The Minister of Finance Ken Ofori-Atta presented the 2019 Budget statement to Parliament.
Excerpts of the 2019 Budget statement dubbed "A Stronger Economy, for Jobs and Prosperity" read:
These are remarkable achievements which we are determined to build on in order to improve the lives of Ghanaians. In preparing this budget, we undertook broad consultations with various stakeholders across the nation. Consequently, I present to this august house and to the people of our great country:
●a budget that delivers on the hopes and expectations of Ghanaians;
●a budget that speaks to the needs of hardworking Ghanaians;
●a budget that enables us to face the future with confidence;
●a budget that reflects Government’s commitment to building human capital through improvements in health and education;
●a budget that continues to deliver on job creation;
●a budget that provides opportunity for wealth creation;
●a budget that follows through on our promise to protect the public purse;
●a budget that small businesses will be happy about;
● a budget that enjoins our citizens to uphold the Republic and to at all times fulfil their civic duties as citizens of the Republic;
●a budget that promotes our commitment to the Sustainable Development Goals (SDGs), and takes fundamental steps towards Ghana Beyond Aid.
This will be the first budget in Africa and second in the world, after Mexico to fully integrate the SDGs framework, enabling us to track our financial performance in order to ensure progress on these important targets that affect lives of our fellow Ghanaians.
Mr. Speaker, our 2018 “Adwuma” Budget aimed to build on our 2017 “Asempa” Budget achievements and put the country back to work; to grow the economy, create jobs and improve the lives of Ghanaians. Economic growth remains strong, and we are on track to achieve our key macroeconomic targets for 2018 and the medium term. This is progress we can all be proud of.
Mr. Speaker, the Ghana Statistical Service (GSS) completed the GDP rebasing exercise in September 2018. As a result, our economy is 24.5 percent larger. This increase reflects economic activities that hitherto were not captured (e.g. natural gas production), or were captured with insufficient data (e.g. fruits, vegetables, mining, and manufacturing activities).
The rebasing resulted in a number of changes in some economic indicators. The good news is that per capita GDP rose from GH¢7,110 to GH¢8,863. On the other hand, with the expanded GDP base, the 2017 GDP growth rate of 8.5 percent was revised down to 8.1 percent, which is still the highest in recent years.
We are fully aware of what happened the last time Ghana’s economy was rebased, in November 2010, resulting in a 63 percent upward change. It gave the then managers of the economy a false sense of security, as the debt-to-GDP ratio was significantly reduced.
They went on a borrowing spree, forgetting that rebasing also exposed how very little revenue we raise through taxation.
Mr. Speaker, during the first half of 2018, real GDP grew by 5.4 percent, reflecting slower growth in the oil sector compared to 2017, but we are still on track to achieve our revised target of 5.6 percent growth this year.
Much of the higher growth in the past 2 years reflects our prudent economic management and flagship programmes that respond to the realities of the majority of our citizens.
In addition to significant achievements in stabilising the economy, we are on course to achieve our fiscal deficit target of 4.5 percent for the year (3.7 % in the rebased series). This will be the 2nd consecutive year this Government has achieved its fiscal deficit target.
Mr. Speaker not only are we growing the economy, the Bank of Ghana has also done an excellent job in implementing monetary policy. This has resulted in inflation dropping to single digit, lower interest rates, and a relatively stable currency, despite recent turbulence in emerging markets, and a strengthening US Dollar.
The financial system is critical to the functioning and development of the economy and, banks are central to our financial system. In addition to providing employment to a large segment of the population, the role of banks as the provider of credit and liquidity to the economy remains critical to the functioning of our economy.
Mr. Speaker, weak macroeconomic conditions coupled with poor corporate governance and risk management in a number of banks, over the past few years, led to high levels of nonperforming loans (NPLs) and abuse of depositors’ funds through related parties and affiliates in breach of regulatory requirements. In addition, the lack of enforcement of the rules contributed to liquidity and solvency challenges in the banking sector.
As a result, we inherited a number of weak banks and specialised deposit-taking institutions (savings and loans companies, Finance Houses, Rural and Community Banks, and microfinance institutions). This eventually led to the failure of seven banks, with potentially adverse consequences for depositors, creditors, employees, suppliers, and other stakeholders.
