Accra (Greater Accra) 22 February 2002 - The balance of trade recorded a deficit of US$848.3 million (16.1 per cent of GDP) against the projected deficit of US$778.8 million (14.5 per cent of GDP).
The larger deficit was on account of larger than projected imports of oil, due to an unusually high demand for diesel fuel especially in the last quarter of the year, a large portion of which went to the mining sector, Yaw Osafo-Maafo, Minister of Finance said on Thursday.
He said in the 2002 budget statement that export trade continued to be dominated by the traditional export commodities of cocoa and gold, which, together accounted for 54.5 per cent of total exports.
Exports performed below expectations, largely by under-performance of both cocoa and gold. The shortfall of US$21.0 million in gold was attributable to labour unrest in one of the major mines as well as the closure of some mines; while the shortfall of US$46.9 million in cocoa was mainly on account of lower than projected crop yield.
He said despite the 1.9 per cent increase in the volume of timber exports over the 2000 level, the export value at US$169.2 million, was lower than the value of US$175.2 million recorded in 2000.
The lower value for timber exports was due to a drop of 0.6 per cent in unit price per cubic metre from US$353.3 in 2000 to US$351.3 in 2001. Non-traditional exports were valued at US$300.6 million, compared to US$226.3 million in 2000 and US$249.3 million in 1999. Mr Osafo-Maafo said total value of imports (fob) was estimated at US$2,691.1 million for 2001 compared to US$2,766.6 million in 2000.
The Minister said the current account balance at the end of the year was a deficit of US$161.5 million against a projected deficit of US$236.4 million. "The better performance was the result of a better than projected net invisibles of US$686.8 million compared to the targeted US$542.4 million," he said.
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Accra (Greater Accra) 22 February 2002 - Ghana's total external debt stood at US$6,025.6 million by the end of 2001, Yaw Osafo-Maafo, Minister of Finance announced on Thursday.
Presenting the 2002 annual budget to Parliament, he said of this total, US $ 5,535.54 million, representing 92 per cent, is long term debt with US$3,947.4 million owed to multilateral institutions and US$1,588.1 million owed to bilateral creditors. Medium term debt amounted to US$399.7 million, 6.6 per cent and short-term debts stood at US$150.0 million, 2.5 per cent.
He said Ghana would reach the HIPC decision point on Friday, February 22 and the first tangible benefit of opting for the HIPC initiative was already being felt in an improved cash flow position.
"The budget is no longer burdened by relatively large debt service payments on the one hand and uncertainty about the disbursement of funds needed to roll over debt or to finance projects." The total debt relief that Ghana would receive in 2002 is estimated at US$249.0 million, which is equivalent to about 4.0 per cent of GDP.
Mr Osafo-Maafo said the capital account showed a provisional surplus of US$305.6 million compared to the projected surplus of US$201.4 million, mainly as a result of improved inflows of official capital and the standstill on the repayment to the Paris Club and other bilateral debts while awaiting the decision point on HIPC.
The Minister said crude oil prices, which opened the year at an average price of US$24.13 per barrel, climbed steadily to US$29.42 per barrel in May; but in the aftermath of the September 11 attacks, crude oil prices fell sharply to US$17.75 per barrel by November 2001.
Provisional gross international reserves at the end of year were estimated at US$336.6 million, equivalent to 1.5 months of imports, thus achieving the programme target.
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Accra (Greater Accra) 22 February 2002 – The Government's economic and financial policies for this year are aimed at building on the progress made in 2001 towards a sustained financial stability, the Minister of Finance, Yaw Osafo-Maafo said on
Thursday.
Presenting the 2002 budget to Parliament, he said the financial policy was also aimed at intensifying efforts to strengthen public sector financial management and lay the foundations for sustained economic growth.
He said in line with the broad objectives of the government's medium-term economic and financial programme, the key macroeconomic targets for 2002 are the following:
* A real GDP growth of at least 4.5 per cent;
* A reduction in the rate of inflation from 21.0 per cent at end-2001 to 13.0 per cent by end-2002;
* An overall budget deficit equivalent to 6.9 per cent of GDP;
* A domestic primary budget surplus of 4.2 per cent of GDP; and
* The rebuilding of gross official reserve holdings equivalent to 2.6 months of imports of goods and services.
