Business News of Friday, 28 February 2003
The Hon.Minister of Finance, Mr. Yaw Osafo- Maafo has presented the 2003 Budget Statement to Parliament (full text).
SECTION ONE: INTRODUCTION - AN OVERVIEW OF ECONOMIC POLICY AND BUDGET- FISCAL YEAR 2003
1. Mr. Speaker, it is a great honour for me to deliver to this august House on behalf of His Excellency President John Agyekum Kufuor, the third Budget Statement and Economic Policy of the NPP Government. On Thursday February 13, 2003, His Excellency the President delivered his State of the Nation Address. The President set out the Government’s broad policy framework and shared his vision of how to ensure enduring success and prosperity for the nation. This broad policy framework and the President’s vision informed the 2003 budget.
2. The Government in 2001 instituted the Emergency Social Relief Programme with the goal to reduce poverty.
3. The year 2002 marked the beginning of the implementation of the Growth and Poverty Reduction Strategy (GPRS) in our drive to become a middle-income country.
4. The GPRS identifies a comprehensive set of policies to support our medium-term strategy.
5. There are three key vehicles in pursuit of this strategy: first, is the maintenance of a solid macroeconomic framework, second, the pursuit of the five priority areas chosen for development, and, third, the President’s Special Initiatives.
6. Mr. Speaker, in the two previous Budget Statements and Economic Policies, we began the process to better manage the economic affairs of this nation. We began to put in place the fundamentals that will enable us make progress in the five priority areas of the GPRS namely; ? the vigorous development of the infrastructure of the country, with special emphasis on roads, ports, transportation, energy supplies and information and communications technology; ? the development of a modernised agriculture based on rural development; ? the delivery of enhanced social services to ensure equity and quality, particularly in education and health; ? the strengthening of the institutions for good governance; and ? the strengthening of the private sector so that it can act effectively as the engine of growth.
7. The President’s Special Initiatives (PSIs) are intended to stimulate private enterprise, improve productivity and create jobs.
8. Mr. Speaker, the 2003 budget is carrying these initiatives forward with specific programmes and activities. We are confident that this is our sure path to achieving higher rates of economic growth, increasing employment and thereby improving the living standards of all Ghanaians.
9. Mr. Speaker, even as we strive to implement our growth and poverty reduction strategy, the NPP Government has had to take some difficult, yet necessary steps so that our progress and gains made in one sector of the economy are not eroded because of the neglect in other areas of our economic life.
10. To borrow the words of the President in his State of the Nation address to this House a couple of weeks ago, we needed “to bite the bullet in a last ditch stance to free the economy for real growth”.
11. Mr. Speaker, these hard decisions are not palatable to any Government. But, we have learnt something important for good governance: we should not underestimate the capacity of Ghanaians to analyze and to understand the difficult problems we face. It is our duty, indeed our responsibility as government to share information when we must and to explain the truth about the difficult problems which confront the nation.
12. Mr. Speaker, the NPP government is heartened to note that Ghanaians understand that the decisions about petroleum and utility price adjustments are not matters of electioneering campaigns. Rather, they understand that we must make these difficult but necessary decisions now so that future generations do not have to bear intolerable burdens because we knowingly refused to make the hard but correct choices.
13. It is better to conduct democratic politics in an open society that squarely faces up to the economic facts of Ghana’s present and future than to shut our eyes in a falsely cocooned world of denial. The public response to the petroleum sector reforms and price adjustments is a vote of confidence in a government which is fearlessly ready to do the right thing at the right time.
14. Mr. Speaker, many events affected our ability to manage our economic affairs effectively in 2002. The ongoing threat of war in the Middle East and the effect on oil prices continue to exert pressure on our foreign exchange reserves.
15. Within our own sub-region the security situation in the Ivory Coast, quite apart from creating an atmosphere of economic uncertainty that affects all of us, has also increased the flow of heavy duty vehicles on our roads with the attendant problems of increased expenditure on maintenance and on fuel imports.
16. On the domestic front, the challenges to sound economic management were numerous and difficult, and included: ? higher than expected payments by government for wages and salaries; ? the need to accelerate payment of arrears to road contractors and to SSNIT which had accumulated from the past; ? the need also to find much higher than programmed levels of subsidy to support public utility companies; ? considerable expenditures on security in troubled arrears of the country; and ? substantial short-falls in the remittance of official assistance from Ghana’s developing partners.
17. Mr. Speaker, in spite of these challenges, and but for the moderate price in the inflation rate towards the end of the year, Government has been able to maintain its record of steadily improving stability in the fundamentals of the economic and rising levels in the average man’s real standard of living.
18. Mr. Speaker, permit me to mention two other developments in the past year that speak to the confidence in government systems and in our management of the overall economy. First, there has been a surge of foreign exchange from mostly Ghanaians resident abroad in the form of remittances and investment.
19. Second, our developing partners have decided to provide untied aid in a common pool of resources as direct budgetary support to be managed at the discretion of the Government of Ghana. The expected amount of such support for 2003 is estimated at US$110 million (about ?935 billion). This form of assistance is intended to provide Ghana with more predictable and flexible inflows of financial resources for the implementation of the priority areas of the GPRS.
20. This is a vote of confidence in the modest progress we have made towards the control and monitoring of public expenditures. Our development partners therefore are willing to coordinate among themselves through the Multi-Donor Budget Support (MDBS) to rely on government systems in delivering development aid. Our responsibility is to use these resources with due diligence and efficiency.
