candour and respect. You are first and foremost the legislative, the representatives of our people and I have been privileged to witness the sacrifices you have gone through to be here. Ayekoo. Secondly, Mr. Speaker, I am standing in the rather large size shoes of a legacy of family members such as Dr. JB

Danquah, Mr. William Ofori-Atta, Honourable Amoako-Atta, Dr. Jones Ofori-Atta (my father), President Nana Addo Dankwa Akufo

-Addo and Honourable Atta Akyea. I have, Mr. Speaker, been brought up to respect this house and I will also like to honour my forbears. Finally Mr. Speaker, let me freely admit, that this battle ahead is indeed the Lord’s and I humbly confess before this august house and the nation, of my inability to accomplish this enormous task without the help and the leading of the Almighty; through Jesus Christ we can resolve these challenges and establish a righteous and just Society for all.

8. Mr. Speaker, nine (9) days ago, the President presented the State of the Nation Address to this august House. His address, in addition to presenting the state of the economy, also broadly outlined the vision and policy direction of his Government. A vision of hope, of jobs and wealth creation, and of a robust economy that supports a thriving private sector. With this Budget, I present to you the policies, strategies and actions we will undertake to deliver the President’s vision.

9. Mr. Speaker, let us acknowledge that we have inherited a challenged economy in which we are all stakeholders in:

· considerable debt overhang and rising interest payments caused by excessive borrowing;

· expenditure overruns and accumulated arrears caused by

excessive sole sourcing, lax fiscal policies and weak commitment controls,

· revenue underperformance caused by leakages, loopholes and tax exemptions;

· slowdown in economic growth caused by energy challenges and a lack of an enabling environment for the private sector;

· limited capital investment, among others, due to rigidities from earmarking of revenues that severely limit the fiscal space and undermines the prioritisation of government policies; and.

· urgent need to collaborate with our work force and build a shared partnership to enhance training and improve productivity

10. The country’s debt stock has reached a level of about 73 percent of GDP at end-December 2016, which is in excess of the debt sustainability threshold of 70 percent. This has resulted in high debt service costs with interest payments alone taking up nearly 42 percent of tax revenue. This, together with Compensation of Employees and Statutory Payments, is more than total domestic revenue, leaving no fiscal space for growth enhancing policies/programmes/expenditures.

11. Total expenditures at end-December 2016 stood at 30.3 percent of GDP against a target of 26.4 percent of GDP, with an outstanding stock of arrears of nearly GH¢7 billion. This is at variance with the Performance Criteria on the non-accumulation of arrears for the 2016 fiscal year under the IMF-supported Extended Credit Facility (ECF) Programme.

12. Mr. Speaker, the large fiscal slippages resulted in a fiscal deficit of 8.7 percent of GDP on cash basis and 10.3 percent on commitment basis. This is a sharp deviation from the IMF program fiscal target of 5.3 percent of GDP. We intend to reverse this trend and restore fiscal discipline.

13. Mr. Speaker, the rate of economic growth has slowed down in recent times, with 2016 growth estimated at 3.6 percent, the lowest in over two decades. Of particular concern is the erratic performance of the Agriculture Sector and the continuing energy challenges which have negatively affected the industrial sector. The effect of this is a struggling private sector and rising unemployment.

14. Mr. Speaker, while inflation and interest rates have recently been on the decline, we still have to fix the underlying macroeconomic fundamentals to ensure that this trend is sustainable.

15. Mr. Speaker, the economic challenges we face require deliberate but urgent, well thought out strategic steps and the backing and total support of the Ghanaian people. I am confident that we have the human resource, especially in this House and in our Diaspora Community, the experience, and most importantly the resounding mandate of the people to guide and inspire us.

16. This budget presents a clear roadmap on how we will move this economy from its current state into a full-fledged middle income economy – a Ghana beyond Aid.

17. Mr. Speaker, our goal is to build the most business-friendly and people-centred economy in Africa, which will translate into job creation and prosperity for all Ghanaians. We will strike the right balance between fiscal consolidation and growth, by making credible policy choices that will create the fiscal space to implement growth enhancing initiatives. Mr. Speaker, we intend to build a partnership with labour that will result in a social contract to mark an era of peace in which we will mutually enhance the productivity of our labour force.

