a REPUBLIC OF GHANA REVIEW OF THE BUDGET AND ECONOMIC POLICY of GOVERNMENT and SUPPLEMENTARY ESTIMATES for the 2016 FINANCIAL YEAR presented to PARLIAMENT on MONDAY, 25TH JULY, 2016 by the HON. MINISTER FOR FINANCE SETH E. TERKPER on the Authority of H. E. JOHN DRAMANI MAHAMA PRESIDENT OF THE REPUBLIC OF GHANA 2016 Review of the Budget and Economic Policy and Supplementary Estimates For copies of the 2016 Review of the Budget and Economic Policy and Supplementary Estimates, please contact the Public Relations Office of the Ministry: Ministry of Finance Public Relations Office New Building, Ground Floor, Room 001/003 P. O. Box MB 40 Accra – Ghana The 2016 Review of the Budget and Economic Policy and Supplementary Estimates is also available on the internet at: www.mofep.gov.gh ii 2016 Review of the Budget and Economic Policy and Supplementary Estimates LIST OF ACRONYMS AND ABBREVIATIONS ABFA Annual Budget Funding Amount BOG Bank of Ghana bopd barrels of oil per day bps basis points CAGD Controller and Accountant-General's Department CBT Competency Based Training CET Common External Tariff CHPS Community Health Planning Systems COA Chart of Accounts CSCE Coffee, Sugar and Cocoa Exchange CST Communication Sales Tax DACF District Assemblies Common Fund DSA Debt Sustainability Analysis DSIP Development of Skills for Industry Project DSR Debt Service Reserve DVLA Driver and Vehicle Licensing Authority ECF Extended Credit Facility ECOWAS Economic Community of West African States EDAIF Export Trade, Agricultural and Industrial Fund EU European Union EXIM Export-Import FPSO Floating, Production, Storage and Offloading GDP Gross Domestic Product GETFund Ghana Education Trust Fund GFA Gross Foreign Assets GFIM Ghana Fixed Income Market GFS Government Financial Statistics GIIF Ghana Infrastructure Investment Fund GNPC Ghana National Petroleum Corporation GOG Government of Ghana GPHA Ghana Ports and Harbours Authority GSE-CI Ghana Stock Exchange - Composite-index GSF Ghana Stabilization Fund GSGDA II Ghana Shared Growth and Development Agenda II GSS Ghana Statistical Service HRMIS Human Resource Management Information System IBES Integrated Business Establishment Survey IPPD Integrated Personnel Payroll Database IPPs Independent Power Producers L/Cs Letters of Credit LMIC Lower Middle Income Country MCA Millennium Challenge Account MDPI Management Development and Productivity Institute iii 2016 Review of the Budget and Economic Policy and Supplementary Estimates MIC Middle Income Country MoF Ministry of Finance MTDS Medium Term Debt Management Strategy NDA Net Domestic Assets NDF Net Domestic Financing NDPC National Development Planning Commission NFA Net Foreign Assets NIP National Infrastructure Plan NSW National Single Window OCTP Offshore Cape Three Points PCOA Put-and-Call Option Agreements PCOAs Put-and-Call Option Agreements PFM Public Financial Management PHF Petroleum Holding Fund PPAs Power Purchase Agreements PPP Public Private Partnership SGN Sankofa-Gye-Nyame SOEs State Owned Enterprises SPVs Special Purpose Vehicles SSNIT Social Security and National Insurance Trust SSSS Single Spine Salary Structure TEN Tweneboa-Enyenra-Ntomme TPRS Third Party Reference System TSA Treasury Single Account VAT Value Added Tax VRA Volta River Authority WARFP West Africa Regional Fisheries Project iv 2016 Review of the Budget and Economic Policy and Supplementary Estimates TABLE OF CONTENTS LIST OF TABLES ................................................................................................. vi LIST OF FIGURES ............................................................................................... vi APPENDICES ...................................................................................................... vii SECTION ONE: INTRODUCTION ........................................................................... 1 SECTION TWO: GLOBAL ECONOMIC DEVELOPMENTS ........................................... 4 SECTION THREE: MACROECONOMIC PERFORMANCE IN 2015 ............................... 7 SECTION FOUR: MACROECONOMIC PERFORMANCE IN 2016 ............................... 24 SECTION FIVE: STATUS OF IMPLEMENTATION OF KEY POLICY INITIATIVES AND OTHER MID TERM INITIATIVES ......................................................................... 34 SECTION SIX: SECTORAL PERFORMANCE ........................................................... 47 SECTION SEVEN: REVISED 2016 MACROECONOMIC TARGETS, FISCAL FRAMEWORK AND REQUEST FOR SUPPLEMENTARY BUDGET ................................................... 58 SECTION EIGHT: CONCLUSION .......................................................................... 62 v 2016 Review of the Budget and Economic Policy and Supplementary Estimates LIST OF TABLES Table 1: Agriculture Growth Performance (Percent)................................................ 