He said in order to achieve these targets and lay the foundation for further gains in subsequent years; the following key policies in addition to other policies would be adopted:
* A more effective control and monitoring of public expenditures;
* Reduction in the government's domestic debt as a share of GDP, and using any unprogrammed receipts from divestiture and programme aid, as well as a portion of HIPC relief, to retire domestic debt;
* The containment of the indebtedness of the main parastatals through price adjustments and explicitly allocated subsidies from the budget, until full cost recovery can reasonably be obtained;
* The continued monitoring and protection of the health of the banking system;
* The development of an effective inter-bank foreign exchange market to improve the allocation of external resources; and
* The development of a vibrant secondary market in the trading of government financial instruments.
Mr Osafo said overall real GDP growth in 2002 is projected at 4.5 per cent.
He said agriculture was programmed to grow at 4.1 per cent. Within the agricultural sector, the crops and livestock sub-sector is programmed to grow at 4.0 per cent, and cocoa production and marketing is expected to recover strongly from -1.0 per cent in 2001 to 4.3 per cent.
Forestry and logging is expected to show a stronger growth of 5.8 per cent than the outturn of 4.8 per cent in 2001. Mr Osafo-Maafo said industry was projected to grow at 4.7 per cent on account of a strong recovery by the mining sector from a growth of -1.6 per cent in 2001 to 4.5 per cent in 2002.
A projected recovery in gold prices is expected to boost growth in that sub-sector. Manufacturing and construction are also projected to show better growth rates of 4.8 per cent and 5.0 per cent, respectively.
Growth in the Services sector is projected at 4.7 per cent, showing a lower projected growth in 2002 than in 2001. The decline in projected growth is attributable to the decline in projected government services, as the government reduces the provision of direct services in favour of private sector participation, through the provision of better policies and regulatory support.
Consequently, the Minster said, it is projected that:
* Transport, Storage and Communication will grow at 5.7 per cent;
* Wholesale/Retail Trade, Restaurants and Hotels will grow at 5.6 per cent; and
* Finance, Insurance, Real Estate and Business services will register 5.5 per cent growth.
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Accra (Greater Accra) 22 February 2002 - The relative stability of the cedi and the good harvests of food crops contributed immensely to the fall in inflation from 41.9 per cent at the end of March to 21.3 per cent at the end of last year, Yaw Osafo-Maafo, Minister of Finance said on Thursday.
The Finance Minister said this in Parliament when presenting the 2002 government financial statement, adding that this was better than the targeted rate of 25.0 per cent for the end of 2001. The Minister described it as "a budget of growth and take-off."
Mr Osafo-Maafo said during the year under review, monetary policy focused on reducing the rate of inflation as well as the rate of depreciation of the cedi, adding that, "the Central Bank continued to tighten monetary policy through intensified open market operations."
He explained that from the beginning of 2001, money supply grew by ¢2,967.0 billion to ¢10,195.4 billion. "This implies a year-on-year growth of 38.8 per cent compared with a growth rate of 47.9 per cent at the end of December 2000."
Mr Osafo-Maafo described the rate of monetary growth in 2001 as "relatively moderate" with reserve money growth declining from 57.9 per cent at the end of December 2000 to 27.4 per cent at the end of December 2001.
The expansion in broad money reflected in aggregate demand deposit increase by 130.4 per cent, while savings and time deposits increased by 52.8 per cent. Foreign currency deposits increased by 22.0 per cent during the year under review.
Mr Osafo-Maafo said it is important to note that the strong growth in demand, savings and time deposits as compared to foreign currency deposits, reflects an increase in confidence in domestic assets, which in turn reflects declining inflationary expectations in the economy.
"The steady growth in deposits suggests a deepening in financial intermediation by the commercial banks, which is consistent with the overall improvement in macroeconomic conditions in the country", the Finance Minister said.
He said the exercise of prudent fiscal and monetary policies resulted in the weighted average interest rate on the 91-day Treasury Bill declining from 47.0 per cent at end of June 2001 to 28.9 per cent at the end of December 2001.
The decline in domestic interest rates led to a savings of about ¢500 billion on government debt service in 2001. Savings deposit rates also declined from a range of 1.0 per cent to 35.0 per cent at the beginning of the year to 1.0 per cent to 28.0 per cent by the end of December 2001.