18. This commitment however, is hampered by five constraints which we need to overcome:

· low revenue collection;
· expenditure overruns and corruption;
· high wage bill;
· rigidity of fiscal structure caused by heavy earmarking of tax revenue; and

· high debt service payments.
19. This budget presents a proposal to address these issues permanently and I hope I can secure the support of this august House in that regard.

20. Revenue administration remains a challenge. To boost revenue streams, we will strengthen tax administration, reduce tax exemptions, plug revenue loopholes and leakages and combat tax evasion especially at our ports. We will broaden the tax base whilst reducing and abolishing some taxes and levies. The National Identification Scheme, a priority project of this administration, which we intend to re-launch this year, will support our efforts to rope in the economically active but undocumented citizens and the informal sector of the economy thereby broadening the tax base and accelerating financial inclusion.

21. Mr. Speaker, we will adhere to and maintain good economic governance principles of fiscal discipline, accountability and transparency. To reiterate what the President said, we will protect

the public purse by guaranteeing value for money in all public transactions, and exercising prudence and discipline in our fiscal management to deliver on the aspirations of the Ghanaian people. Inefficiencies and waste in government spending will not be tolerated and there will be strict enforcement of all relevant laws and regulations, especially the new Public Financial Management Act, 2016 (Act 921).

22. Government will pursue an effective debt management strategy to ensure debt sustainability. We will also adopt global standards of risk and treasury management to ensure accountability in the use of state resources. In addition, we will work to reduce the amount of government borrowing and the resulting crowding out of the private sector. Mr. Speaker, as an example, In the 2016 budget statement, the entire allocation for the Ministries of Roads and Highways, Trade and Industry, Food and Agriculture, Water Resources, Works and Housing, Youth and Sports and Ministry of Transport amounted to a total of GHC2.2 billion. Interest payments in 2016 (GHC10.8 billion) would be nearly 5 times what was allocated to the six key ministries combined. This is how pernicious our debt stranglehold is.

23. Mr. Speaker, the Budget will set the pace for job creation and accelerated growth by empowering the private sector. To accomplish this, we will shift the focus of economic

management from taxation to production. This will reduce the cost of doing business and create a conducive climate for investment and job creation. In this regard, a number of taxes that impede growth will be reviewed, and if necessary, abolished. Government will reverse the recent low growth trend by boosting agriculture and industrial productivity.

24. Mr. Speaker, the 2017 Budget will set in motion the following key policy priorities and flagship projects:

· establishment of the Infrastructure for Poverty Eradication Project (IPEP). Under this project, every constituency will be allocated the cedi equivalent of US$1 million to combat poverty and improve the lives of rural dwellers and deprived communities;

· implementation of the “One District One Factory”

programme;
· establishment of the Zongo Development Fund to support the provision of critical infrastructure and services;

· roll-out of the National Identification Scheme to facilitate the efficient delivery of public and private services and help formalise the economy;

· roll-out free SHS to ensure equal opportunities for all and enhancement of human capital for the country;

· roll-out of a national digital addressing system to provide

unique addresses for all properties in Ghana; and
· restoration of teachers and nurses training allowances.

25. Mr. Speaker, despite significantly missing the 2016 the set targets, I want to assure my fellow Ghanaians, investors and external stakeholders that we are committed to continue with the Extended Credit Facility (ECF) Programme with the IMF. We will, however, review some of the targets and structural reform benchmarks to accommodate our priorities of tax reliefs and other positive measures to boost the private sector.

26. Mr. Speaker, Government will implement measures that will unleash the creative abilities of Ghanaians, and facilitate increased economic activity which will lead to the improvement in people’s lives.

27. Mr. Speaker, there are exciting times ahead and there is every good reason to be optimistic that our country is ready to work again. Our government looks forward to a partnership of progress with our honourable colleagues across the aisle

28. Mr. Speaker we must as a nation come together to confront our reality. The President did mention nine days ago that he was in a hurry… Mr. Speaker, we must all be in a hurry, we must trigger a national sense of urgency to deal with our deficit. It’s

continual presence curtails our capacity to leverage our many opportunities and resources that we have as a nation. Let me stress, Mr. Speaker, we cannot borrow our way out of these challenges. This will be tantamount to creating and sharing poverty, which only leads to a loss of our fiscal sovereignty; so like the President, we must all be in a hurry to grow our way into Prosperity. This budget, Mr. Speaker, seeks to do this.

