161. Growth in the industrial and manufacturing sector has significantly declined over time, contributing to an unprecedented level of unemployment. This situation could be attributed to a variety of factors including, but not limited to the high cost of capital; limited access to medium to long term financing; high cost of electricity and unreliable power supply; limited access to land for industrial activity as well as weak logistic and infrastructure support for industrial development.

162. It is against this background that a National Industrial Revitalization Programme with a stimulus package for industry will be established to provide technical and financial support to existing companies that are currently distresseddistresseddistresseddistresseddistresseddistresseddistresseddistresseddistressed or are facing operational challenges, but are deemed to be viable to benefit from the stimulus package which will put them in operation in the shortest possible time.
Industrialising Ghana from the Ground Up: One District, One Factory

163. “One District, One Factory”, implementation of which will commence this year and be closely intertwined with our “National Industrial Revitalization Programme”, is designed as a comprehensive programme for rural industrialisation, driven by the private sector and involving the setting up of at least one medium to large scale factory in each of the administrative districts of Ghana.

164. It is aimed at creating massive youth employment, especially in rural and peri-urban communities, add value to the natural resources of each district, ensure even and spatial spread of industries to stimulate economic activity in different parts of the country, enhance the production of local substitutes for imported goods, and promote exports and increase foreign exchange earnings.

165. It has the potential of transforming the industrial landscape of Ghana, and will contribute significantly to the socio-economic development agenda of the country. We estimate that over 350,000 direct and indirect jobs would be created from all parts of the country, as a result of the implementation of the programme.

National Identification Programme

166. Mr. Speaker, the benefits of having a modern, reliable and unique national identification systemsystem system are enormous and imperative for the development of our nation. A robust identification system and the issuance and use of integrated, multipurpose national identification cards would enable us to advance economic, civic and social activities in Ghana and to target particular developmental programs.

167. It is against this background that the National Identification Authority (NIA) was established in 2007 to oversee the registration of all residents in Ghana. However, a decade later, the NIA has made limited progress. In consonance with Government‟s commitment to reenergise the NIA to fulfil its statutory mandate, the new leadership of the NIA will be supported and resourced to be more effective.

168. Government has commenced stakeholder consultations to revive and roll-out the National Identification Scheme in 2017. All registered persons will be provided with a Unique Identification Number, and an ID Card. Subsequently, a national ID Card shall be required for the provision and efficient delivery of public and private services, including financial services, mobile banking, m-commerce, social safety nets, health insurance, and revenue collection among others.

National Digital Addressing System

169. Mr Speaker, the last time the whole country was mapped was in 1974. The lack of modern property addressing system in Ghana is a serious impediment to our developmental agenda agenda . As part of our plans to enhance economic development and growth, Government has commenced stakeholder consultation to develop and implement a National Digital Property Addressing System for the country in 2017.

170. The aim of the National Property Addressing System is to have digital addresses for parcels of land and properties of the entire country. Every land or property will be assigned a unique identifier. This is aimed at facilitating improved ownership data and unique identification of properties. A proper addressing of properties will ensure efficient delivery of services for economic development.

E-Services Portal

171. In order to improve efficiency of service delivery by government institutions with regard to acquisition of licenses and payment for services, Government established the e-servicesservices servicesservicesservicesservicesservices portal (https://www.eservices.gov.gh/) in 2012. This platform has helped in the delivery of government services (licenses and permits, etc.). Government will expand coverage to all parts of the country and improve efficiency of service delivery through private sector participation in the e-services portal. This is expected to help reduce corruption, promote compliance and improve the tracking of government resources.

EXPENDITURE MANAGEMENT AND COMMITMENT CONTROL

172. Mr. Speaker, our country continues to grapple with weak expenditure management and budgetary controls leading to excessive expenditure overruns and payment arrears resulting in persistent fiscal deficit. Prudent expenditure management and commitment controls are, therefore, very crucial in order to achieve the goals and objectives of the budget.

Enforcement of the PFMA

173. Mr. Speaker, the Public Financial Management Act, Act 921, passed by Parliament and enacted into law in August 2016 has the sole objective to strengthen the public financial management system in the country. The Act regulates the financial management of the public sector within a sound macroeconomic and fiscal framework; defines the responsibilities of persons entrusted with the management and control of public funds, assets, liabilities and resources in a manner consistent with the level of public debt; provides for the accounting and audit of public funds; and provides for more robust sanctions and penalties.

174. The effectiveness of the law depends to a large extent on strong enforcement and compliance with its sanctions regime.
Government will ensure that the robust sanctions regime provided providedprovidedprovidedprovided provided for in the law is complied with by all Public Institutions. The required institutional arrangements, including functional independent Audit Committees, will be addressed to promote and enhance the effectiveness of the law.

