BUDGET 2011 PRESS CONFERENCE

Ladies and Gentlemen of the Press we thank you for giving us the opportunity to remind Ghanaians of what is in store for us in 2011 as implied by the Financial policies of the Government of Ghana for the fiscal year 2011 which was presented to the August house on 18th November, 2010.

Ladies and Gentlemen, it is worth noting that unlike the 2009 and 2010 budgets, The Minister did not start out by telling Ghanaians of what the government inherited in 2008. The message is beginning to sink in. Ghanaians want to know what the NDC administration is doing about what it inherited. A government is elected to solve problems not to explain problems away in a way that it deems fit!

Fellow Ghanaians, a careful reading of the budget statement reveals a very unusual characteristic. It is about the issue of full disclosure of facts and figures relating to the true state of the economy, the non-transparent nature of policies, programs and initiatives in the energy sector, the inconsistencies in stated policies on housing, water and sanitation, among others and a general characteristic of failed promises.
Fellow Ghanaians as one reads the budget and comes across several instances of failed promises one cannot help but be afflicted with fear and panic. Fear of being hit with higher taxes and panic of further broken promises, with no relief in sight. This is why we called this year’s budget “the fear and panic budget”---
In reviewing the budget of 2011, we have had to go back to reflect on our expectations for 2010 as implied by the 2010 budget when it was delivered in November 2009. To sum it up we said “most macroeconomic targets are likely to be missed. On current policy initiatives we expect 2010, to even be a more difficult year than 2009. To be forewarned is to be forearmed”. How prophetic these words proved to be.
Ladies and gentlemen I am afraid to say that, the performance of the economy for 2010 as described in the Budget statement for 2011 was worse than we anticipated.
In 2010, the government targeted a real GDP growth of 6.5 %, the actual attained growth was 5.9% -- a missed target. With respect to sectoral growth rates, the agricultural sector was targeted to grow at 6%, industry at 6.6 % and the services sector at 6.8%. The provisional growth rates achieved are reported to be 4. 8%, 7.0 % and 6.1% for the agricultural, industry and services sector respectively. In other words for the sectoral targeted growth rates two out of three targets were missed.
On inflation, the average inflation was targeted at 10.5 %, while the end period inflation was targeted at 9. 2 %. The provisional numbers are estimated at 12.5 % and 9.38 % for the average and end period inflation respectively. It means the inflation targets were also missed despite the horn blowing of falling inflation by government.
With respect to the budget deficit, the cash-based budget deficit was targeted at 7. 5%, while the commitment-based deficit was targeted at 7.6%of GDP. The provisional numbers indicate that on a cash basis the deficit ranges between 9.7% and 13.3%. On a commitment basis the deficit is between 15% and 17%-- Another case of missed targets.
Finally, gross international reserves were targeted at 2.5 months of imports. The provisional estimate is that for 2010 gross international reserves will be about 3.2 months of imports. However if one accounts for the accumulation of arrears, then the target would have been missed.
Fellow Ghanaians lest we forget, this record of failing to achieve targets (failed promises) is not new to the NDC led administration. The story is no different for 2009; real GDP growth was targeted at 5.9% but the actual was 4.1%. Sectoral targeted growth rates were 5.7%, 5.9% and 6.6% for the agric, industry and services sectors respectively. Actual growth rates realized were 6.1%, 1.6% and 5.9% for the agric, industry and services sectors respectively. Again two out three targets missed.
Average inflation was targeted at 15.3%; but actual realized was 19.3%; End period inflation was targeted at 12.5% but actual realized was 19.25%; the cash deficit was targeted at 9.4% of GDP, but actual realized was 9.7%. When you factor in the net arrears accumulated, the deficit would have amounted to 11.1% of GDP. Gross International reserves which were targeted at 2 months of import cover reached 2.5 months in 2009. Here again if account is taken of the arrears accumulated, then gross international reserves would have been below target.
What do we conclude from this? Simply that almost all the targets set for 2009 were also not achieved. More importantly however Ghanaians got poorer in 2009, when per capita income which stood at $1231.6 in 2008 fell to $1108.6 in 2009. This represented a loss in income of about 10 %. Is this a better Ghana Agenda?
In the light of this two year record of failure to achieve targets, can anyone claim that the better Ghana agenda is on course?
When one compares our economic performance in 2009 and 2010 with those of our neighbours in the West Africa Monetary Zone, Ghana which wants to position itself as the gateway to the sub-region falls short on major indicators. For example the average growth rate for the region is expected to be over 7 % in 2010 and Ghana is happy to reach 5.9%. Is this a better Ghana agenda? The average inflation for Africa is projected to be at 6.5% in 2010. Ghana the gateway is content to target 10.5% and really registered 12.5% as the actual average inflation. That is the better “Ghana Agenda” from President Mills.
On the basis of the statistics presented above we are tempted to give a grade of F to the economic managers of the economy. The reason is that given the relatively positive external economic developments, especially with respect to gold prices, cocoa prices and a relatively stable but benign oil price in 2010, what was required was complementary domestic policies to assure that the targets set were achieved.
Since the targets were not achieved, it would stand to reason that ineffective domestic policies pursued, worked to outweigh the positive impact of the external developments. The question is what were these domestic policies. We will focus here on fiscal policy. In particular we focus on the” policy of arrears accumulation for 2010”, which in our view is at the heart of the serious economic difficulties we are currently facing.

