HIGHLIGHTS OF THE 2004 BUDGET STATEMENT

The Hon. Minister for Finance And Economic Planning, Mr. Yaw Osafo-Maafo today presented The 2004 Budget Statement And Economic Policy Of Government to Parliament in Accra under the theme: Releasing Energies Of Individuals And Businesses Towards Sustainable Growth
INTRODUCTION:

Creating a more friendly environment to support business
Tax reliefs to individuals and businesses
Strengthening and streamlining existing revenue mobilization strategies to maintain robust revenue collection
Reduction of import duties and removal of VAT on selected inputs

DEVELOPMENT PRIORITIES

President’s priorities cornerstone for transformation of society viz:
- Infrastructure development
- Modernisation of Agriculture based on Rural Development
- Delivery of enhanced Social Services
- Strengthening of institutions of Good Governance
- Strengthening the Private Sector
OVERVIEW OF PERFORMANCE IN 2003
Developments in the West African Monetary Zone (WAMZ)
- Met 3 out of 4 convergence criteria, the best in the WAMZ countries
- Location of the Headquarters of West African Central Bank in Accra
OVERVIEW OF PERFORMANCE IN 2003
- Real GDP growth of 5.2 percent as against target of 4.7 percent over performing the medium term target of 4.9%
- Decline in year-on-year inflation to 23.6 percent end December, 2003 after peak of 30 percent in April, 2003
- Depreciation of only 4.7 percent of cedi against the US dollar
- Overall Budget deficit of 3.4 percent of GDP marginally above the budget target of 3.3 percent of GDP
- Net Domestic financing registered a repayment of 0.4 percent of GDP against target of zero
- Healthy levels of foreign exchange reserves – covers 3.9 months of imports
- Robust and sustained tax revenue growth:
  
  - ?4.4 trillion in 2000 (16.3% of GDP)
  - ?6.6 trillion in 2001 (17.2% of GDP)
  - ?8.5 trillion in 2002 (17.5% of GDP)
  - ?13.4 trillion in 2003 (20.5% of GDP)
- Ghana Stock Exchange (GSE) All – Share Index appreciated by 154.7% (142.7% in dollar terms) – best ever
- Sharp fall in 91-day Treasury Bill Rate from a peak of 35.3% in June, 2003 to 18.3% end of year
- Growth in Exports:
  - US$1,867.1 million in 2001
  - US$2,015.2 million in 2002
  - US$2,297.2 million in 2003
- District Assemblies Common Fund (DACF) and GETFUND – current on transfers into the DACF & GETFUND
- Ghana’s Sovereign Credit Rating
  B+ rating by Standard and Poors
  B with a positive outlook rating by Fitch Ratings
  
  SIGNIFICANT DEVELOPMENTAL ACTIVITIES IN 2003
  
  Infrastructure
  - Rehabilitation of sections of Accra Kumasi road.
  - Commencement of works on Mallam Kasoa and Kasoa-Winneba road sections of Accra – Yamoransa road
  - Study progress on Tema-Sogakope section of Accra-Aflao road
  - Work on Tettey-Quarshie interchange about 50 percent complete
  - Commencement of work on Kwame Nkrumah – Achimota road, Tema Hospital-Ashaiman road including interchange
  - Inchaban-Sekondi road
  - 1,130 new boreholes fitted with hand pumps completed in the rural areas
  Modernized Agriculture
  - Ayensu Starch Factory started production in 2003 and exported first consignment of 240 tonnes in September, 2003.
  - 30,305 hectares of forest plantation establish in 2003 creating 95,000 jobs.
  Cocoa Sector
- Producer Price increased to 9 million at the beginning of 2003/2004 Main Crop Season
- Price almost a 3 fold increase over that paid in the 2000/2001 Main Crop Season
- Bonus payment of ?154.6 billion
- Off-shore loan syndication of US$650 million for cocoa purchases in the 2003/2004 Crop year
- 496,793 metric tones of cocoa produced second highest in the country’s history
- ?253 billion spent on control of capsid and black pod covering an area of 1.6 million hectares
Enhanced Social Services
- 685 3-unit classroom each with toilet facilities, teachers common room, store and library built across the country
- Primary gross enrolment ration improved from 79.5 percent to 81.1 percent
- Funding provided for implementation of 120 District Mutual Health Insurance Scheme in 90 districts
- Implemented a programme for the prevention of mother-to-child transmission of HIV in 19 sites
- Provided Anti-Retro-Viral Therapy to AIDS patents at 4 hospitals.
- Skill training for 10,000 youth
Good Governance
- 1,200 new personnel recruited for Ghana Police Service
  