175. Mr. Speaker, in addition to the assignment of responsibilities and enforcement of sanctions, two provisions are crucial for the effective implementation of the law. First, is the Commitment Control provisions to curb the build-up of expenditure arrears. Second, is the provisions that prohibit MDAs from entering into agreements with financial commitments that bind Government for more than one financial year or that results in contingent liability, unless approved by the Minister of Finance and authorized by Parliament. These we must strictly adhere to if we are to ensure sound public financial management.

176. To fully operationalize the law to enhance budget credibility, Government will ensure the introduction of the necessary regulations to support implementation of the law, in collaboration with PFM stakeholders for effective implementation of the Act. Government through the Ministry of Finance will strengthen oversight of SOEs and Public Corporations, as well as, Local Government, to help mitigate fiscal risk emanating from contingent liabilities.

177. Mr. Speaker, to facilitate adherence to the provisions of the law, the Ministry will continue with the sensitization programme for Public Institutions at the National and Sub National levels as well as for key Stakeholders including CSOs, media, professional bodies and the public at large.

Establishment of the Fiscal Council

178. Ghana has been faced with significant, long-term fiscal slippages and an escalating public debt stock leading to a high risk of debt distress. This is principally due to the fact that our fiscal policy implementation lacks a transparent institutional arrangement for providing quality fiscal information to the public, a mechanism for ensuring accountability in implementing optimal fiscal policies to guarantee the stability of the system, and an institution to ensure the credibility of fiscal projections provided by the Government.

179. To address this, GovernmentGovernmentGovernment Government Government Government will initiate the process towards the establishment of a Fiscal Council that will adopt and implement rules to anchor fiscal policy implementation. The Fiscal Council will contribute to the accountability of Government, responsible for setting up medium-term fiscal policy anchors to guide fiscal policy as well as monitor compliance. The principal objectives for the formation of the Fiscal Council are to:
♦ ensure the credibility of our fiscal projections,
♦ set up medium-term fiscal policy anchors to guide fiscal policy, and
♦ monitor compliance of fiscal policy rules.

180. Legal backing will be given to the Fiscal Council through an amendment of the Public Financial Management Act, 2016 (PFMA), Act 921, to inter alia capture all the elements of a fiscal responsibility law.
Re-alignment of Statutory Funds

181. Mr. Speaker, as the President noted in his State of the Nation Address on the 21st February 2016:

182. “[T]he reality of the state of Ghana‟s public finances today are quite stark. Today, as a result of policy choices, we find ourselves in a situation where Ghana‟s total revenue is consumed by three main budgetary lines: wages and salaries, interest payments and amortization, and statutory payments. These three items alone account for 99.6 percent of government revenue. This means that anything else that government has to do outside of these lines, will have to be financed by borrowing or aid. The persistent resort to borrowing for any additional expenditures to meet the aspirations of our people is also not sustainable. We cannot continue this way with our public finances” (State of the Nation Address, 2017).

183. Indeed, this problem of lack of fiscal space in the current budget architecture and the problems associated with earmarking was rightly recognized by the NDC Government in the 2010, 2011, 2015 and 2016 budget statements. In these budget statements, the then Ministers for Finance noted the following:
♦ “Statutory funds introduce extreme inflexibility in the management of the budget, giving no room for policy manoeuvre. Given the important social interventions that need to be scaled up and/or implemented, some key government programmes will have to be offloaded from the core budget to the statutory funds, in order to create space for the utilisation of discretionary expenditure in other priority areas.” – 2010 Budget Statement.
♦ “...over 75 percent of the total wage bill and the associated increases resulting from the Single Spine Salary
Structure goes to employees in only three MDAs, namely the Education, Health and Local Government, which ironically are the very sectors with the statutory funds that introduce rigidities in the budget structure and leaves no revenue space for the sustainable implementation of the Single Spine Salary Structure.” - 2011 Budget Statement.
♦ “Mr. Speaker, the national budget is increasingly becoming inflexible to manage as well as to accommodate shocks and changes in government priorities. These are mainly due to the earmarking of a huge component of the budgetary resources as statutory transfers in addition to existing statutory liabilities, such as wages and salaries, amortisation, and interest payments.... Mr. Speaker, in the medium term, government will realign expenditures under the Statutory Funds hitherto being catered for under the Consolidated Fund. Starting with the 2015 Budget and as a transitional arrangement, government will enhance the administrative process for aligning statutory fund expenditures to national policies and priorities.” - 2015 Budget Statement.
♦ “To address the increasing rigidities in the budget that limits the room for policy manoeuvre, Government announced a policy of aligning the statutory and internally generated funds to national fiscal goals in the 2014 Budget. Consequently, in 2016, Statutory Funds expenditures totalling GH¢564.6 million will be realigned to the central Government budget.” - 2016 Budget Statement.

184. In 2016, transfers to the earmarked funds constituted 33.5 percent of national revenue, up from 28.2 percent in 2015. These rigidities mean that government‟s ability to shift public spending from one expenditure line to another is hindered even where current exigencies require government to do so. Consequently, it has become difficult to use public spending as an instrument to respond adequately to changing public needs.