Three-month time deposit rates also declined from 27.0 per cent to 40.0 per cent at the beginning of the year to 12.5-34.0 per cent at the end of 2001. Interest rates on Certificates of deposits declined from 15.5 per cent to 40.5 per cent at the beginning of the year to 6.0 per cent to 30.5 per cent at the end of 2001.
The Finance Minister was not happy about the interest rate situation saying, "unfortunately the decline in interest rates has not been fully reflected in the lending rates of banks.
"Bank lending rates have only marginally declined from a range of 39.0 per cent to 55.0 per cent at the end of December 2000 to 39.0 per cent to 53.0 per cent at the end of December 2001.
Between December 2000 and December 2001, the deposit money banks' outstanding credit to public institutions and the private sector increased by 17.7 per cent to ¢6,100.9 billion. Credit to the private sector increased by 16.7 per cent while credit to public institutions increased by 38.8 per cent.
On consumer price index dynamics, Mr Osafo-Maafo said the year 2001 began with built-up inflationary pressures in the economy as a result of expansionary demand policies pursued in 2000.
The excessive money supply growth in the last quarter of 2000, the rundown of local food stocks in the lean season and the upward adjustment in petroleum prices in February 2001, all continued to exert further pressures on prices in the first quarter of 2001.
He said the new government, however, reversed this trend through prudent fiscal management and tight monetary policy stance with the government moving away from Central Bank financing of its deficit, resorting more to non-bank financing.
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Accra (Greater Accra) 22 February 2002 - The Minister of Finance, Mr Yaw Osafo- Maafo announced on Thursday that total receipts were projected at ¢16,359.7 billion while total payments were projected at ¢16,359.7
Total receipt comprises tax revenue of ¢8,785.6 billion, non-tax revenue of ¢449.1 billion, and foreign grants of ¢1,982.2 billion, out of which ¢471.0 billion is HIPC assistance in the form of programme grants.
Other receipts, projected at ¢5,591.8 billion, include divestiture receipts of ¢386.9 billion, programme loans of ¢724.8 billion and project loans of ¢1,999.4 billion, he said.
Mr Osafo-maafo said in order to limit the practice of government competing with the private sector in accessing funds from the financial institutions, net domestic financing of the budget would not exceed 139.0 billion (0.3 per cent of GDP) in 2002.
He said included in other receipts is an exceptional financing of ¢2,223.8 billion which is part of the projected debt relief from the HIPC initiative. "Also included in the exceptional financing is a financing gap of 792.4 billion, for which we intend to seek additional concessional programme support.
"It is also projected that a total saving of about ¢118.0 billion will be made in 2002 as a result of the restructuring of treasury bills to the Government of Ghana Inflation-indexed bonds."
The Minister said out of total payments of ¢16,359.7 statutory payments were estimated at ¢6,894.6, with discretionary payments programmed at ¢9,465.1 billion. Under statutory payments, servicing of external debt is estimated at ¢2888.1 billion, while domestic interest payments are projected at ¢2,136.1 billion.
Amounts of ¢367.9 billion and ¢329.2 billion are programmed as transfers into the District Assemblies Common Fund (DACF) and the Ghana Education Trust Fund (GETF), respectively. It is also estimated that an amount of ¢460.0 billion will be transferred into the Road Fund.
Mr Osafo-Maafo said ¢713.3 billion has been projected for transfers to households. This includes provisions of ¢292.1 billion and ¢70.0 billion for pensions and gratuities, respectively. Government social security contributions for its employees are projected at ¢351.2 billion. With regard to discretionary payments, personal emoluments are projected at ¢3,122.2 billion, while Administration and Services are programmed at ¢1,115.0 billion.
Total investments are projected at ¢3,583.8 billion, out of which ¢3,287.2 will be financed from foreign sources. A total provision of ¢624.8 billion has been made for the payment of road and non-road outstanding obligations. In addition, an amount of ¢589.3 billion has been earmarked for poverty reduction activities under the HIPC initiative.
Mr Osafo-Maafo said a provision of ¢353.6 billion has, for the first time, been explicitly provided as a transfer to households, earmarked for the operations of the utility companies, namely the Electricity Company of Ghana (ECG) and the Ghana Water Company Ltd. (GWCL).
"This amount is a short-term measure meant to cushion consumers and smoothen the transition of the proposed increases in utility tariffs by the Public Utilities Regulatory Commission (PURC), into full cost recovery."
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