Budgeting for Hard Times: Ghana's 2009 Budget Reflects the Current Economic Gloom Hanging over the World, Although the New Administration Led by President John Atta Mills Has Stuck to Its Campaign Pledge to Clean Up Government Business and Provide a Million Free School Uniforms. Stephen Gyasi Jnr Reports from Accra
Gyasi, Stephen, Jnr, African Business
Presenting the budget to Parliament in March, Finance and Economic Planning Minister, Dr Kwabena Duffour admitted that the domestic and external state of affairs will make the year 2009 very challenging for the new National Democratic Congress administration. But, he promised, the government was nevertheless committed to its pledge of providing enhanced social services to improve the living conditions and dignity of the average Ghanaian.
"Expected shortfalls in remittances, a slowdown in donor support and private capital inflows as a result of the global recession are likely to have a negative impact on the Ghanaian economy in general and on public finances in particular.
"This trend calls for vigilance and careful monitoring of the global situation. Weak demand for exports and weak commodity prices imply less export revenue."
The policy thrust of the 2009 budget is to reduce the current budget deficit to sustainable levels, improve the exchange rate regime and work towards the attainment of a single-digit inflation. The main strategies to be used, according to the minister, will include enforcement of fiscal discipline, significant reduction in unproductive recurrent expenditure and improvement in revenue generation (including dividends from state-owned enterprises). Infrastructural development in the roads, energy and water sectors is to be accelerated and expanded whilst providing security and justice for all. These measures, he said, will be pursued within a process of monitoring and evaluation of all government ministries, departments and agencies to ensure the effective implementation of government policies and the achievement of objectives and set targets. The savings that would be achieved from this exercise would be channelled into projects that would benefit the ordinary Ghanaian.
The budget focuses on rationalising some key government expenditure. This includes a critical look at the wage bill administration, the management of statutory funds and the profitability, financial situation and relevance of state-owned enterprises and subvented organisations. In this regard, Ghanaians have been promised a significant change in the management of the economy since the leaders of government institutions, especially state-owned companies, are expected to commit themselves to very high levels of accountability while in office.
The private sector is also expected to work hand-in-hand with government to provide the necessary enabling policy environment and incentives for both enterprise growth and the efficient and effective delivery of public services.
Some 2008 budgetary targets under the government of John Kufuor were missed and Dr Duffour says the government would learn from the mistakes of the erstwhile government in their bid to meet their budgetary projections. A targeted real GDP growth of 7% produced 6.2% at the end of the 2008 year, while a projected end-period inflation rate of between 6%-8% produced a rate of 18.1%, with the year ending with an average inflation rate of 16.5% as against the targeted 7%. The sectoral components were as follows: the agriculture sector, the largest of the three sectors in the national accounts, grew by 4.9% against a target of 5.0% and the industrial sector grew at 8.3% against a target of 9.8%.
With the exception of construction, which exceeded its growth target of 13%, all the industrial subsector components registered lower than projected outturns. In order to stabilise the economy quickly, Dr Duffour says his ministry intends to deepen collaboration with the Bank of Ghana to ensure better formulation and implementation of fiscal and monetary policies.
"Our policy in 2009 will be reinforced to ensure macroeconomic stability in the context of a deteriorating international environment so as to provide a temporary cushion to the domestic economy.
"Subsequently, the stable economy will enhance accelerated growth which will ensure the attainment of a middle income status by 2020," the minister said. "This strategy will be accomplished through fiscal discipline hinged on prudent public expenditure management, strict adherence to public procurement rules, efficient and effective domestic revenue mobilisation and encouraging the private sector to participate in our accelerated growth agenda through public-private partnerships."
One of the major challenges facing Ghana is how to broaden the tax net. The fact that the vast majority of Ghanaians are in the informal sector makes revenue generation a daunting task and the government intends to take a critical look at ways of expanding the public purse through an effective, all-inclusive tax regime.
The government intends to strengthen tax administration to realise efficiency gains and broaden the tax base. But in a country where tax exemptions constitute a significant proportion of about 9% of total tax revenue, losses from exemptions granted in duties and taxes continue to rise. In order to rein in this development, the government intends to review the exemptions regime as a whole, to reduce the scope and to eliminate abuses in the administration and application of the facility.