The 2011 budget statement read on the 18th of November reveals quite clearly that the management of the economy suffered a major setback in 2010. Almost all targets set were missed as demonstrated above. The entire program of the government was anchored on its ability to reduce the fiscal deficit. The reported project deficit for 2010 of 9.7 % of GDP on a cash basis is not only off target but more importantly is grossly underestimated. . In particular the non disclosure of the status of the net arrears accumulated in the course of the fiscal year 2010, leads to an assessment of economic performance which is totally different from reality.

First, it relies on some unexplained increase in non tax revenue of over GH¢770 million from profits and dividends in the last quarter of 2010 (when the first three quarters yielded only GH¢609 million.
Second the budget did not account for over GH¢300 million in payments on arrears including judgment debt that were made in 2010.
Thirdly, the projected deficit also depends on grants of over GH¢300 million materializing in the last quarter of 2010.
Should the projections not materialize and account is taken of the stock of arrears then the projected deficit will be over 13% of GDP as compared to a target of 7.5% of GDP.
What is really worrisome however, is the significant accumulation of new arrears in 2010. The government has accumulated domestic payment arrears (that is payments not made for work done) to the tune of some GH¢3.2 billion or over 12% of GDP, including arrears on single spine salary structure of between GH¢600 million and GH¢1.1bilion), new commitments by MDA’s of some GH¢1billion, arrears on GetFund, DACF, NHIS, SSNIT pensions, etc.
When you add this new accumulation to the stock of arrears as of 2009 of GH¢ 1.4 billion then the total stock of arrears as of the end 2010 will be over GH¢4.6 billion. This is much higher than the stock of arrears of GH¢1.1 billion that was inherited in 2008. Is this a better Ghana Agenda?
In this regared it is worrisome to observe that the information that is sent to international organisations is different from what is given to us. A case in point is that at the last visit of the IMF during the second quarter of 2010, the government told them that the stock of arrears for 2008 stood at GH¢1.1 billion.
However on page 231 of the budget statement, paragraph 933 the Minister says “When I appeared before you last year, I mentioned” the legacy of arrears that this Government inherited on assumption of office in 2009…“totaling GH¢1,801.56 million related to unpaid invoices and certificates for various works done in the period leading to December 2008.” So what is it? GH¢1.1 billion or GH¢1.8 billion?.
Ladies and Gentlemen, the new arrears of some GHC 3.2 billion for 2010, indicates that on a commitment basis the deficit exceeds 23% of GDP and could be as high as 26% of GDP, a record high. We wish to remind all of you that in March 2009 and again in November 2009, when he came to present the budget statements for 2009 and 2010 respectively, the Minister told Ghanaians that he had inherited a rundown and distressed economy because the deficit was 20.1% of GDP while the stock of arrears stood at GH¢1.7 billion. After only two years in government the deficit is hovering above 23 % of GDP and the stock of arrears is above GH¢4.6 billion. Is this a better Ghana agenda?
We wonder how the Minister will want to characterize an economy with a deficit of over 23% of GDP and stock of arrears of GH¢4.6 billion? Is the economy now comatose after only two years?
With the government not paying it’s bills it is not surprising that it can boast of accumulating Gross International Reserves of some $3.9 billion. Over 60 % of the gross reserves is on the back of debt owed to workers and contractors, is this a better Ghana agenda?
As a result of the huge arrears, public debt in 2010 is increasing at a rapid pace and rose from $8 billion in Dec2008 to over $11 billion as of September 2010, representing over 68 % of GDP. The stock of public debt in 2000 stood at $7.5 billion
At this rate as of the end December 2010, the NDC administration would have added more to Ghana’s Public Debt in two years than the NPP administration did in 8 years. This does not include the STX loan of over $4.5 billion, the so-called $13 biilion framework loan package from China, as well as the over 700 million Euro loan package currently before Parliament. Is this a better Ghana agenda?
Ladies and Gentlemen thanks to the NPP administration, Ghana’s economic status changed from being a HIPC to become a MIMIC (moderately indebted middle income country). In two years of the NDC administration, we have now become A HIMIC (highly indebted middle income country). With the relatively lower economic growth rates and a rather quick pace of debt accumulation (domestically and externally), we could easily revert to being a HIPC sooner than later. Is this a better Ghana Agenda?
It is against this background of economic performance 2010, that we attempt to assess whether the fiscal measures being proposed for 2011, especially in the light of the promises made by the NDC administration (embodied in their manifesto), will lead to the achievement of the targets set in the Budget Statement for 2011.
The NDC party described these promises as a “Social Contract with the People of Ghana”
The NDC promised inter alia to:
1. Provide Tax Relief for Ghanaians through various tariff and tax measures. Since 2009, however the policies of the NDC government have increased the burden on the Ghanaian taxpayer and household through, increases in petroleum prices, increases in utility tariffs, astronomical increases in road tolls and other user fees, increases in school fees for secondary schools. Is this a better Ghana agenda?

