Sector expenditures for 2001 and outlook for 2002
Accra (Greater Accra) 23 February 2002 - The Minister of Finance, Mr Yaw Osafo-Maafo on Thursday presented the 2002 Budget Statement and Economic Policy to Parliament saying its guiding principle was President John Agyekum Kufuor's belief in sound economic management and his desire to lift the country on the path of rapid national development.
He said the budget, which was the first full year implementation of the President's economic and social development agenda is on the theme: "Towards Stability and Growth."
Mr Osafo-Maafo said the 2002 budgetary allocations to various sectors were guided by the key areas spelt out by the President in his State of the Nation Address.
These are infrastructure development, agriculture and rural development, enhanced social services with emphasis on education and health and good governance.
He said the macroeconomic targets for this year are a real GDP growth of at least 4.5 per cent, a reduction in the rate of inflation from 21 per cent at the end of 2001 to 13 per cent by the end of 2002.
Other targets are 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 rebuilding of the gross official reserve holdings to the equivalent of 2.6 months of imports of goods and services.
Mr Osafo-Maafo said the government intended to finalise its transitional pricing policy for electricity and water and come up with a timetable for moving utility prices to full cost recovery.
The Government also intends to give special consideration to targeted subsidies to "buy down" water rates for the poor. Mr Osafo-Maafo said government would consult with oil companies and other stakeholders with a view to encouraging competition in crude oil purchases.
The Government would also divest its holdings in 12 companies, including Ghana telecom, eliminate the special tax, to be replaced with anti-dumping measures with international norms and regulations.
There would also be explicit subsidies to utility companies to reduce their expected losses.
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Accra (Greater Accra) 23 February 2002 - Monetary policy in the coming year will focus firmly on strengthening the disinflation process that is underway, to further bring down the rate of inflation and sustainable reductions in interest rates, the Minister of Finance, Mr Yaw Osafo-Maafo said on Thursday.
This would provide the private sector and the market-increased confidence to make the investment decisions that would support a sustained expansion of output and employment.
Mr Osafo-Maafo said in the 2002 budget that the Government's end-year inflation target for 2002 is 13 per cent. "To achieve the target rate of inflation, the Bank of Ghana will use appropriate monetary instruments to control growth in its net domestic assets, and hence in reserve money growth.
"Reserve money growth for 2002 is targeted at 18.7 per cent while broad money is expected to grow at 21.5 per cent."
The Minister said under the current monetary policy framework, it was not clear whether the Central Bank was in the money market for the purpose of funding government or conducting open market operations and whether the current downward drift in the interest rates is a true signal of monetary policy intentions.
"The Bank of Ghana will, therefore, introduce a lending facility in 2002 and the applicable interest rate for this facility will serve as the signalling rate for monetary policy purposes.
"It is also the government's objective to foster the development of a secondary market for government securities."
The Minister said this would be facilitated, inter alia, by improving settlement facilities, listing of government securities on the stock exchange and offering bills and bonds with different maturity profiles.
Mr Osafo-Maafo said the restructuring of the Tema Oil Refinery (TOR) debt to the banking system which involved the introduction of the Government of Ghana Index-Linked Bonds (GGILBs) with a three-year maturity at a fixed real interest rate, is an initial step.
He said the issuance of long-term government bonds with floating interest rates, for example, would offer the possibility to diversify debt instruments and to deepen the secondary market in securities.
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Accra (Greater Accra) 23 February 2002 - The Minister of Finance, Yaw Osafo-Maafo said on Thursday that the external policy for 2002 would be to improve the external position of the country and to accumulate external reserves.
Gross reserves, therefore, for the year 2002 is projected at US$629.0 million, equivalent to 2.6 months of imports, he said in the government's budget statement to Parliament.
The Minister said merchandise exports were projected at US$2,037.0 million, 10.05 per cent higher than the value in 2001. Cocoa and cocoa products are also expected to generate US$467.7 million compared to US$378.1 million in 2001.