29. Mr. Speaker, my presentation today will follow this outline:

· I will present a short brief on how the Global economy performed in 2016, the medium-term outlook and the expected impact on the Ghanaian economy;

· This will be followed by the Macroeconomic Performance for 2016 against the target sets;

· I will then present the President’s Macroeconomic Targets for 2017 and the Medium-Term Targets;

· In addition, I will briefly talk about some key sector deliverables for 2017;

· And then provide you with the key policy initiatives for 2017;

and
· I will finally conclude with highlights of the key messages in the Budget.

GLOBAL ECONOMIC PERFORMANCE AND
OUTLOOK
Global Output
30. Mr. Speaker, the global economy is expected to witness some improvement in growth in 2017 and the medium term after a lackluster performance in 2016. The January 2017

Update of the IMF’s World Economic Outlook (WEO) projects a global growth of 3.1 percent in 2016. This is expected to improve marginally to 3.4 percent in 2017 and further to 3.6 in

2018.
31. For emerging markets and developing economies growth is expected to remain unchanged at 4.1 percent in 2016, and is projected to recover to 4.5 percent in 2017 and further to 4.8 percent according to the WEO.

32. The downside risks to the global outlook, according to WEO, include, increased restrictions on global trade and migration and its negative impact on productivity. In addition, high corporate debt, declining profitability, weak bank balances, and thin policy buffers in emerging market economies may lead to capital flow reversals and depreciation of the local currency.

Commodity Prices
33. Mr. Speaker, oil prices have picked up in recent weeks resulting mainly from an agreement among major producing countries to reduce supply. Crude oil prices are expected to

average $55 per barrel in 2017, about 28 percent increase over the 2016 levels.

34. Gold prices are expected to decline from an average of US$1,249 per fine ounce in 2016 to US$1,219 in 2017 due largely to an expected strengthening of the US dollar. According to the Commodity Markets Outlook by the World Bank, Cocoa price is projected to average about US$2,940 per tonne in 2017 up from US$2,850 in 2016.

Implementation of ECOWAS Common External Tariff (CET

35. Mr. Speaker, Ghana joined nine other member state to implement the ECOWAS Common External Tariff (CET) effective 1st February, 2016. The ECOWAS CET is considered a major platform for the establishment of Customs Union that will facilitate free trade and advance greater economic integration within the region. The tariff is expected to help address problems such as cross-border smuggling and dumping in the sub-region. Government is currently monitoring and evaluating the impact of the new regime on various sectors of the economy.

Implications of Global Developments for Ghana’s Economy

36. Mr. Speaker, we address the risk of commodity price volatility, Government will work towards diversifying the economy. We will add significant value to our exports and support local manufacturing of imported goods, which can be produced locally in partnership with the private sector.

MACROECONOMIC PERFORMANCE FOR 2016
Growth
37. Mr. Speaker, growth has remained subdued over the period. The 2016 GDP, based on the provisional outturn for the first three quarters of the year, is estimated at 3.6 percent, with the non-oil real GDP estimated at 4.6 percent, same as target. At the sectoral level, the Industry Sector, specifically, mining and quarrying underperformed due to a contraction in upstream petroleum output, which constitutes the bulk of the Mining and Quarrying Subsector. All the subsectors in the Agriculture Sector, however, recorded positive growth rates. The Services Sector continues to dominate the sectors with a share of 54.3 percent in 2016.

Inflation
38. Mr. Speaker, inflation, which remained elevated for most

part of 2016, began to slow-down towards the end of the year. Inflation began the year at 19.0 percent, peaked at 19.2 percent in March and ended the year at 15.4 percent.

Monetary and Credit Developments
39. Mr. Speaker, the key monetary aggregates and credit to the private sector recorded slower growth in 2016, in line with the tight monetary policy stance. The broad money supply (M2+), at the end of December 2016, recorded an annual growth of

22.0 percent compared with 26.1 percent in the same period of

2015. This was mainly driven by a moderate growth of 19.5 percent in Net Domestic Assets (NDA) and a Net Foreign Assets (NFA) growth of 29.8 percent in December 2016

40. Growth in total outstanding credit to the public and private institutions moderated further in December 2016, a reflection of a higher incidence of non-performing loans and the tight monetary policy stance. The annual growth in total credit slowed to 17.6 percent at the end of December 2016 from 24.9 percent recorded in 2015.