In the interim, all exemptions resulting from the clearance of goods on 'permit' will be curtailed. Work on the remaining types of exemptions is expected to continue in order to achieve a comprehensive review in the medium term
The minister said the development plan for the Jubilee Field (the oil exploration site in the Western Region) is nearing completion and added that the Ghana National Petroleum Corporation (GNPC) would lead the efforts in the commercialisation of gas from the Jubilee Field. The plan involves the development of gas infrastructure, onshore processing of gas and its supply for power generation. "The gas development shall be undertaken in parallel with oil development. The government will pursue a non-gas-flaring policy," he said. The government will also support private sector initiatives in the establishment of a second export-oriented refinery.
In this regard, the Bulk Oil Storage and Transportation Company Limited (BOST) would expand the network of depots, increase strategic stock and also improve transportation of petroleum products across the country.
The government is expected to continue with the implementation of the Rural Kerosene Distribution Improvement Programme.
Dr Duffour said the Ministry of Water Resources is to construct a new water treatment plant at Akuse in the Eastern Region to address water problems in Accra and parts of the region.
The government would also supply school children in deprived areas of the country with one million school uniforms in fulfilment of its campaign pledge.
The National Health Insurance Scheme which was introduced by the previous administration would also be strengthened with the anticipated introduction of a one-time payment for all subscribers.
RELATED ARTICLE: Beverages
Windhoek beer to go global following new Diageo deal
Diageo, the world's leading premium drinks business, has reached an agreement with Namibia Breweries Limited (NBL) to produce and distribute Windhoek beer globally. The agreement, which is for an initial 10-year term, will give Diageo the right to brew and distribute Windhoek globally except for certain African markets, including South Africa and Namibia.
Available as Windhoek Lager, Windhoek Light and Windhoek Draught, the Windhoek beers are premium brands with a unique and long heritage, having been brewed in Namibia in accordance with the Reinheitsgebot, the German purity law of 1516.
Windhoek and Windhoek Light have, between them, won numerous gold and silver medals at the Deutsche Landwirtschafts-Gesellschaft and Windhoek Light was also named as the world's best light beer in 2005 in the Brewing Industry International Awards.
The Windhoek beer brand has a rich heritage and a well-developed footprint in its home markets of Namibia and South Africa. Diageo currently distributes Windhoek brands in South Africa through brandhouse--its joint venture with NBL and Heineken. NBL, in which Diageo has a 14.6% stake, will continue to produce and distribute Windhoek in Namibia.
In South Africa, Windhoek is the third-largest premium beer and grew by 6.7% last year alone. In Namibia, the Windhoek brand portfolio has grown overall by 400% since 2006. In other markets where it is available, the Windhoek brand portfolio has grown by 40% since 2006. Nick Blazquez, managing director of Diageo Africa, said: "We are very pleased that Windhoek will be joining our portfolio of premium beers. This transaction deepens our commitment to total beverage alcohol and, along with a great partner in NBL, provides us with a strong addition to our range of premium brands in Africa and elsewhere."
Sven Thieme, the chairman of NBL, said: "The agreement between NBL and Diageo enables Windhoek Lager and its variants to benefit from Diageo's global distribution platform and its reputation in developing premium brands around the world. We enjoy a good partnership with Diageo already through our brandhouse venture in South Africa. We now look forward to working closely with them in other markets."
Diageo's beer business in Africa is performing well. The company recently announced half-year results that indicated Guinness delivered outstanding growth of 25% in net sales for Africa and grew 8% in volume with strong performances in Nigeria, Cameroon and East Africa.…
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Budgeting for Hard Times: Ghana's 2009 Budget Reflects the Current Economic Gloom Hanging over the World, Although the New Administration Led by President John Atta Mills Has Stuck to Its Campaign Pledge to Clean Up Government Business and Provide a Million Free School Uniforms. Stephen Gyasi Jnr Reports from Accra. Contributors: Gyasi, Stephen, Jnr - Author. Magazine title: African Business. Issue: 352 Publication date: April 2009. Page number: 62+. © 2009 IC Publications Ltd. COPYRIGHT 2009 Gale Group.
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