He said the higher projected receipts for cocoa was on account of both higher prices and bigger volumes for cocoa and its products. The volume of cocoa beans is, therefore, projected to increase by 27.4 per cent to 389,000 tonnes in 2002.
The volume of gold exports is expected to increase by about 12 per cent in 2002 to 2.6 million fine ounces although the price is expected to average about $265.0 per fine ounce compared with $273.3 per fine ounce realised in 2001.
The current account balance (including official transfers) is projected to be a deficit of US$393.2 million, compared to the provisional deficit of US$161.5 million in 2001.
The capital account on the other hand is projected to show a surplus of US$247.3 million, thus leaving the overall balance of payments in a deficit of US$145.9 million.
According to the Minister the government regarded restoring the financial health of the public energy and utility companies as one of its highest priorities over the next 1-2 years.
To prevent a recurrence of the huge parastatal losses built up in 1999 and 2000, which will be a burden on consumers and taxpayers for many years to come, the government intends to:
* urge the Public Utilities Regulatory Commission to finalize its transitional pricing policy for electricity and water to reflect changes in cedi costs of imported inputs and a timetable for movement to full cost recovery;
* monitor the impact of PURC's plan on the finances of ECG, VRA, and GWCL, to ensure that the provision in the 2002 budget for transfers to these companies to cover the implied subsidies to consumers associated with price controls is adequate;
* give special consideration to targeted subsidies to "buy down" water rates for the poor, in recognition that water is a staple with a significant bearing on the living standards of the poor; and
* in order not to further aggravate the finances of the parastatals, Government will remain current on its own payments for utilities and on the budget transfers needed to cover the implicit consumer subsidies.
Mr Osafo-Maafo said a preliminary assessment indicated that the impact of the Tema Oil Refinery (TOR) debt restructuring had worked to lift pressure from the balance sheets of commercial banks and begun stabilising the refinery's own financial position.
"The government also intends to consult with oil companies and other stakeholders with a view to the possible dismantling of TOR's monopoly of the import of petroleum products.
This would enhance competition in the petroleum sector and also help the development of the interbank foreign exchange market."
Mr Osafo-Maafo said the Government considered the divestiture of state holdings in commercial enterprises as a core component of its strategy to promote private sector development.
"In this connection, the planned 'fast track' sale of state holdings in 12 companies, including Ghana Telecom will be completed. Valuations for these assets have started and potential buyers will be identified during the first quarter of 2002.
"Sales are expected to begin in the second quarter, with a projected yield of at least US$50 million. In addition, the privatisation of the National Investment Bank and the Ghana Commercial Bank will continue.
"The sale on the stock market of Government shares in the Cocoa Processing Company is expected to be completed in the course of the year."
Mr Osafo-Maafo said a transactions advisor had already been appointed for the offer for sale of the Electricity Company of Ghana and valuations have been completed.
"In this same vein, we intend to reduce progressively the distortions inherent in Ghana's import tariff regime, which are an impediment to efficient private sector activity.
"We are seeking the elimination of the special import tax, which will be replaced later with anti-dumping measures that are consistent with international norms and regulations.
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Accra (Greater Accra) 23 February 2002 - Mr Moses Asaga, the Minority Spokesman on Finance, on Thursday described the budget estimates as one that suffers from "kworshiokor" because it lacked the necessary "ingredients" for growth.
"It was myriad of issues. He did not focus on specifics thus offering no hope for economic growth."Mr Asaga was reacting to the budget statement presented by Mr Yaw Osafo-Maafo, Minister of Finance in Parliament.
He said the target of real Gross Domestic Product (GDP) of at least 4.5 per cent was too low and that it was an excuse for non-performance. "Ghana's economy needed to grow more than 5 per cent and even hitting the eight per cent mark if we are to reach middle income levels by 2020."
Mr Asaga said there was no mention of per capital income, which is a crucial benchmark for assessing the economy. He called for the revision of taxes since the government was making Ghana a high-cost-port for investment.
"The National Reconstruction levy for instance, is killing industry. Their talk of economic tariffs for electricity and water and other utilities would drive investors away."