2. The 2011 budget will further worsen the plight of Ghanaians as a result increases in a wide range of taxes on individuals and businesses. The 2011 budget introduced a 400 percent increase in petroleum taxes ; airport taxes have risen by a new environmental tax of 20% has been slapped on plastic packaging materials; gift taxes are set to rise from 5% to 15%; taxes on imported rice and poultry will rise to 35%; the abolition of tax holiday incentives for Ghanaian real estate developers; no deferred tax payment for bonded ware houses; extension of the communication service tax to all companies in the industry; increase in vehicle income tax; repeal of tax holidays for hotels and hospitality industry; increase in tax stamp for market women, businesses in kiosks and other informal sector businesses continuation of the stabilization levy on banks and financial institutions an increase in withholding taxes; a new scheme of combined vat and income tax for those falling below the threshold of GH¢90000; Is this really a better Ghana agenda.

3. Ladies and Gentlemen later on under the section on Trade and Industry we will revisit these policies and show how they will impact adversely on the economy.

Pursuant to the government’s rather optimistic projections, the Government has for 2011 introduced a wide range of tax measures ostensibly to rake in more revenues. Aside from the fact that this runs counter to the promises the NDC made to the people of Ghana, especially as captured in their manifesto, it is simplistic to assume that these measures will result in higher revenue collection. In fact it is quite likely that these new taxes may serve as a disincentive to businesses and, hence, actual revenue to be collected may fall.
We have come to this conclusion because of a record of poor tax administration and rather hugely optimistic projections on revenues, especially non- tax revenues. For 2009 and 2010, revenue collections fell below projections. Even with new taxes, the revenue agencies are underperforming, especially CEPS.
Interestingly, Ladies and Gentlemen, the NDC administration has decided that State owned enterprises which have not been performing well over long periods of time, are, suddenly in a position to provide the state with huge dividends and profits, when we know otherwise.
Additionally the NDC has a peculiar penchant to over-project collections of non-tax revenues. For example in 2009, government projected to collect over GH¢740 million in non tax revenue. By the third quarter of 2009, less than 48% of the projection, indeed only GH¢352 million had been collected. In spite of this record, in 2010 government projected to collect a whopping GH¢1.9 billion in non tax revenues. But by the end of the third quarter only GH¢609 million representing only 32% had been collected. Why this extreme optimism?
What all these sum up to is that there will be revenue shortfalls in 2011, as sure as night follows daylight.
On the expenditure side the challenges lie in the area of wage overruns as a result of the implementation of the new salary structure as well as indiscipline on the part of government agencies with respect to not respecting budgets approved by Parliament.
Admittedly, we must concede the fact that the implementation of the new SSSS will continue to bring challenges. It is important to remind ourselves that in 2010, salary arrears accumulated amounted to between GH¢600 million and GH¢1 billion, of which only GH¢214 million will be paid in 2011, leaving a balance of between GH¢386 million and GH¢786 million.
Looking at the proposed wage bill for 2011, a further salary arrears accumulation of about GH¢1.6 billion is anticipated. Thus by the end of 2011, as a result of the partial implementation of the SSSS, a total amount of between GH¢1.986 billion and GH¢2.396 billion would have accumulated as salary arrears. In particular, teachers and nurses will be owed huge salary arrears since they are likely to be the last group to be put on the new SSSS. In this regard it was almost comical the response given by the Minister of Manpower that as far as the implementation of the SSS is concerned, the government is ready with the meal and any group of workers who presented their plates would be served. Is government really ready for all workers? The obvious answer is no. But all that is in line with a better Ghana agenda!!
The second challenge on the expenditure side, relates to lack of discipline. The practice of awarding contracts over and above what is approved by Parliament must be stopped. As an example in 2010, government functionaries had approved contracts that are at least GH¢1 billion over and above what was approved in the Budget by Parliament.
Ladies and Gentlemen, on the basis of projected shortfalls in revenue and expenditure overruns especially on wages, we predict that the fiscal outcome for 2011 will be worse than projected.