8 Table 2: Industry Growth Performance (Percent) ................................................... 8 Table 3: Services Growth Performance (Percent) ................................................... 9 Table 4: Summary of Fiscal Performance ............................................................. 14 Table 5: Revenue Performance for 2014 - 2015 ................................................... 15 Table 6: Summary of Tax Revenues for 2014-2015 .............................................. 16 Table 7: Summary of Total Expenditure, 2014-2015 ............................................. 18 Table 8: Financing, 2014-2015 ............................................................................ 19 Table 9: Jubilee Production, 2011-2015 ............................................................... 19 Table 10: Details of 2015 Ghana Group Crude Oil Liftings ..................................... 20 Table 11: Sources of 2015 Petroleum Receipts (US$) ........................................... 20 Table 12: Distribution of 2015 Petroleum Receipts (US$) ...................................... 21 Table 13: 2015 ABFA Allocation and Variance Analysis (Prorated Basis) ................. 22 Table 14: Revised 2016 GDP Growth (percent) .................................................... 25 Table 15: Summary of Revenue and Grants, JAN – MAY, 2016 ............................. 29 Table 16: Details of Tax Revenue Performance JAN – MAY, 2016 .......................... 30 Table 17: Summary of Total Expenditure, JAN – MAY, 2016 ............................... 31 Table 18: Total Financing, JAN – MAY 2016 ......................................................... 32 LIST OF FIGURES Figure 1: Annual Real GDP Growth, 2008-2015 ...................................................... 7 Figure 2: Sector Distribution of GDP, 2009-2015 .................................................. 10 Figure 3: Provisional Public Debt as Percent of GDP (2014 – May 2016) ................ 32 vi 2016 Review of the Budget and Economic Policy and Supplementary Estimates APPENDICES APPENDIX 1: SUMMARY OF CENTRAL GOVERNMENT OPERATIONS – ................... 63 APPENDIX 2: ECONOMIC CLASSIFICATION OF CENTRAL GOVERNMENT – ............ 65 APPENDIX 3: ECONOMIC CLASSIFICATION OF CENTRAL GOVERNMENT EXPENDITURE - 2015-2016 ................................................................................ 66 APPENDIX 4: ECONOMIC CLASSIFICATION OF CENTRAL GOVERNMENT EXPENDITURE - 2015-2016 ................................................................................ 67 APPENDIX 5: ECONOMIC CLASSIFICATION OF CENTRAL GOVERNMENT REVENUE – 2016 ................................................................................................................. 69 APPENDIX 6: ECONOMIC CLASSIFICATION OF CENTRAL GOVERNMENT EXPENDITURE - 2016 ......................................................................................... 70 vii 2016 Review of the Budget and Economic Policy and Supplementary Estimates SECTION ONE: INTRODUCTION 1. Mr. Speaker, I beg to move that this Honourable House approves the sum of GH¢1,888,203,387 as Supplementary Estimates for the 2016 Financial Year. 2. Mr. Speaker, in doing so, I would proceed by first presenting to this august House, a Mid-Year Review of the Budget Statement and Economic Policy of the Government of Ghana, for the 2016 Financial Year. 3. Right Honourable Speaker and Honourable Members of Parliament, on the authority of the President, His Excellency John Dramani Mahama, the review and need for revised estimates are necessitated by both domestic and long- standing global developments. 4. Mr. Speaker, before I proceed, on behalf of the President, I wish to express our profound appreciation to this august House for your cooperation in the management of the economy, in particular, the pursuit of a very active legislative agenda in the country’s fiscal and financial management. No doubt, this has contributed to a very clear “turnaround story” that now shines the path on our plan for bright positive prospects for the economy. 5. Despite a few lingering problems, we will demonstrate in this Statement that the context is clearly different from the “challenges” that made President Mahama call on citizens to change course from an unsustainable path—as I presented my first Budget on behalf of the President to this House in March 2013. 6. The specific aims of this year’s Mid-Year Review and Supplementary Estimates are to: provide an update to Honourable Members on the performance of the economy during the first five months of 2016; revise the macroeconomic targets and Budget Estimates for 2016; request the House to approve Supplementary Estimates for 2016; and present a