11 takeaways from 2022 ‘agyenkwa’ budget

Ken Ofori-Atta presented the 2022 budget to parliament

The budget presentation was in accordance with Article 179 of the constitution and Section 21 of Act 921

Dressed in his usual white kaftan, Ken Ofori-Atta, the Minister of Finance and Economic Planning on Wednesday, November 17, 2021, presented the 2022 Budget Statement and Government’s Economic Policy in Parliament.

He also submitted to the House the 2021 Annual Report on the Petroleum Funds, in accordance with Section 48 of the Petroleum Revenue Management Act, 2011 (Act 815), (as amended) and the 2021 Report on the Utilization of the African Union Levies in accordance with Section 7 of the African Union Import Levies Act, 2017 (Act 952).

Regarding Resource Allocation for 2022, the Finance Minister said Total Expenditure (including clearance of Arrears) is projected at GH¢137.5 billion, equivalent to 27.4 percent of GDP and the 2022 estimate represents a growth of 23.2 percent above the projected outturn of GH¢111.6 billion, equivalent to 25.3 percent of GDP for 2021.

The Budget statement which is focused on solving the rising unemployment rate in the country is in accordance with Article 179 of the 1992 Constitution and Section 21 of the Public Financial Management Act, 2016 (Act 921) and presented on the authority of H.E. President Nana Addo Dankwa Akufo-Addo.

Article 179 of the 1992 Constitution of Ghana requires that at least one month before the end of the financial year, the President causes to be prepared and presented to Parliament a budget for the following year.

The 2022 budget, according to the Minister will be the propelling tool to catapult the country into a prosperous future by creating a careful realignment and rebalancing of the country’s needs, wants, and aspirations as a nation to ensure sustained recovery and transformation to a Ghana Beyond Aid.

He said the broad vision of Government includes creating a robust economy that supports a thriving private-sector aimed at strengthening the economy with a focus on jobs and skills training for the youth to address the growing unemployment in the country.

In this report, GhanaWeb outlines some eleven key areas in the 2022 budget statement dubbed, ‘Agyenkwa’ (Saviour) budget.

Economic Growth

Ken Ofori-Atta told the parliamentarians that, the COVID-19 pandemic—with its associated health and economic risks, fuelled by the new Delta variant—continues to weaken the global recovery momentum.

He said information from the Worldometer COVID-19 Dashboard indicates that the global death toll from the pandemic has surpassed the 5 million—specifically 5,126,659 as at 17:42 GMT, 16th November, 2021.

“Mr. Speaker, data from the IMF’s October 2021 World Economic Outlook (WEO) indicate that the global economy is estimated to grow at 5.9 per cent in 2021.

“Although this is a 0.1 percentage point lower compared to the July 2021 WEO update, it is still a significant improvement over the 3.1 per cent contraction recorded in 2020. However, the global economic growth forecast for 2022 remains unchanged at 4.9 per cent from the July 2021 projection.

“Mr. Speaker, the 2021 global growth projection reflects an expected increase in vaccine rollout powered by economic activity and stronger financial conditions from advanced economies. So far, according to the WHO, almost 7.2 billion doses of COVID-19 vaccines have been rolled out globally as of 11th November, 2021,” Ofori-Atta explained.

He added, “the growth prospects, however, remain varied across regional blocs and differ significantly between countries and across sectors, reflecting the different pace of vaccinations and removal of COVID-19 restrictions. While advanced economies have achieved 60 percent full vaccination of their population, only 4 percent of the population in low-income countries have been vaccinated. The continued spread of the Delta variant, amid stalled vaccination efforts across emerging market and developing economies, would additionally continue to heighten uncertainty about the global growth outlook, especially in those countries.”

Inflation

On Inflation, the Finance Minister indicated that, global inflation has been declining over the past half-century and since January 2021, headline inflation has generally trended upwards in most parts of advanced and emerging markets economies, driven by strong demand, rising commodity prices, input shortages, and supply chain disruptions. “Inflation in advanced economies is projected at 2.8 percent for 2021, up from the 0.7 percent recorded in 2020.”

Ken Ofori-Atta explained, “in emerging markets and developing economies, inflation is expected to increase by 0.4 percentage points to 5.5 per cent in 2021. Looking ahead, headline inflation is projected to peak in the final months of 2021, with inflation expected back to pre-pandemic levels by mid-2022 for both advanced economies and emerging markets country groups.