He said the Minister's talk of the seeming global recession is an alibi for non-performance since predictions had been made already thus prompting serious governments to plan ahead.
Mr Asaga criticised the government for being silent on the looming energy crises and said if care was not taken the low targets might not be achieved.
Mr Asaga commended the government for allowing revenue-collecting agencies to keep three per cent of the money collected. "This idea has been floated around for a long time and it is good that it has been implemented."
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Accra (Greater Accra) 23 February 2002 - Ghana would reach decision point in the Highly Indebted Poor Countries (HIPC) Initiative on Friday, February 22, Mr Osafo-Maafo, Minister of Finance, announced on Thursday.
Presenting the 2002 budget to Parliament he said the Government expected to save an additional 100 million dollars from debt service payments from the Initiative. The money would be geared towards domestic debt and poverty reduction spending plan.
Mr Osafo-Maafo said the additional relief would boost the government's efforts to raise cash to support and reduce the incidence of poverty and promote growth.
He said the government would continue to ensure that Ghana got the full benefits under the HIPC initiative. On cocoa prices, Mr Osafo-Maafo noted that the producer price was increased by 41 per cent from 4,384,000 cedis per metric ton to 6.2 million cedis or 274,000 per bag to 387,500 cedis.
He said 178.4 billion cedis was earmarked for the exercise on pests control project and cocoa diseases.
The Finance Minister said there was a special partnership between the government and the private sector under which, with the support of the Ministry for Private Sector Development, 10 small- and medium-scale fruit processing plants would be established.
Three tomato-processing plants as well as 10 small- and medium-scale brown sugar production plants would also be established.
Mr Osafo-Maafo said the Ministry would facilitate provision of land and machinery for salt production to increase the volume of production for export from the current 200,000-300,000 metric tons to about 600,000 metric tons.
On revenue, he said new revenue enhancing measures were introduced to improve on the efficiency of tax collecting agencies and minimise abuses of tax concessions, especially on operation in the Free Zones.
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Accra (Greater Accra) 23 February 2002 - Ghana's economy grew by about 4.2 per cent in 2001 despite a major slow down in external trade and the general malaise in the world leading economies, Finance Minister Yaw Osafo-Maafo has disclosed.
He said although the prices of the country's traditional exports, notably gold and cocoa, fluctuated during the period, gross international reserves increased from 264 million dollars to about 336.6 million dollars as at the close of December 2001.
Overall tax revenues also exceeded target by about five per cent. The Minister, who was presenting the 2002 budget and economic policy to Parliament, attributed the good performance to a "firm fiscal discipline on the part of government".
Other key success areas, the Minister highlighted included the lowering of the inflation rate from 40.9 per cent in 2000 to 21.3 per cent as at December 2001, the stabilisation of the cedi around 2,300 cedis, decline in the growth of the stock of reserve money from 57.9 per cent in 2000 to 27.4 per cent last year.
The rest are a domestic primary balance surplus equivalent to 4.7 per cent of Gross Domestic Product and an overall budget balance deficit of 4.4 per cent to GDP.
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Accra (Greater Accra) 23 February 2002 - Project loans and grants received last year fell short of expectations with inflows for loans and grants recording 1,113.8 billion cedis and 511 billion cedis, against the targets of 2,247 billion cedis and 707.3 billion cedis, respectively.
However, programme loan and grant inflows were 1,055.6 billion cedis and 1,059.0 billion cedis, respectively, Mr Yaw Osafo-Maafo, Minister of Finance said on Thursday.
"These compare with the respective targets of 1,224.9 billion cedis and 707.3 billion cedis," he said in the 2002 budget statement to Parliament.
He explained; "the increase in programme grants reflected an increased confidence by our development partners in our economic and financial policies".
On receipts from the Divestiture Programme, Mr Osafo-Maafo said it recorded 154.4 billion cedis against a target of 391.2 billion cedis. The programme was stalled to allow for stock taking and auditing of the activities of the Divestiture Implementation Committee, he said, adding, "this explains the less-than-projected divestiture proceeds."
