8% growth rate & 5% inflation target for 2009

Finance minister Kwadwo Baah Wiredu has announced a target of 8% growth rate by the year 2009, with a corresponding 5% inflation by the same year. With the growth rate currently at 6.2%, the finance minister says the new target forms part of government’s policies for the medium term.

At a Consultative Group Meeting with the World Bank and other development partners in Accra, Mr. Baah Wiredu said with a growth rate target of 8%, the 5% inflation target is very likely to be achieved and would help preserve the current relative exchange rate stability.

The theme for the CG Meeting was “human resource development for accelerated and shared growth.”

He told the development partners that the economy has remained resilient despite the increases in world crude oil prices and the energy crisis, and therefore expects some adjustments in all the economic figures and indicators for the next couple of years particularly the growth rate, inflation and GDP.

The current External Account deficit of 8.2% of Gross Domestic Product (GDP) expected at the end of 2006 is expected to narrow down to about 7% of GDP in 2009. Mr. Baah Wiredu says the government’s pursuit of a continued consolidation of public finances will hold the overall fiscal deficit down to an average of 5% of the GDP while public, domestic and external debt will be maintained within sustainable levels.

Government is also expecting to maintain its revenue as percentage of GDP which has averaged about 23% during the short term together with the fiscal deficit which is also estimated to fall from 7.8% of GDP to about 4.2% by 2009.

In line with these expected improvement in economic indicators between now and 2009, the Finance Minister announced that steps are been taken to implement a growth and stability compact which is aimed at ensuring that the stability of the economy is not compromised while scaling up investments in critical growth areas.

The growth and stability compact which the government is set to introduce will include a fiscal rule using total public debt to GDP ratio as an anchor, high level value for money unit to ensure proper selection of projects for inclusion in the public investment budget in addition to efficient use of funds, enhanced public debt management and an enhanced public private partnership policy to encourage the private sector to participate in key infrastructure aspects of the accelerated growth agenda.