Stock Market Developments
41. Mr. Speaker, annual changes in the Ghana Stock Exchange

Composite Index (GSE-CI) remained negative, generally reflecting investor preference for higher yielding money market instruments. The GSE Composite Index (GSE-CI) lost 15.3 percent (305.82 points) year-on-year in December 2016 to close at 1,689.09 points from 1,994.91 points in December

2015. Total market capitalization stood at GH¢52,690.99 million at the end of December 2016, showing a year-on-year decline of 7.8 percent.

Interest Rate
42. Mr. Speaker, interest rates in 2016 exhibited mixed performance. The Bank of Ghana Policy Rate was kept at 26 percent until October 2016 as risks to inflation and growth were assessed as balanced. The policy rate, however, was reduced to 25.5 percent, as inflation pressures eased while domestic growth conditions continued to deteriorate. Yields on short-term Government securities decreased, while those of medium to long-term GOG bonds increased in line with Government’s policy to properly align the yield curve and extend the maturity profile.

Exchange Rate
43. Mr. Speaker, the Ghana cedi remained relatively stable against the major currencies in the currency market, on account of tighter monetary policy and improved foreign exchange inflows. However, this trend was reversed in the run- up to the December elections, as demand pressures mounted. The Ghana cedi recorded a cumulative depreciation of 9.6 percent and 5.3 percent against the US dollar and the euro, respectively, but appreciated by 10.0 percent against the pound sterling in the interbank market in 2016.

External Sector
44. Mr. Speaker, the balance of payments (BOP) turned surplus for the first time since 2011 due to improved current account balance. Accordingly, there was a build-up in gross foreign assets, which supported the relative stability in the exchange rate. The BOP surplus was US$247 million, compared to a deficit of US$129 million in 2015. The trade balance improved from a deficit of US$3.1bn in 2015 to a deficit of US$1.7bn in

2016 due to increased exports receipts by 7.2 percent and a decline in imports by 5.3 percent.

45. The gross foreign assets at the end of December was estimated at US$6,161.80 million, from US$5,884.70 million at the end of December 2015, representing a build-up of US$277.07 million. This was sufficient to provide cover for 3.5 months of imports of goods and services, same as in December 2015.

Fiscal Developments
46. Mr. Speaker, the main objective of fiscal policy, as envisioned in the 2016 Budget, was to consolidate Government’s finances by reducing the fiscal deficit from 6.3 percent of GDP in 2015 to 5.0 percent of GDP in 2016.

47. Provisional data for 2016, however, indicates that the envisioned fiscal consolidation was not achieved. As a result, total domestic revenue and grants was 11.1 percent below target (an actual of GH¢33.7 billion, against a target GH¢37.9 billion), while total Expenditure (including outstanding expenditure claims) exceeded the target by 16.2 percent. These slippages resulted in a fiscal deficit on commitment basis of 10.3 percent of GDP. On cash basis, the fiscal deficit was 8.7 percent of GDP against a target of 5.0 percent of GDP. The primary balance for the period, recorded a deficit of 1.4 percent of GDP, against a targeted surplus of 1.2 percent of GDP.

48. Mr. Speaker, the shortfall in total Revenue and Grants was broadly attributed to the impact of energy challenges on households and firms, lower than anticipated receipts from oil due to both lower-than-programmed benchmark crude oil price and production, and non-realisation of proceeds from both tax and non-tax categories. In addition, tax compliance was relatively weak.

49. Mr. Speaker, total expenditures (incl. outstanding obligations) amounted to GH¢51.1 billion at end-December

2016. Outstanding obligations of GH¢5 billion, comprise MDA obligations with MoF, which had not yet been captured on the GIFMIS as well as oustanding payments to Statutory Funds. The outstanding obligations relate mostly to Compensation of Employees, Goods and Services, and domestically financed Capital Expenditure..

Petroleum Receipts in 2016
50. Mr Speaker, in 2016, GNPC lifted six parcels of crude oil (consisting of the 31st to 35th Jubilee and 1st TEN liftings) on behalf of the State, and exported a total of 21,580 MMscf of gas to Ghana National Gas Company (GNGC). Total crude lifted was 5,856,921 barrels of oil (4,860,462 barrels of Jubilee oil and 996,459 barrels of TEN oil). Receipts from crude oil liftings for 2016 included revenues from the sale of 4,824,417 barrels of oil from the 30th (lifted in December 2015) and the 34th Jubilee liftings, which amounted to US$207.79 million (GHȻ811.68 million). The proceeds from the 35th Jubilee and

1st TEN liftings in December 2016 were received in the first quarter of 2017. Mr. Speaker, actual petroleum receipts for

2016 fell short of the 2015 performance by 29.1 percent due to the continuous decline in crude oil prices, the decline in Jubilee production and lower TEN production.