In summary the government’s fiscal program in 2010 is worse than reported. On a cash basis the deficit is over 13 % of GDP. On a commitment basis the deficit is well over 23 % of GDP as a result of new accumulation of arrears in 2010.

Public debt has ballooned to over 68 % of GDP. The NDC administration has in two years increased the public debt by more than the NPP did in eight years.

The proposed fiscal measures are not robust enough to clean up the economic mess of 2010. On the revenue side, the 2011 budget continues to increase the burden on Ghanaians by increasing a wide range of taxes on businesses and individuals. In their own words in their manifesto they have pledged to “prepare and present to Parliament, legislation on various tax and tariff measures designed to provide relief for Ghanaians” within the first hundred days in office. The Good Book says “by their fruits ye shall know them”.

With respect to expenditures, the 2011 budget promises to accumulate more arrears (especially on the wage front). Public workers especially teachers, and nurses will be owed huge arrears and thus will be poorer in 2011. Another case of a Failed promise.

In addition, the appetite for debt accumulation especially on the external front (about $17.5 billion from Korea and China) continues to grow as a result of anticipated increases in petroleum revenues .In this regard one must exercise extreme caution since the oil revenue of GH¢584 expected in 2011, is barely enough to pay off 12% of the stock of domestic debt of GH¢4.6 billion, that will have accumulated by the end of 2010. In fact the total anticipated oil revenues for 2011, 2012 and 2013; of about GH¢3.5 billion cannot wipe away the GH¢4.6 billion stock of domestic debt accruing in 2010.

But on the specific matter of the anticipated oil revenues, it is important to let Ghanaians know that we are not convinced about the expected revenue of GH¢584 million since different figures are being thrown about with regards to the quantum of production for 2011. There does not appear to be any transparency in the benchmark price for petroleum which will in anticipation yield GH¢584 million. In the meantime whereas only GH¢322 is coming into the national budget about GH¢262 representing 45% of the revenue is allocated to GNPC for God knows what. It is heartwarming that upon the insistence of the Minority group Parliament has ultimately agreed that GNPC must provide details of its income and expenditure to enable Parliament determine whether it must be so supported.

After having moved from a HIPC country to MIMIC country under the NPP administration, Ghana is slowly heading towards being a HIMIC and eventually back to HIPC. In other words we are moving in the wrong direction.

Faced with these prospects and challenges, we predict that once again the targets in the 2011 budget cannot be met. In the context of the program with IMF it is likely that additional taxes and expenditure cuts may be proposed in the course of 2011. The year 2011 may be tougher for Ghanaians than 2010. The better Ghana agenda will continue to be only a mirage”. The budget brings with it fear and panic and hence the tag of “AMINA” budget.

We will now take a look at certain specific sectors to show further that the 2011 budget cannot do what it claims to do.

TRADE AND INDUSTRY
Ladies and Gentlemen, earlier on we had suggested that the imposition of new taxes will have an adverse effect on businesses in Ghana. In this section we review the various tax measures and discuss their probable effects.

Increase in the TOR Debt Recovery Levy: As we all know by now petroleum ex-pump prices have already gone up by between 25 % and 30 %. Along with this, transportation costs have gone up by 18%. Sooner rather than later other commodity prices including food will go up. Ghanaians are already feeling the impact, in the light of the fact that our incomes have not changed. Is this a better Ghana agenda?

Increase in tax on Imported Rice and Poultry: This measure may be useful, when combined with measures to improve domestic supply (which is not sufficient). In fact only 30 % of domestic consumption of rice is produced locally. As a result of this increase in tax without commensurate measures to increase domestic production Ghanaian consumers will experience higher prices on rice and poultry.