  Utilisation of HIPC Funds
- Disbursements amounted to ?850.79 billion by the end of the year
- Start of work on Ofankor-Nsawam and Kumasi-Fumesua sections of Accra-Kumasi Road
- Continuation of work on sections of Accra-Yamoransa road
- Begin work on Sogakope-Akatsi sections of the Accra-Aflao road
- Continuation of Government’s regional road programme
- Upgrading of a number of roads to bituminous surfacing
- Commencement of works on Central Business District roads including reconstruction of the High street in Accra
- Development of Asafo Market interchange in Kumasi
- Continuation of the Tamale arterial roads
- The metro Mass Transit Company will take delivery of 100 DAF/Neoplan buses from Holland
- Construction of 2000 new boreholes fitted with hand pumps
- Completion of Buipe-Bolgatanga petroleum products pipe line projects
- Provision of 20 ground water irrigation equipment
- Completion of 100 factory units under garments and textiles imitative
- Start of work on 25 schools under second phase of Model Senior Secondary Schools Programme.
- Continuation of first phase involving 31 schools
- Distribution of 365 saloon cars, 500 motor cycles and 1000 bicycles for health professionals under hire purchase scheme
- Completion of 15 health centres and rehabilitation of 7 health facilities.
- Rehabilitation of Maternity and medical blocks at the Korle-Bu Teaching Hospital
- Construction of 5 blocks of flats and 12 block of flats for Doctors at Komfo Anokye and Korle-Bu respectively.
- Expansion of 11 nursing training schools
POLICY INITATIVES FOR 2004

Tax Relief Measures
- Increase in the minimum tax free threshold from ?1.2 million to ?1.5 million
- Widening of the income tax bands
- Reduction in corporate income tax rate from 32.5 percent to 30 percent effective next financial year.
- Special tax rate of 25 percent for companies listing on Stock Exchange for the first time
- 5-year tax holiday for new agro-processing firms
- Revised taxes for agro-processing as follows:
  :::Accra and Tema - 20 percent
  :::Other Regional Capitals - 10 percent
  :::Outside Regional Capitals - zero
- For 3 Northern Regions zero tax rates for
Agro-processing firms irrespective of location
7-year tax holiday for waste processing enterprises
reduction in vehicle income tax for articulated trucks from ?1.2 million to ? 900,000

Reduction of Import Duties and Removal of VAT on Selected Imported Imputs
- reduction in import duty on aluminium ingots from 10 percent to 5 percent
- Zero rating of imported industrial raw materials
- Removal of duties on imported lumber
- Removal of VAT on irrigation pumps
- Removal of duty and VAT on imported inputs for fishing nets and fishing ropes
- Removal of taxes on musical instruments
- Removal of GCNet processing fees on currency importation
Other Measures
- DVLA to be connected to GCNet system to facilitate registration of imported vehicles
- Government to derive appropriate returns on investments in commercially oriented public institutions
- Rationalization of interest payments in Government contracts
- Sale of low cost houses to occupiers
- Floatation of new shares on Ghana Stock Exchange
- Tender for new management contract for the bank
- Floatation of new shares in GCB on the Ghana Stock Exchange and encourage Ghanaians to acquire shares.
- Consumer protection through enforcement of health and safety standards
Value Addition to Cocoa Industry
- Government to support commercial production of cocoa industrial by-products developed by Crop Research Institute of Ghana – animal feed, fertilizer, soap, pomade and alcoholic beverages
- 5-year tax holiday for companies investing in production of cocoa industrial by-products
- allocation of ?25 billion to support the establishment of such industries
Other Support Measures
- Government has voted an amount of ?18 billion for the purchase of new varieties of pineapple suckers.
- Government to support the development of a regulated warehouse receipt system
Financial Sector Reforms
- Establishment of Long-term Savings Plan
- Introduction of other financial bills to accelerate the process of financial deepening – the Foreign Exchange Bill, Credit Union Bill, Insurance Bills and Cheques Bill
- Government to recapitalise Exim-Guaranty Company Limited
- Establishment of National Micro Finance Administration to coordinate and administer micro finance programmes