Dr Kwabena Duffuor, Minister of Finance and Economic Planning on Wednesday, said government would focus on key areas for economic growth.
These are the oil and gas industry, modernisation of agriculture, private sector development, provision of key infrastructure and information
and communication technology.
Presenting the 2010 Budget to Parliament in Accra, Dr Duffuor said growth in these areas were requisite in the medium term to grow the economy
at eight to 10 per cent per annum, to move the country to a middle income status by 2020.
He explained that fiscal policy was one of the most powerful instruments to maintain macro-economic stability for growth, as well as for intra-generational and inter-generational transfer of wealth, and to correct market failures.
Dr Duffuor said despite its potential for promoting growth, fiscal intervention, when misguided, could do more harm than good, therefore, Government spending in the medium term would need to be directed to areas considered to be key to the country's economic growth.
He said Government's monetary policy would continue to focus on stabilising price and exchange rate expectations. "Over the medium term, non-oil real GDP growth has been projected at
eight per cent, while the overall budget deficit is to reduce to three per cent of GDP, which is driven by reduction in low-priority public spending and re-allocation of resources to priority areas," he said.
Dr Duffuor said structural reforms that were initiated in 2009 would continue in 2010 and were expected to strengthen fiscal management and
support the public sector transformation.
He said in the fiscal area, the focus would be on strengthening institutions, enhancing revenue mobilisation and improving expenditure
management.
"With the continuation of reforms in the tax system in the medium term, to plug loopholes, reduce tax evasion and fairly taxing rents from natural resources to make the tax system more efficient and less dependent on indirect taxes.
"New taxes and levies would also be introduced to establish the right prices for natural and environmental capital, thus generating more government revenue while providing the right incentives for reducing environmental degradation," he said.
Dr Duffuor said increased emphasis would be placed on the evaluation of tax systems, particularly in documenting tax evasion and efforts to reduce them, and increase the base to ensure fiscal sustainability.
He explained that to modernise the Ghana tax system and enhance revenue administration, managements of the three revenue agencies, Valued Added Tax, Customs, Excise and Preventive Service and Internal Revenue Service would be brought under the umbrella of a single Ghana Revenue Authority in 2010 as part of the e-Ghana Project.
"This will address the problems of duplication; streamline operational policies and procedures; minimise administrative costs; reduce compliance cost for taxpayers and improve efficiency," he said.
He said the tax administration reform programme would continue to focus on broadening operations of the existing Large Taxpayer Unit (LTU) to ensure that the largest companies received genuinely integrated, one-stop tax coverage from a restructured LTU under the Ghana Revenue Authority.
Dr Duffuor said the second phase of the reforms would focus on the establishment of Medium Taxpayer Unit, and in parallel with these reforms,
the VAT threshold would be substantially increased in a phased-in manner.
Dr Duffuor said cash management had improved significantly with the introduction of frequent and up-to-date monitoring of revenues, expenditures and cash balances, supported by the establishment of Treasury Single Account
and the setting of monthly cash ceilings for MDAs had improved significantly.
The next phase of the reform, which would be implemented next year, would involve improving expenditure projections of Ministries, Departments
and Agencies (MDAs) and aligning them with revenue inflows.
He said liquidity management of Government would improve significantly when the accounts of the statutory funds, such as District Assemblies'
Common Fund and Ghana Education Trust Fund, were maintained with the Central Bank rather than with the commercial banks as pertaining now.
The Finance Minister said the Budget and Public Expenditure Management System, which came to a halt after being rolled out to some MDAs, was being upgraded under the new Ghana Integrated Financial Management System (GIFMIS).
The first phase of the project is the installation of hardware and software in selected MDAs on a pilot basis, followed by the implementation of the new system in the pilot MDAs and integration of the payroll management module with the new system.
He said the head count of employees in the public sector, which commenced in the Ghana Health Service in 2007 followed by the Ghana Education Service in 2009, would be rolled out to the other MDAs next year.
Dr Duffuor said although placing the 54 remaining subvented agencies onto the computerised payroll database of the Controller and Accountant
General's Department had faced some technical and other logistical challenges, efforts would be made to ensure it was completed by the end of
2010 and the database integrated into the GIFMIS by late 2010.
"We hope that weakness in the financial management system that bedevilled the public sector for years would end with the implementation of GIFMIS, "he said.