BUDGET shows 44% decline in public debt

Accra, Nov. 16, GNA - The government's budget statement for the year 2006/2007 indicated that total public debt, domestic and external, had declined by a margin of 44.3 per cent from US$8.4 billion in 2005 to US$4.8 billion at September 2006.

Mr. Kwadwo Baah Wiredu, Minister of Finance and Economic Planning attributed the "phenomenal" decline to the stock of debt cancellations that the country benefited from under the HIPC and the Multilateral Debt Relief Initiative (MDRI), when he presented the 2006/2007-budget statement to Parliament on Thursday.
"The phenomenal decline is the result of the stock of debt cancellation that Ghana benefited under both the HIPC and the MDRI debt relief Initiative," he said.
Mr. Baah-Wiredu said prior to MDRI in 2005, government's total external debt alone, comprising of government overseas debts, government-guaranteed debts and debts owed by institutions with over 50 per cent government shares was over six billion dollars, accounting for about 75.9 per cent of the total public debt.
"This amount had been reduced significantly to US$2,143.79 million by the end of September 2006, as a result of a 66 per cent debt reduction under the MDRI," he said.
He said a large chunk of the external debt was owed to multilateral credit institutions, 63.4 per cent, of which the World Bank contributed about 44.3 per cent. Bilateral debt constituted about US$610.49 million, representing 28.5 per cent of total external debt and the remaining US$174.1 million (8.1 per cent) ascribed to commercial debt. The debt composition for the first nine months of 2006, he said, was not any different from that of 2005.
Mr. Baah-Wiredu noted that the domestic debt, owed to local banks and non-bank financial institutions however, rose to 55.6 per cent of the total public debt by the end of September 2006 in the post MDPI period.
He said, "in terms of ratios, the net total public debt to GDP declined from 32.0 per cent in 2005 and is expected to be 28.2 per cent by end 2006."
Mr. Baah-Wiredu was confident that the trend in public debt ratio was consistent with Government target to reduce the debt burden and the rate of growth of public debt.
He however, told Parliament that based on the fiscal performance for the first nine months of this year and the projections that have been made for the end of the year, the overall budget balance is projected to record a deficit of A25,591.8 billion.
He said, that was equivalent to 4.9 per cent of GDP compared to the budget estimate of 4.5 per cent of GDP.
"The domestic primary balance is also projected to be a deficit of 2.1 per cent of GDP against the budget estimate of a deficit of 1.4 per cent of GDP. As a result, the main fiscal anchor - domestic debt-to-GDP - is projected at 10.1 per cent against a target of 8.7 per cent for 2006," the Minister told Parliament. 16 Nov. 06