An increase in Vehicle Income Tax on Tourism Hiring Cars and Tour Operators, Repeal of LI 1817 to limit powers of GIPC to grant exemptions for the hospitality Industry, and Increase in the Airport Tax: The combined effect of these three measures will certainly lead to the collapse of the tourism industry, which is currently reported to be the largest foreign exchange earner for the nation. The increase of some 400% on the operators is not only punitive but will certainly be passed on to consumers. Taxi and trotos were exempted from the vehicle income tax only to be slapped with an increase in petroleum price. With respect to the repeal of LI 1817, simply transferring the function from GIPC to GRA will not stop the alleged collection of illegal rents if that is the intended purpose.

Upward Review of Tax Stamp for Informal Operators: This simply means that the daily payment of levies by market women, kayayei and truck pushers will increase. Coming from a government that is so-called Social Democratic, that purportedly has a contract to bring relief to Ghanaians, especially the poor and downtrodden, this is yet another example of a broken promise. A better Ghana Indeed?

Extension of the National Stabilisation Levy: When this levy was first introduced the government promised it would be in effect for 18 months. Now that stabilization is alleged to have occurred, the levy is being extended for another year. The question to ask is has stabilization been achieved? Is it another phantom achievement or another broken promise or a combination of the two?

Institutions with Tax free status to be taxed on Commercial Operations: The objective of this measure is to tax Religious bodies, NGO’s and other not-for- profit organisations on their commercial activities. Government has still not made clear whether the schools, clinics, and hospitals which some of these institutions run are to be taxed or not. The truth of the matter though is that these organizations are only able to perform these social responsibilities because of their tax-exempt status and because government on its own cannot provide all these public goods. We urge extreme caution on this matter as this will mean increase in fees, on health care, education etc.

Extension of CST beyond class 1A operators: With this measure government seeks to apply the communication service tax beyond telephone companies to include internet service providers, data service providers, etc. This is essentially a tax on the wider use of ICT for an infant middle income country that is seeking to be competitive in the global world. Aside from the practical difficulties with enforcement, it is not consistent with the general objective of increasing the use of information technology. To all intents and purposes, it will discourage our people from joining the rest of the world in enjoying the advantages of information technology. We suggest this measure should be abandoned immediately.

Discontinuation of Deferred Vat Payments: Given the inefficient nature of the VAT refund system, the proposed discontinuation of the deferred VAT payment system will create further upfront cash problems for businesses and hence hike the initial cost of doing business. It would have been more proper to first improve the refund system to assure businesses of prompt payment.

Restricting Bonded Warehouses Facility to Only Raw Materials for Manufacturers: Placing a ban on Bonded warehousing for general importers will cause them to lose the price advantages of large scale purchases which translates into lower prices for consumers. The unions in this sector have already signaled that as much as 5000 jobs could be lost by March this year if this measure were implemented immediately. Is this a better Ghana?

Abolition of 5 year Exemption for Real Estate Developers: This is perhaps one of the most controversial, ill-timed and ill-advised measures being proposed. Given, the huge housing deficit that exists in the country it is unthinkable that government will want to discourage local real estate developers who have since time immemorial worked hard to reduce the hiousing deficit. The measure coming at a time when government is proposing to provide more than enough incentives to one foreign firm STX is even more repugnant. If government’s claim of being involved heavily in affordable housing were to be believed, it would have materialized in government working vigorously to complete the over 5000 housing units started by the NPP administration. For over two years nothing has been done about these housing units, yet the same government is willing to pay over $250 million dollars as insurance, provide all sorts of waivers, provide free land, provide electricity, potable water, access road, drains as well as a sovereign guarantee to a foreign firm to provide 30,000 housing units for the security agencies. We believe it would make more sense for government to use its B+ credit rating to borrow and on-lend to local real estate developers to provide housing units, which can then be sold to retire the debt. This way they will be providing subsidies to local firms, creating employment locally, as well earning returns to pay off the loan. We believe a better Ghana agenda must begin with Ghanaians first. Charity, it is said, begins at home.

Ladies and Gentlemen, from this analysis it quite evident that the proposed taxes are likely to impose severe costs on both individuals and businesses. The impact is already being felt from the increase in the petroleum prices. Strong concerns have already been expressed by The AGI which is predicting severe layoffs in industry. The TUC has already requested government to review the price increase.We strongly urge government to listen to their call and come up with the appropriate corrective measures to prevent the economy from taking a nose-dive.

ENERGY
On energy, the 2011 budget does not provide serious policy initiatives to transform the nation into a modern development state. It appears that out of lethargy or perhaps out of vindictiveness or both the government has failed to take advantage of the opportunities made available by the discovery of oil and gas in 2007 to move the nation forward. It is true that commercial production has started in earnest, but unfortunately the regulatory framework for commercial production is sorely missing.

