"2003 was a period of consolidation" - Osafo Maafo
Accra, Feb. 6, GNA - Mr Yaw Osafo Maafo, Minister of Finance and Economic Planning, says the Government's aim in 2003 was to consolidate the remarkable achievements chalked during the 2002 fiscal year. Against this background, the economic policies of the Government last year were aimed at strengthening and sustaining economic growth, reducing inflationary pressures while ensuring effective implementation of the Poverty Reduction Programmes of the Ghana Poverty Reduction Strategy.
Mr Osafo Maafo said this in Accra on Thursday when he presented the 2004 Budget Statement and Financial Policy to Parliament. He said Government set for itself in the 2003 Budget Statement and Economic Policy a real GDP growth of at least 4.7 per cent, a reduction in the year-to-year rate of inflation from 15.2 per cent at end-December, 2002 to 9.0 per cent by end-December, 2003.
The rest was an overall budget deficit of 3.1 per cent of GDP, a domestic primary budget surplus of 3.0 per cent of GDP, and rebuilding of gross official reserves equivalent to 2.3 months of imports.
"Key policies that were outlined to deliver those outcomes included reducing and stabilizing the domestic debt with a view to stemming the increase in interest payments, and achieving the desired decline in real interest rates, reinforcing effective monitoring, control, and transparency in public expenditure operations, in particular, the tracking of pro-poverty reduction related expenditures.
"Reducing the losses and restructuring the debts of the major parastatals, phased adjustments of utility prices to achieve and maintain full cost recovery, effective implementation of the divestiture programme and continued development of the financial sector. These, he noted, included improved banking supervision and policies to facilitate increased credit by the banking system in support of private sector development; and improving the quality and timeliness of the dissemination of economic statistics for effective planning of the economy.
However, the institution of adjustments and corrective measures to rationalize the prices of petroleum products sparked off a chain of price increases above the levels anticipated by Government.
"This led to a jump in the rate of inflation from 16.3 per cent at the end of January 2003 to 29.4 per cent at the end of February 2003. These developments necessitated a revision of the macro economic targets for the 2003 economic programme.
"I then reviewed the end-period inflation target of 9.0 per cent upwards to 22.0 per cent, revised domestic primary budget surplus downwards from 3.0 per cent to 2.3 per cent of GDP and the overall budget deficit from 3.1 per cent to 3.3 per cent of GDP.
"The other key macroeconomic targets, however, remained the same," he said.
Mr Osafo Maafo said the implementation of the 2003 Budget was beset with challenges such as the high and volatile world oil prices. This necessitated the transfer of resources to the VRA for the procurement of crude oil to enable it to provide uninterrupted electricity to Ghanaians as well as the continued restructuring of the Tema Oil Refinery debt, which posed a systemic risk to the domestic banking system.
He said, notwithstanding, those challenges, economic performance during 2003 was strong as a result of the hard work and prudent measures put in place by the Government.
Real GDP growth, he said, was higher than expected - 5.2 per cent against a projected 4.7 per cent and year-on-year inflation declined to 23.6 per cent at the end-December, 2003, after peaking at 30 per cent at end-April 2003;
The cedi remained relatively stable throughout the year depreciating by only 4.7 per cent against the dollar, but the overall budget deficit was contained at 3.4 per cent of GDP against the targeted 3.3 per cent of GDP.
The net domestic borrowing by Government represented the best performance since 1995, registering a net repayment of 0.4 per cent of GDP, against the target of zero net borrowing while gross foreign exchange reserves at the Bank of Ghana equalled 3.9 months of imports, the highest since the liberalisation of the foreign exchange market in 1990.
Interest rates assumed a downward trend, with the benchmark 91-day Treasury bill rate falling sharply from a peak of 35.3 per cent in June 2003 to 18.7 per cent at the end of the year and total tax revenues exceeded expectations in 2003 as a result of measures taken to improve efficiency in tax administration meaning that expenditures were kept within budget ceilings.
On the overall growth of Gross Domestic Product, the Minister of Finance put provisional figures at a growth rate of 5.2 per cent, exceeding the projected per cent for the year, and better than the 4.9 per cent stipulated in the GPRS for the medium-term.
"All the major broad sectors contributed to this impressive performance, with the Agricultural Sector leading the way with a remarkable 6.1 per cent growth against the growth of 4.4 per cent achieved in 2002.
"The Industrial Sector growth of 5.1 per cent exceeded the 2002 growth of 4.7 per cent, while the Services Sector growth rate of 4.7 per cent matched the 2002 performance."
He said the strong agricultural performance was propelled by the strong recovery of the cocoa sub-sector, which improved, from 0.5 per cent in 2002 to a remarkable 16.4 per cent growth in 2003.
"This performance is mainly attributed to the cumulative favourable impact of the continued mass spraying exercise initiated by the New Patriotic Party (NPP) Government in 2001. Growth in the other remaining sub-sectors similarly exceeded their 2002 levels," he explained.