It was critically important that these failed banks be made to exit the financial system in a timely and orderly fashion to avoid contagion for the rest of the financial system.
Mr. Speaker, since the assumption of office by the current administration of the Bank of Ghana, bold measures have been taken to restore the health and resilience of the banking sector and to clamp down on unlicensed deposit-taking financial houses.
In addition to the two insolvent banks that were closed last year by the Bank of Ghana, five more were closed in August this year for insolvency and other infractions of the law.
Rescuing the situation regarding these seven banks has, so far, cost some GH¢9.9 billion in monies that Government had not budgeted for and could have surely been put in good use to fix our numerous infrastructural needs, such as housing, roads, bridges, etc.
The Government has continued to provide assurances to depositors and customers of licensed banks and specialised deposit-taking institutions, through demonstrable actions, that their deposits are safe.
Indeed, following the creation of the Consolidated Bank Ghana Limited (a wholly owned Government of Ghana and licensed by the Bank of Ghana as a universal bank), the government capitalised it with GH¢450 million.
In addition, Government had to issue a bond with a face value of GH¢7.6 billion to cover the gap, between the deposit liabilities and the remaining good assets of the failed banks. This singular action of government has reposed confidence in the banking system because it will ensure that no deposit will be lost, and customers will continue to access their deposits without difficulty.
Through Government’s intervention in August this year, deposits of some GH¢11.0 billion have been saved as well as some 2,661 jobs in addition to several hundred saved in 2017 from the insolvent 2 banks that were closed in 2017.
The Government’s action has also created a strong indigenous Ghanaian bank in place of the five failed banks. The Government is committed to ensuring that Consolidated Bank Ghana Limited remains a strong customer-oriented indigenous bank, well positioned to meet the demands of all its customers and to serve as the go-to bank for financing Small and Medium Sized Enterprises (SMEs) and corporate Ghana.
Mr. Speaker, generally, banks have made progress in repairing their balance sheets by writing off bad loans and addressing capital needs. Banks are far advanced in executing their plans to augment their statutory capital in line with the new minimum requirement, compliance of which is expected by end-December 2018.
The Bank of Ghana is also working on a comprehensive action plan for cleaning up the specialised deposit-taking institutions (SDI) sector made up of savings and loans companies, finance houses, rural and community banks, and microfinance institutions. The Government will support an orderly resolution of the difficulties and will provide the much-needed funds to facilitate prompt pay-outs to their depositors.
Mr. Speaker, the Government’s financial interventions in the clean-up exercise have been necessary to help mitigate the socio-economic impacts arising out of the closure of the failed financial institutions.
It is important that the costs of these interventions, borne by taxpayers, are recovered to the extent possible, through recoveries from debtors, shareholders, and related and connected parties, who, through unfair means, siphoned funds, from the defunct banks to the detriment of depositors, employees, other stakeholders, and the economy as a whole.
The receivers for the resolved banks have already commenced civil actions against shareholders and directors to recover funds. The Attorney-General has also set up a special investigation team that is preparing dockets to prosecute those found criminally liable.
The Bank of Ghana has also set up an Office of Ethics and Internal Investigations to investigate all allegations of misconduct by staff, including any role in the collapse of defunct banks. The Government will not shield anyone found complicit in the failure of these banks.
In addition to all these clean-ups, Government has also taken steps to settle almost all claims of DKM customers. Mr. Speaker, you would recall that DKM Diamond Microfinance Limited had its license revoked in February 2016 with considerable suffering imposed on depositors, without any meaningful response from the previous government. That has significantly changed.
The official liquidator received 99,858 claims and the validated claims amounted to GH¢502 million. I would like to inform the country that out of the 99,858 claims, 79,708 (80 percent) have been settled and depositors have been paid.
The Government has set aside funds at the Bank of Ghana to pay the remaining 20 percent of depositors upon validation. An additional 12,612 claims have been fully provided for, but the customers have not as yet been able to show proof of deposit.
This means that 92 percent of DKM claims from depositors have been paid or provided for. Depositors for the remaining 7,568 claims of above GH¢10,000 are yet to reach agreement with the liquidators.