After two years of dilly-dallying, the government finally submitted three bills to Parliament, the Petroleum Revenue Management Bill, The Petroleum Exploration and Production Bill and the Petroleum Commission Bill. As of date none of these bills have been passed into Law and the order in which they were submitted raises concerns about the Government’s commitment to following constitutional provisions as well as setting the right legal framework to govern the management and use of our petroleum resources.

For the avoidance of doubt Article 269, clause 1 states “Subject to the provisions of this Constitution, Parliament shall by or under an Act of Parliament , provide for the establishment, within six months after Parliament first meets after the coming into force of this Constitution, of a Minerals Commission, a Forestry Commission, Fisheries Commission and any such other Commission as Parliament may determine which shall be responsible for the regulation and management of the utilization of the natural resources concerned and the co-ordination of the policies in relation to them”

In our view once this matter was brought to the attention of Government by the NPP Minority group in Parliament, the first Bill that it should have sought to bring to Parliament for passage should have been the Petroleum Commission Bill to rectify the anomaly. Since this was not done it leads one to question the government’s commitment to providing the right legal environment for the commercialization of oil and gas. The failure to do the right thing will create serious difficulties in the years ahead.

In particular the government’s inability to provide the appropriate infrastructure for the utilization of gas presents another case of lost opportunities. After a dubious contract award to a consortium comprising MODEC, ITOCHU and OANDO, which promised to deliver the gas infrastructure in sixteen months the nation still does not have a gas processing plant after two years of lethargy. The nation in the meantime is still in the dark about the so-called $800 million gas infrastructure project.

There is now talk about a Kwesi Botchway led Gas Committee and quite recently it was reported that the $1.2 billion gas project is on course - whatever that means. No one is talking about the IFC’s concerns about the StratOil controversial subcontract with MODEC. Who are the shareholders of StratOil? What exactly did StratOil do to earn a huge payment of over $2 million with a $3 million balance yet to be paid? Or has government gotten cold feet. We are hoping the new committee will provide answers to Ghanaians soon. ASEM BEBA DABI

Ghanaians will recall that when the NDC government assumed office it gave several figures on the amount of debt owed the Tema Oil Refinery (TOR). As of date the Minister has not submitted any official figures to Parliament . But in trying to pass the Appropriation Bill, he reported that three months after the NDC assumed office, i.e. March 31, 2009, the debt inherited had grown to GH¢880 million. Of this, an amount of GHC 445 million had been paid, albeit illegally, since Parliament had not approved of the loan raised to make that payment, leaving a total GH¢435 million.

He mentioned further that as of September, 2010 the stock of TOR debt now stands at about GH¢630 million, as a result of interest accumulation among other factors. For this reason, the budget has included an increase in the TOR Debt Recovery levy of over 400 percent on Premium and Gas Oil which is expected to rake in some GHC 330 million in 2011.

Clearly the nation deserves to know the true stock of debt at TOR in order to find a lasting solution. Nonetheless the impact of the the increase in the levy is certain As a matter of fact we all know that on January 3, the NPA announced a 30 percent increase in ex pump prices of premium and gas oil, and a 25 percent increase on LPG. This has already led to an 18 percent increase in transportation costs. Soon, food and other prices will go up. What happened to the promise to “significantly reduce the prices of petroleum products”?

In this vein a related issue is the lack of information on the so-called hedging policy on crude-oil. Is the policy being implemented or not? If so how much has it cost the nation to hedge? And why the increase in pump prices since the intent of hedging is to keep pump prices at a steady level. Ghanaians need to know.

The lack of transparency, commitment and accountability that informs the government’s policies on the energy sector, especially regarding the regulatory framework for oil and gas, the TOR debt, the crude oil hedging policy, gas infrastructure among others, will present serious challenges in 2011 and may well lead us on a dangerous path of making the oil find a curse rather than a blessing to Ghanaians. Ghanaians deserve better.

On the Power sub-sector, it is obvious that any progress that is being made especially in the electricity subsector results from significant investments made in earlier years with funds from the Eurobond issue and other loans, such as the Bui Dam Loan. But here again had the government put the gas infrastructure in place on time, significant cost savings would have been made. Even with the Akosombo dam providing a bulk of our electricity needs, the “dum so” phenomenon is still with us. Significant parts of Accra were without power for the holiday season. Even during periods of merriment we are burdened with a government that appears not to know what to do.

Industry, including agro-industry are supposed to lead in growth stimulation. They suffer from the burden of additional tax imposition, from high interest rates, from lack of access to credit, from various other negative discriminatory measures, and in addition very erratic power supply. How is industry to grow and stimulate growth in the economy?