“As emphasized in the October 2021 Regional Economic Outlook for SSA, higher food prices have impacted headline inflation expectations in the region. Average food price inflation has been on the ascendency from 2 percent year-on-year in 2019 to about 11 percent in 2021, reflecting poor weather conditions and conflict-related supply disruptions. Annual average inflation in SSA is, nonetheless, projected to decline to 8.6 percent in 2022.

“However, inflation is expected to be lower in the region’s two monetary unions (West African Economic and Monetary Union (WAEMU), and Central African Economic and Monetary Community (CEMAC)), despite heightened inflationary pressures caused by supply disruptions and a pickup in economic activity.”

Commodity Prices

The Minister noted that commodity prices have surpassed pre-pandemic levels, supported by favourable global trade recovery and strong demand from advanced countries in 2021.

“Crude oil prices rose by 13.9 percent between February and August 2021 on the back of the rapid economic recovery in advanced economies. According to the October 2021 IMF WEO, crude oil prices will average US$65.68 per barrel (close to 60 percent above the 2020 base price) for 2021 and US$64.52 per barrel for 2022 and will remain unchanged over the medium-term. This is in line with market tightness and oil demand recovery projections.

“However, beyond 2022, it is expected that lower global production capacity (due to a decline in investment over the past year), prolonged price support by OPEC+, a rise of the Delta COVID-19 variant, increased output from uncommitted OPEC+ members (Iran, Libya, Venezuela), as well as US shale oil producers will moderate crude oil prices,” Ken Ofori-Atta said.

He added, “the World Bank’s Precious Metals Index decreased by 3 percent year-on-year in the third quarter of 2021 due to declining investor sentiment stemming from higher real interest rates and a stronger U.S. dollar, as well as lower physical demand. According to the Commodity Markets Outlook of the World Bank, October 2021 edition, gold prices declined by 1.4 percent in the third quarter driven by a slump in investment demand amid a rise in interest rate yields. Gold prices are anticipated to average US$1,788 per troy oz in 2021, before falling to US$1,711 per troy oz in 2022 due to higher interest rate yields in the United States.

“Global cocoa production for the just-ended 2020/21 crop season increased by about 10 percent compared to the 2019/20 crop season, occasioned mainly by favourable weather conditions in West Africa, especially in Côte d’Ivoire, the world’s largest cocoa supplier. Cocoa prices have been generally stable since October 2020, within a band of US$2,300 per tonne and US$2,550 per tonne and is expected to remain stable in 2021 and 2022, as the global market is adequately supplied and as COVID-19 related disruptions gradually ease. Data from the International Cocoa Organization (ICCO) also show that the average daily price of cocoa futures contract stood at US$2,322 per tonne in London during the 2020/21 crop season, down by almost 2 percent year-on-year from US$2,358 per tonne recorded in the preceding season.”

Gov’t to create 1m jobs with YouStart initiative

The government also announced the creation of one million jobs for the youth of this country.

Ofori-Atta explained the YouStart initiative as follows, “The understanding of the youth employment challenge, as well as extensive consultations with stakeholders including youth associations and educational institutions across the country, have led to the development of the YouStart initiative which proposes to use GH¢1 billion each year to catalyze an ecosystem to create 1 million jobs and in partnership with the Finance Institutions and Development Partners, raise another 2 Billion Cedis.

“In addition, our local Banks have agreed to a package that will result in increasing their SME portfolio up to GHC 5 billion over the next 3 years.

“This, Mr. Speaker results in an unprecedented historic 10 Bn Cedis commitment to the private sector and YouStart over the next 3 years.

“Mr. Speaker, YouStart is a vehicle for supporting young entrepreneurs to gain access to capital, training, technical skills and mentoring to enable them launch and operate their own businesses.

“Mr. Speaker, the Ghana Enterprises Agency (GEA), the National Entrepreneurship and Innovation Programme (NEIP), and partner financial institutions, will serve as the implementing arms of YouStart.

“Entrepreneurs will be able to apply for support through a dedicated YouStart online portal.”

Road tolls scrapped

“Government has abolished all tolls on public roads and bridges. This takes effect immediately the Budget is approved,” Ken Ofori-Atta hinted while reading the 2022 budget statement in Parliament.

He added, “Over the years, the tolling points have become unhealthy market centres, led to heavy traffic on our roads, lengthened travel time from one place to another, and impacted negatively on productivity.