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Accra (Greater Accra) 23 February 2002 - Finance Minister Yaw Osafo-Maafo said on Thursday that the net domestic financing of last year's budget was 862.5 billion cedis, 21.5 per cent higher than the programmed amount of 686 billion cedis.
He attributed the increase to the government's decision to liquidate a large portion of road and non-road arrears during the last quarter of the year.
Presenting the 2002 budget statement to Parliament, Mr Osafo-Maafo said provisional fiscal data showed total statutory payments of 5,474.5 billion cedis and discretionary payments of 6,206.3 billion cedis. "These are lower than the respective targets of ¢5,574.8 billion and 7,498.7 billion cedis," he said.
Under statutory payments, the Minister said external debt service was 1,867.9 billion cedis, while domestic interest payments were 2,309.5 billion cedis. "Thus debt service constituted about 76.0 per cent of statutory payments, and 36.5 per cent of total payments."
Mr Osafo-Maafo said a total amount of 262.8 billion cedis was transferred into the District Assemblies' Common Fund, while the Ghana Education Trust Fund received a total of 260.2 billion cedis of these amounts.
Transfers to households, comprising pensions and gratuities, were 289.6 billion cedis, while the Road Fund got 719.3 billion cedis. On discretionary payments, the Minister said, personal emoluments amounted to 3,036.5 billion cedis.
"This constitutes about 51 per cent of total discretionary payments and was 416.5 billion cedis above target."
Expenditures on Administration and Services were 717.3 billion cedis with a provisional outturn of about 20 per cent below target. On Investments, Mr Osafo-Maafo said the outlays on total Investments were 1,859.4 billion cedis, of which 1,644.8 billion cedis representing 88.5 per cent were financed from foreign inflows.
In addition to these expenditures, he said, payments in respect of outstanding liabilities totalling 516.5 billion cedis for roads, utilities and supplies were made.
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Accra (Greater Accra) 23 February 2002 - The producer price for cocoa for 2001/ 2002 main crop season has been reviewed upwards by 41 per cent with effect from Friday February 22, the Ghana Cocoa Board announced on Thursday.
A statement signed by the Board's Chief Executive, Mr Kwame Sarpong said a tonne of 16 bags of Cocoa would now sell at 6.2 million cedis from 4.384 million cedis.
It further said that all buying centres would now pay an amount of 186,000 cedis for a load of 30 kilograms grade I and II Cocoa beans naked ex-scale and 387,500 cedis per bag for 64 kilograms gross.
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Accra (Greater Accra) 23 February 2002 - Total government payments amounted to 11,559.9 billion cedis in 2001, Mr Yaw Osafo-Maafo, Minister of Finance, said while presenting this year's budget on Thursday.
He said out of this amount, a total of 5,474.5 billion cedis and 5,985.4 billion cedis were programmed for statutory and discretionary expenditures respectively.
Against this, 2002 total payments have increased to 16,359.7 billion cedis, out of which an amount of 9,465.1 billion cedis in discretionary expenditure is allocated to the Ministries, Departments and Agencies (MDAs) for the implementation of their programmes.
The Finance Minister said in the context of the GPRS, the government development priorities in the medium term, as outlined by the President, would be:
* infrastructure development;
* agriculture and rural development;
* enhanced social services with emphasis on education and health;
* good governance; and
* private sector development.
Mr Osafo-Maafo gave the broad sectoral groupings expenditures in 2001 as against allocations in 2002 as follows:
In 2001, actual expenditure was 681.9 billion cedis against the revised figure of 681.4 billion cedis. The Infrastructure Services Sector has been allocated 1,282.0 billion
cedis in 2002 as compared to 736.5 billion cedis in 2001.
This allocation represents 17.0 per cent of the total planned expenditure of 7,406.0 billion cedis for the five broad sectors and a 74.0 per cent increase over the planned expenditure in 2001, Mr Osafo-Maafo said.
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