Public Debt Development
51. Mr. Speaker, total public debt stock as at end 2016 stood at almost 73 percent of GDP up from 71.63 percent in 2015. This was due to the larger than expected fiscal deficit and financing requirement in 2016. Domestic and external debt stood at 31.7 percent of GDP and 40.8 percent, respectively. In nominal terms, the public debt stock as at end 2016 stood at GH₵122.3 billion (US$29.2 billion), with domestic and external debt of GH₵53.4 billion (US$12.8 billion) and GH₵68.9 billion (US$16.5 billion), respectively.

52.
Energy Sector Levies
53. Mr. Speaker, the Energy Sector Levies Act, 2015 (Act 899) was enacted to “consolidate existing energy sector levies to ensure efficient utilisation of proceeds generated from the levies, impose a price stabilisation and recoveries levy to facilitate sustainable long term investments in the energy sector, and to provide for other related matters”.

54. Mr. Speaker, the law requires the utilisation of the energy sector levies mainly for the clearance of legacy debts of SOEs operating in the energy sector, to support power generation and power sector infrastructure, subsidy for premix fuel, and

the stabilisation of petroleum prices.
55. A total amount of GH¢3.2 billion was programmed to be collected as total Energy Sector Levies (ESL) for the year 2016. Actual collections at the end of the year was GH¢3.3 billion. A breakdown of the utilization of the levies is provided in this Budget Statement.

56. Mr. Speaker, a few challenges have been encountered in the utilization of the proceeds and we will have to come to this august House for an amendment of the Act.

MACROECONOMIC TARGETS FOR 2017 AND THE MEDIUM
TERM
57. Mr. Speaker, Government’s policy objectives for the medium term among others will be to:

· build the most business-friendly and industrialized economy in Africa, capable of creating decent jobs and prosperity for all Ghanaians;

· modernize agriculture, improve production efficiency, achieve food security, and profitability for our farmers with special emphasis on value-addition;

· develop leadership skills, quality education,

entrepreneurship, job skills and creative skills; and

· ensure a functioning social protection system which addresses the needs of the weak, marginalized, vulnerable and socially excluded; among others.

58. Mr. Speaker, to achieve our broad macroeconomic objectives, our policy direction will be to:

· restore and sustain macroeconomic stability;

· shift the focus of economic management from taxation to production;

· manage the economy competently; and
· make the machinery of government work to deliver the benefits of progress for all Ghanaians.

59. Mr. Speaker, prudent monetary and external sector policies will also be pursued by the Bank of Ghana to complement the fiscal policy stance to ensure price and exchange rate stability.

60. Mr. Speaker, we are confident that the above highlighted policies which are discussed in detail in the Budget Statement will contribute to the achievement of the following macroeconomic targets for 2017:

· overall real GDP growth of 6.3 percent;
· non-oil real GDP growth of 4.6 percent;
· end-year inflation of 11.2 percent;
· average inflation of 12.4 percent;
· overall fiscal deficit of 6.5 percent of GDP;

· primary surplus of 0.4 percent of GDP; and

· Gross Foreign Assets to cover at least 3 months of imports of goods and services

61. Mr. Speaker, we believe strongly that our medium-term policies, anchored on fiscal discipline, a broadened tax base, elimination of wasteful expenditures, prudent debt management strategies, complementary monetary policy, and sustainable external balance will ensure even better macroeconomic outcomes in the medium-term. Consequently, the macroeconomic targets for the medium-term (2017-2019) include the following:

· overall real GDP growth to average 7.4 percent;

· non-oil real GDP growth to average 5.6 percent;

· inflation to be within the target band of 8±2 percent in the

2018-2019 period;
· overall fiscal deficit to reduce to 3 percent by the end of

2019;
· current account deficit projected to decline to 4.8 percent of GDP in 2018 and further to 2.7 percent of GDP in 2019; and

· Gross Foreign Assets to cover not less than 3.5 months of import of goods and services in the medium-term.