Ladies and Gentlemen what is certain however is that by the end of January we are likely to have increases in electricity and water prices? It appears the government is bent on keeping to the promises it has to the IMF and World Bank rather than to the promises it made to the good people of Ghana.

WATER RESOURCES, WORKS AND HOUSING
The government’s policies on water resources works and housing remains a mirage. Over the past two years and into the third year of the NDC the same promises have been made and nothing concrete is delivered. For example in the fiscal year 2010, the government promised to provide 1474 boreholes and only 64 were delivered. Given this abysmal performance, how can the government promise to build 20000 new boreholes in 2011? It is a promise which government cannot fulfill except to merely signal a good intent.
On sanitation we are told that 80 % of Ghanaians do not have access to decent dignified places of convenience. However there is no roadmap in the budget statement to ensure that this serious sanitation problem is remedied.


On urban water delivery, it is clear in the last two years that no new project has been undertaken. The Koforidua Water project which was virtually completed in 2008, has yet to be inaugurated and the Konongo/Kumawu/ Kwahu Water project is yet to take off.

At this rate Ghana is not likely to achieve the MDGs on water. The President has said that by 2025, every Ghanaian will have access to good drinking water and pledged to find resources amounting to $200 million a year for this purpose. In the 2011 budget the total amount available is only $66 million. So where is the gap of $134 million coming from? Clearly, with this pace of slow delivery, slow implementation and such huge funding gaps the promise of accelerating the provision of safe water will be another failed promise.

On the delivery of housing, one is really confused about the government’s intentions. In 2010, the government promised to secure funding for the completion of the 5140 units of affordable Housing project; the construction of the 3rd phase of the Affordable Housing projects at Sekondi/Takoradi Cape Coast, Sunyani and Bolgatanga; construction of 10000 house at Nsakina near Amasaman on a 74 acre land and the acquisition of 50000 acres of land for the construction of affordable homes. What happened to these promises?

Or are we to assume that the STX project will be a substitute for all the projects listed above? We have already told Ghanaians our concerns about the STX project. First it is too expensive, the list of waivers granted to STX is too extensive; the insurance is expensive; and the sovereign guarantee requested is unnecessary. We find it inconceivable that having granted all these benefits to a foreign company, the government will withdraw tax incentives for private developers in particular local private developers who do not partner with government. Housing provision in Ghana in the past years has been led by private sector players who have not partnered with the government. We call on the government to immediately suspend this new policy- Otherwise the residential construction industry will die.

As to STX, notwithstanding the fact that the EPC contract and the loan agreement have been signed, we wish to reiterate the fact no one in government can tell Ghanaians where the source of funding is coming from. Perhaps the STX Corp needed to sign an EPC so they could use that to source for funds from the Korean Government and/or private sector. This is yet to be proven. The most significant development though was that exactly three days after the NDC Parliamentarians voted for collateralization in the Petroleum Revenue Management Bill, the STX deal was signed by the Minister of Finance, the Housing Minister and the STX officials. The cat is certainly out of the bag by now. The STX deal is to be financed from oil revenue. While we wait for this project to materialize (if at all) Ghanaian private estate developers are probably figuring out how to survive if they choose not to partner with government.

AGRICULTURE
The government since 2009 has announced it’s intention to modernize agriculture to enhance food security and reduce income variability to farmers. It is suggested that the main policy interventions will be buffer stock management, fertilizer subsidies, irrigation development and mechanized systems. A look at the performance of that sector for 2010 indicates however that either these policies are not being implemented or that implementation is very slow. For example in 2010 even though the sector was targeted to grow at 6.0 percent actual outturn was only 4.8 percent. This is so because unlike 2009, when the outgoing NPP administration had made resources (machinery and fertilizer subsidies) available by January 2009, in 2010 not enough resources were made available.

Fertilizer subsidies were made available in June 2010, by which time the major season for the south, middle and transitional agricultural zones was almost over. Moreover the review of the subsidy programme to cover all crop farmers has put the small scale Ghanaian farmer at a disadvantage, because of a lack of access to credit to purchase the fertilizer.

On mechanization, the objective was to provide for 90 mechanization centers with a full complement of equipment, but only four centers( less than 5 %) were established in 2010. At this rate how is the agriculture sector going to be modernized?

On the buffer stock management programme , it was reported that 6949 tons of rice and 416 metric tones of maize were purchased and stored. Since Ghana produces about thirty percent of her rice consumption requirements, what is the wisdom in buying and storing locally produced rice while using scarce foreign exchange to purchase 70 percent of our consumption requirements?