“The congestion generated at the tolling points, besides creating these inconveniences, also leads to pollution in and around those vicinities.”

The Finance Minister stressed that, “a portion of the proceeds from the E-Levy will be used to support entrepreneurship, youth employment, cyber security, digital and road infrastructure among others.”

1.75% levy on electronic transactions

Ken Ofori-Atta introduced a new 1.75% levy on all electronic transactions such as Mobile money transactions, remittances and other electronic transactions.

Fees and charges of government services have also been increased by 15%.

The Finance Minister explained, “It is becoming clear there exists an enormous potential to increase tax revenues by bringing into the tax bracket, transactions that could be best defined as being undertaken in the informal economy.

“As such government is charging an applicable rate of 1.75% on all electronic transactions covering mobile money payments, bank transfers, merchant payments, and inward remittances, which shall be borne by the sender except inward remittances, which will be borne by the recipient.

“To safeguard efforts being made to enhance financial inclusion and protect the vulnerable, all transactions that add up to GH¢100 or less per day, which is approximately ¢3000 per month, will be exempt from this levy,” Ofori-Atta revealed.

No more wasteful tax exemptions

About five percent of Ghana’s Gross Domestic Product (GDP) is lost annually due to excesses in taxes of companies operating in the free zone enclave, Ken Ofori-Atta hinted.

He indicated that the government has therefore decided to streamline the country’s tax regime to prevent large companies from abusing tax exemptions.

“We are in challenging times, which require radical measures, so let us embrace these new policies to enable Government to address the fundamental issues affecting the economy, to ensure that, our nation continues to maintain its position,” Ofori-Atta justified.

5 interchanges to be constructed in Kumasi

Ken Ofori-Atta, reading the 2022 budget statement disclosed that “five interchanges will be constructed in the Greater Kumasi Metropolitan Area.”

Some of the areas where the interchanges will be built are; Suame, Santasi and Airport Roundabout.

Other road projects in the pipeline include; “Kumasi South and Western Bypass, Kumasi Outer Ring Road, Mamfe-Koforidua Road, Oyibi-Dodowa-Somanya-Akuse Jn. Road, the Accra Outer Ring Road, Asutuare Junction-Volivo Bridge, Eastern Corridor Road (Gbintiri-Kulungugu), and the Sawla-Wa Road.”

No laying off public sector workers

No public sector worker will be laid off due to the impact of the novel COVID-19 on Ghana’s economy.

According to the Finance Minister when he delivered the 2022 budget statement, “not a single public sector worker was laid off due to the impact of the Covid-19 pandemic on our public finances. Government managed to pay them monthly, and we are grateful to the Unions for their cooperation in this regard.”

‘We are eagles, let us fly’

Ken Ofori-Atta, however, encouraged Ghanaians that, “we are eagles; we must eschew the language of poverty of aspiration and reject the 10 spies who want us to go back to Egypt. We are God’s people meant for greatness. Let us fly.

“While we have not eliminated suffering, we have done more in terms of social interventions than any other government since 1992 and certainly more in this regard than the NDC governments.”

“We will therefore continue to work towards mitigating the burdens imposed by the global impact of Covid-19 on Ghanaians as we also commit to tackling the social ills of expenditure control, corruption, recurring leakages and low productivity,” he assured.

Moments when Ken Ofori-Atta added scriptures to the budget

Ken Ofori-Atta would not have ended presenting the 2022 budget statement without introducing some biblical anecdote.

He said, “Mr. Speaker, Scripture teaches us that the process of building a nation is in phases. We learn from the story of biblical Israel that life in the wilderness is very different from in the promised land. In the desert, God freely provided for the necessities of the young nation – food, water, clothing. When the nation transitioned into their promised land, God enabled them to cultivate farms and build enterprises for themselves and their country.

“We can draw lessons from this ancient story for our national quest. Building on the foundations laid by the earlier NPP government of President John Kufuor, this current NPP administration under the bold and visionary leadership of President Akuffo Addo, has revamped our economy, enhanced social mobility, strengthened our democratic credentials and illuminated the Black Star like no one else since independence. Today, we want to lead our young men and women to their promised land, an Entrepreneurial Nation of Burden Sharers. It is time to cross the Jordan and as FDR said in his inaugural address, ‘We have nothing to fear but fear itself’. With the interventions, we offer through this budget, and with an understanding of burden sharing, we shall unleash a new cadre of entrepreneurs and nation builders.”