185. Further, these increasing statutory rigidities have limited our flexibility and impeded our ability to meet our commitments, especially capital expenditure. As such, we continue to miss our obligatory disbursements to the Statutory Funds due to wishes to fulfil other commitments.

186. Mr. Speaker, in sum, we have been unable, as a nation, to comply with our statutory and budget requirements in respect of earmarked funds because they impose unhelpful rigidities in our public expenditure and development strategies.

187. Notwithstanding the recognition of the underlying problem with the lack of flexibility and space in the budget as a result of the earmarking of funds, we have not tackled the problem. After many years of talking about it, this budget is finally going to tackle this problem.

188. Mr. Speaker, starting this year, government will propose a cap of 25 percent of tax revenue to all Earmarked Funds for the approval of this august House. The capping of transfers to Earmarked Funds to 25 percent of tax revenues in any particular year will allow a realignment of budget revenues to government priorities and in fact make possible increased expenditure on government priorities such as education, health, agriculture and infrastructure. However, we will make adjustment for constitutionally-mandated earmarked funds to make them whole.

Treasury and Risk management

189. Mr. Speaker, efficient budget implementation requires a proper alignment of cash inflows and outflows. This will improve the predictability of budget implementations and cash allocations. In line with this, Government will strengthen its treasury management functions by creating a Treasury Management Unit in the Ministry of Finance to handle all treasury management and related functions.

190. The current PFM law will be enforced with regards to the utilization of the Treasury Single Account (TSA). To this end, the bank accounts of all government institutions will be transferred to the Central Bank for ease of management and monitoring.

191. Additionally, Government will eliminate all payments in cash at service delivery points in public service institutions, including MDAs and MMDAs, in order to improve efficiency in service delivery and revenue collection to support the TSA.

Improving Payroll Management

192. Mr. Speaker, the size of the public-sector compensation bill (wages, salaries, & other costs), which accounts for a significant proportion of domestic revenue, is a major concern for Government. It is one of the „Big-Three‟ budget line items that continue to narrow Government‟s choices in pursuing higher economic growth and development programmes.

193. The SSNIT database will be used as a filter for the payment of public sector workers. Starting in April, all workers who have not been biometrically registered with SSNIT will be taken off Government payroll.

Recruitment and Promotion Related Arrears

194. Mr. Speaker, in spite of the Public Services Commission policy on recruitments and promotions, we continue to see delays in the processing of recruitments and in promotions. These delays create frustrations for new recruits and serve as demotivation for serving officers due for promotion. Further, these delays lead to unexpected accumulation of arrears that hurt the integrity of our fiscal planning.

195. Mr. Speaker, in order to control the wage bill, and avoid compensation arrears that have not been provided for in our budgets, Government will from 2017 strictly enforce the policy and guidelines on the effective dates of promotions and recruitments within the Public Services. Substantive effective dates of recruitments and promotions shall not be backdated without the explicit permission of the Minister for Finance in writing.

Enforcement of the Public Procurement Act

196. Mr. Speaker, as part of our expenditure management framework, Government will strictly enforce the provisions of the Public Procurement Act, 2003 (Act 921) as amended by Public Procurement (Amendment) Act, 2016 (Act 914), especially with regard to sole sourcing, which has proven to pose significant risks to fiscal policy management. To ensure that public procurements are done within budgetary constraint, we intend to strengthen the procurement process by introducing another level of approval for MDAs and MMDAs. To this end, sole sourced procurements by MDAs and MMDAs beyond the threshold of GHȻ50 million will be subject to explicit approval by Cabinet before submission to the Public Procurement Authority for consideration and approval.

IMPROVING DEBT MANAGEMENT

197. Mr. Speaker, as a sign of Government‟s commitment to ensuring public debt sustainability within the framework of the PFMA, the debt management strategy in 2017 envisages the introduction of new instruments to further lengthen the maturity profile of public debt, reduce cost/risk factors associated with the debt portfolio through effective liability management, and support the development of the capital market.
Liability Management

198. Mr. Speaker, to improve the structure of public debt, Government will continue to implement sound liability management initiatives aimed at reducing interest cost and mitigating interestinterest interestinterestinterest rate risk associated with the current debt portfolio. This will involve the implementation of a wide variety of operations, including the buy-back of existing debt using Sinking Fund Account, interest rate hedging and the use of structured financial instruments, as market conditions permit.
Implementation of a Credit Risk Assessment Framework for SOEs

199. Mr. Speaker, the current financial state and governance structures of the SOEs, particularly, in the Energy Sector, is worrying. This continues to pose challenges for fiscal policy outcomes. In this regard, Government will implement a credit risk assessment framework to guide SOE borrowing and continue to ensure that necessary security structures and instruments are put in place by the SOEs to ensure they honour their debt obligations.

200. In addition, Government intends to establish a Single Entity with oversight responsibility of the SOEs. This forms part of broader SOE reforms aimed at consolidating the State‟s ownership role, improve performance and ensure effective and efficient service delivery by SOEs.

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