In the cocoa subsector in spite of the favourable world market conditions, output fell from 721000 metric tonnes to about 632000 metric tonnes in 2010, largely as a result of a poor pricing policy which led to a substantial amount of smuggling to neighbouring countries, unprecedented in the history of our nation. When the Minority in Parliament canvassed for an increment in the purchase price of the commodity, government opted to patrol the borders with security personnel at a very high cost without success. Thankfully, common sense has prevailed and government has increased the purchase price of cocoa. While the slight upward adjustment of the producer price may work to reduce the quantum of smuggling, the absence of cocoa sacks in the country may affect the quality of cocoa beans that is purchased. And here we wish to know who got the contract to supply the sacks and has not delivered.

A month ago Parliament approved a stamp duty waiver for a syndicated loan of $1.5 billion to facilitate cocoa purchases, why then is it that cocoa purchasing companies who have negotiated loans from banks and purchased cocoa from farmers have not been paid as of yet even though the purchased cocoa has been taken to the ports ready for export? It is the first time cocoa purchasers are going through this experience. That is the better Ghana agenda!

The social security scheme for cocoa farmers which was announced in the 2010 Budget Statement, with a seed amount of GHC 15 million is yet to begin. In the 2011 Budget Statement, it is renamed Cocoa Farmers Pension Scheme with seed funding of GHC 9.3 million. Yet another case of promise and fail.
The Budget for the agricultural sector for 2011(GH¢221.6 million) is 12 percent less than the allocation for 2010 (GH¢256.9 million). If one factors in inflation the amount will be at least 23% lower than the 2010 figure. Poor policy implementation record for 2010, (with a higher budget,) resulted in a lower outturn, i.e. 4.8 instead of 6.0. Clearly, therefore, the anticipated outturn for 2011 is not likely to be realized. With the advent of an” oil economy”, the agricultural sector is likely to continue to be marginalized in particular because of government’s decision to co-mingle the oil revenue in the budget funding. Unless corrective measures are taken to reverse this trend the nation’s economic fortunes will suffer significantly.


EDUCATION
The NDC has promised to within two years extend school feeding programmes to cover all primary schools in the country. This promise was not fulfilled before 2010 ended and when one thought that they would use the 2011 budget to redeem themselves they have fallen flat on their faces.

The NDC pledged to review within two years the GETFUND Act by decentralizing the utilization of the FUND to the educational institutions themselves with the participation of students. Pedestrian populism as usual. Contrary to this promise the GETFund is now more centralized with award of almost all contracts controlled by the Minister of Education. Today contracts awarded for 2010 far exceeds the anticipated inflow into the fund and it will take another two or three years to remedy the mess that has been caused at GETFund by just one person. In the meantime the fund cannot pay legitimate contracts awarded.

Education and indeed every endeavour in these days propelled by ICT.
That is why we have expressed grave concern about the application of the Communication Service Tax to internet service providers.

The nation is awaiting the much hyped review of the capitation grant other than the principle established by the NP administration.

SADA
The NPP administration gave birth to the Northern Development Authority to provide accelerated development for the three northern regions. Kufuor’s administration was to provide a seed money of $25 million. The NDC lampooned the effort. They have rechristened the same project Savanna Accelerated Development Authority (SADA) with a promise to make available $200 million a year for ten years to finance major investments for growth in these regions. For 2010 they promised to utilize the $25 million that Kufuor left but spent only $5 million. The 2011 budget allocates only GH¢25 million. That amount is woefully inadequate for any meaning development. Another broken promise.

CONCLUSION
Fellow Ghanaians it is not possible given the limited time and space we have to cover every facet of our national development. For instance, we have not spoken about the NHIS which is in a parlous condition. We will attend to that and other relevant issues subsequently. But it is very clear from this candid assessment that the economy performed badly in 2010. It is also very obvious that 2011 is not going to be any better. The President in the midst of these catalogue of broken promises and the budget which is inducing fear and panic, is promising that 2011 is going to be an action year . Which sector of the economy is going to stimulate the growth they are talking about? Where is the action going to come from? Clearly, government is not seeing its way clear and the rule by the regime is a tragedy that is unfolding before us all. The 2011 budget is a “journey to nowhere budget “ and that is why even before Parliament could approve of it the Minister of Finance promised to come with a supplementary budget. That is how bad the reality is.

Ladies and gentlemen2011 has just began we have all witnessed the baptism of fire in the fuel price increases. Let us all be clear-eyed to witness further unfolding events and the verdict will be unanimous, disaster.

Thank you all for your indulgence.