62. Mr. Speaker, consistent with Section 16 of the PFM Act,

2016 (Act 921), we have also set the following targets on primary and secondary fiscal indicators to monitor the fiscal health of the economy towards the achievement of our fiscal policy objectives in 2017:

· non-oil primary deficit of 0.8 percent of GDP;

· public debt stock equivalent to towards trend 70.9 percent of GDP;

· capital spending of 12.6 percent of total expenditures; and

· (domestic) revenue-to-GDP ratio of 21.4 percent

Resource Mobilization for 2017
63. Mr. Speaker, total Revenue and Grants, including programmed receipts from petroleum for the 2017 fiscal year, is estimated at GH¢44.9 billion (22.1 percent of GDP), indicating a 33.5 percent increase over the provisional outturn in 2016. Total non-petroleum Revenue and Grants is estimated at GH¢42.6 billion (21.4 percent of non-oil GDP) representing

29.2 percent increase over the provisional outturn in 2016.

64. Mr. Speaker, total receipts from petroleum is estimated at

1.2 percent of GDP and amounts to GH¢2.4 billion, representing a 231.2 percent increase over the outturn in 2016.

65. Domestic revenue is estimated at GH¢43.4 billion or 21.4 percent of GDP and is expected to be 33.5 percent higher than the provisional outturn in 2016.

66. Mr. Speaker, total tax revenue is estimated at GH¢34.4 billion, representing 6.9 percent of GDP. Of this amount, non- petroleum tax revenue is estimated to grow by 32.4 percent and this amounts to GH¢33.8 billion equivalent to 16.9 percent of non-oil GDP.

67. Taxes on Income and Property is estimated to increase by

47.7 percent to GH¢13.4 billion in 2017, accounting for 39.1 percent of total tax revenue. Of this amount, Royalties from petroleum is estimated at GH¢616.8 million.

68. Taxes on Goods and Services are estimated at GH¢13.9 billion, representing 13.3 percent increase over the provisional outturn in 2016 and 40.3 percent of the estimated total tax revenue for 2017.

69. International Trade taxes, are estimated at GH¢7.1 billion, representing 3.5 percent of GDP and 20.6 percent of total tax revenue. This estimate represents a 61.1 percent increase over the provisional outturn for 2016.

70. Mr. Speaker, the significant growth of this tax type emanates mainly from additional GH¢1.0 billion in tax measures that will be realised as savings from the reduction in the amount of import exemptions that will be granted in the 2017 fiscal year.

71. Mr. Speaker, Non-tax revenue, is estimated at GH¢6.7 billion (3.3 percent of GDP), representing 15.3 percent of domestic revenue. An amount of GH¢3.4 billion is expected to be retained by MDAs for the funding of their activities and the rest lodged into the Consolidated Fund. Of the total amount estimated for Non-tax revenue, an amount of GH¢1.7 billion is estimated as non-tax petroleum revenue.

72. Mr. Speaker, grants from Development Partners is estimated at GH¢1.5 billion, equivalent to 0.8 percent of GDP.

Resource Allocation for 2017
73. Mr. Speaker, total expenditure, including provision made for the clearance of arrears and outstanding commitments in 2017 is

estimated at GH¢58.1 billion, equivalent to 28.6 percent of GDP. The estimated expenditure for the year represents a 13.7 percent increase over the provisional outturn for 2016. Of this amount, GH¢3.7 billion, equivalent to 1.8 percent of GDP and 6.4 percent of total expenditure will be used for the clearance of arrears and outstanding commitments.

74. Mr. Speaker, provision has been made for the clearance of up to 20 percent of the outstanding claims from previous years whiles we await the outcome of a special forensic audit of these outstanding claims.

75. Mr. Speaker, Compensation of Employees is estimated at GH¢16.0 billion (7.9 percent of GDP). Of this amount, GH¢14.0 billion, equivalent to 6.9 percent of GDP

76. Expenditure on Goods and Services is estimated at GH¢3.5 billion, representing 1.7 percent of GDP.

77. Total Interest Payment estimated at GH¢13.9 billion, represents 23.9 percent of total expenditure and is equivalent to

6.9 percent of GDP. Of this amount, domestic interest payment constitutes 80.5 percent of the total Interest Payment and

amounts to GH¢11.2 billion.
78. Mr. Speaker, the existing legislation that have underpinned the estimation of Grants to other Government units over the years is being reviewed to break the cycle of rigidities in the Budget. Consequently, Grants to other Government units, comprising statutory payments into the National Health Insurance Fund, Ghana Education Trust Fund, the District Assemblies Common Fund, Road Fund, Energy Fund, transfer to the Ghana National Petroleum Company, retention of internally-generated funds by MDAs and other earmarked Funds has been constrained to a ceiling of 25 percent of tax revenues. The total allocation for grants to Other Government Units is GH¢9.7 billion.

79. Mr. Speaker, in addition to the significant tax incentives granted in this year’s Budget, an amount of GH¢241.2 million has been budgeted in Social Benefits to assist lifeline consumers of electricity and transfers for social protection.

80. A total amount of GH¢7.1 billion has been allocated for capital expenditure. Of this amount, 38.9 percent will be financed from domestic sources and the remaining from foreign sources.

Overall Budget Balance and Financing for 2017
81. Mr. Speaker, based on the revenue and expenditure estimates, the 2017 budget will result in an overall budget deficit of GH¢13.2billion, equivalent to 6.5 percent of GDP.

82. Financing of the deficit will be from both domestic and foreign sources. Net Domestic Financing is estimated at GH¢14.6 billion, equivalent to 7.1 percent of GDP, and includes financing from divestiture proceeds of GH¢1.8 billion. Net foreign financing is estimated to constitute a net repayment of GH¢1.3 billion, equivalent to 0.6 percent of GDP. An amount of GH¢300.7 million, equivalent to 0.1 percent of GDP is estimated to be saved in the Ghana Petroleum and Contingency Funds while the Sinking Fund is expected to be drawn-down by GH¢716.1 million.

Projection of 2017 Petroleum Receipts and allocation

83. Mr. Speaker, the estimated Benchmark Revenue (BR) price for crude oil is US$56.142 per barrel for 2017 with a benchmark output of 43,875,920 barrels (120,208 bopd) and 32,512,497

MMBtu for oil and gas, respectively.
84. The petroleum revenue for 2017 is estimated at US$515.64 million, with BR projected at US$242.08 million.

85. Mr Speaker, the second 3-year cycle for the review of the petroleum revenue distribution formula, as stipulated in the PRMA, has elapsed. We would like to request this august House to maintain the existing distribution formula as follows:

· 30 percent of the net Carried and Participating Interest to GNPC;

· 70 percent of net receipts (after GNPC’s) to the ABFA;

· 30 percent of net receipts (after GNPC’s) to the Ghana

Petroleum Funds;
· 30 percent of the amount allocated to the Ghana

Petroleum Funds to the Ghana Heritage Fund; and
· 70 percent of the amount allocated to the Ghana

Petroleum Funds to the Ghana Stabilisation Fund.
86. We would also like the House to approve the following priority areas for the spending of the ABFA for 2017-2019, in line with the PRMA:

· Agriculture;
· Physical Infrastructure and Service Delivery in

Education;
· Physical Infrastructure and Service Delivery in Health;

and
· Road and Rail Infrastructure Development.
The Medium Term Debt Strategy and Debt Sustainability Analysis

87. Mr. Speaker, the debt strategy for the medium term would be to manage the public debt at the lowest cost and at prudent levels of risk to bring our debt to GDP ratio to 65 percent over the medium term.

88. Consequently, in accordance with the requirement of the Public Financial Management Act, 2016 (Act 921), my Ministry will conduct and publish a Debt Sustainability Analysis (DSA) and update the MTDS to guide the borrowing plan and operations. The reports will inform policy decisions, leading to the reduction in the debt burden and insulation against other fiscal vulnerabilities.

SECTORAL PERFORMANCE AND OUTLOOK
89. Mr. Speaker, the sectoral policies are designed to achieve our broad objectives of jobs and wealth creation and macroeconomic stability while ensuring compliance with the PFM Act. Permit me to update this august House on the performance of some key sectors of the economy and the

outlook for 2017 and the medium term. I will begin with this

August House;
PARLIAMENT OF GHANA
90. Mr. Speaker, Parliament continued to discharge its mandate through the consideration of 181 Papers including 25

Bills, four Legislative Instruments (L.Is), eight Constitutional Instruments (C.Is), 19 Loan Agreements and 39 Committee Reports. Out of the 25 Bills laid, 18 were passed into law.

91. Parliament also facilitated the establishment of the Scrutiny Office to provide expert analysis of policy measures on Bills, the budget, loan agreements and international financial transactions brought before the House for approval. In 2017, the Office will be strengthened to undertake pre-legislative scrutiny of bills through research and information pursuant to the PFM Act.

92. Mr. Speake