21. On our relationships with multilateral institutions, let me add that we have concluded negotiations for agreement on a three-year Poverty Reduction and Growth Facility (PRGF) with the International Monetary Fund (IMF) and this is expected to be submitted to the Fund Board in April, 2003. We have also concluded negotiations with the World Bank on the final version of the framework and costing of Ghana’s Growth and Poverty Reduction Strategy. Government also has started negotiations with the World Bank on the Poverty Reduction Support Credit (PRSC). This is expected to be submitted to the Board of the Bank in May, 2003.
22. Mr. Speaker, this year’s Budget continues the NPP Government’s commitment to deliver a macro-economic environment that underpins our strategy for growth and poverty reduction. Keeping inflation low and stable is not enough, we will also ? accelerate the implementation of the priority programmes and activities identified in the GPRS; ? work towards the early attainment of Ghana’s HIPC completion point; and ? intensify the rate of infra-structure development though public and private investment.
23. Mr. Speaker, the outlook for reduction in poverty has never been brighter, thanks to our targeted interventions and the sound use of ‘HIPC Dividends’. We shall continue with the judicious use of the ‘HIPC Dividends’ as we have done in 2002, to bring to the people improvements in sanitation, water, health facilities, accelerated job creation and basic education. At the end of 2002, about ?235.0 billion was committed to District Assemblies and through Ministries, Departments and Agencies (MDAs) for these specific HIPC interventions.
24. Mr. Speaker, in the management of the nation’s finances, the 2002 budget sought to: ? strengthen our tax base; ? allocate resources toward priority areas in the GPRS; ? reduce significantly the debt burden; and ? develop a more effective interbank foreign exchange market.
25. We emphasized improvements in public expenditure management to ensure that the budget was implemented as planned. 26. Our vision is to continue to develop an effective and efficient domestic tax system. Despite the increasing cooperation of our development partners, our firm belief is that a government that ‘earns’ its revenues through a well-developed domestic tax system is better able to respond to the needs of its citizens even in the face of external shocks. The ability to raise revenue from within is a real test of the strength of our public finances.
27. On the expenditure front, we shall continue to make public expenditure management a transparent system that would emphasize accountability and close all possible loopholes. Despite the various problems we experienced this past year with respect to our expenditure commitment control systems, we will improve our control and monitoring systems through the use of strict cash management budgeting.
28. Mr. Speaker, we have been very conscious this year to translate the GPRS into the budget. The Ministry of Finance (MOF) together with the Ministry of Economic Planning and Regional Cooperation (MEPRC) have been working with the MDAs to bring them within the framework of the GPRS and the macroeconomic policy.
29. Mr. Speaker, the desire to create the “Golden Age of Business” continues to find expression in our public policy initiatives, in the development of strategies, and in the rebuilding of institutions. This year will see a re-doubling of our efforts to rebuild institutions that have for so long been left to decay. For example, we intend to re-equip the office of the Registrar General not only for its revenue potential, but, more important, for the fact that this institution has a role to play to ensure good corporate governance.
30. The 2003 budget is guided by the principle that the financing of all the programmes and activities to deliver the goods and services that Ghanaians value most must neither be inflationary nor lead to a debt overhang. More particularly, the implementation of the GPRS and its financing must not obstruct or crowd out the private sector in any way. The stance of fiscal and monetary policies in this budget reflects this cautious principle. 31. We should always bear in mind the need to support micro businesses and Small and Medium Scale Enterprises (SMSEs) to grow. It is our hope that domestic stakeholders and our development partners will be supportive in raising the additional resources needed to support the implementation of our growth and poverty reduction strategy.
32. Mr. Speaker, we live in an increasingly globalised world. The welfare of Ghanaians is not only dependent on what we have in Ghana, but also in a very large measure on what happens on the external front. It is therefore important that the 2003 Budget Statement and Economic Policy be viewed in the appropriate global context.
34. Investment demand and consumer spending remain weak. Financial markets appear unsettled and weighing down growth. Investors’ nervousness and the wide-ranging uncertainties in the world financial markets appear to be holding back prospects of recovery even in 2003.
35. The threat of war in Iraq and oil prices increasing above US$32 a barrel have dampened growth expectations in 2003. With the exception of Australia and Canada where growth is predicted to reach the 3 per cent mark, it is estimated that growth for the other major industrialized economies will hover around 1-2 per cent. Unemployment continues to rise in major economies.
36. Government fiscal deficits for the major advanced economies are forecasted to increase from 1.1 per cent of GDP in 2001 to about 3 per cent in 2002 and 2003. Governments in the advanced economies may be forced to make some tough fiscal decisions if the slowdown continues into 2003. 37. For developing regions, the World Bank’s projection is that growth in 2003 seems certain to be weaker.
38. For 2003, the real GDP growth forecast for Sub Sahara Africa of 3.2 per cent is considerably lower than the 5.4 and 6.1 per cent growth for South Asia and East Asia, respectively. Our export growth is also likely to be adversely affected unless there is significant recovery in Europe, the major destination of our exports. 39. After falling to a three decade low in February 2000, the rise in cocoa prices is re-assuring. But, Mr. Speaker, the gains to us were rather modest because of the forward sales of our crop before the price rise begun in late 2002. We took lessons from the forward sales and adjusted our strategy in order to benefit from increasing world market price of cocoa. In 2003, we must use any price gains to improve on producer price for farmers and to build up reserves so that we will be in a position to stabilize domestic producer prices in the event of unanticipated price reversal.
40. For most other agricultural commodities, the prospects of price increases appear low. Palm oil prices continue to decline. Price recovery of tropical timber from the lows reached at the end of 2001 has been slow.
41. Like the price of timber products, price recovery of metals and minerals is not expected to be strong unless there is a significant rebound in the global economy. The rally in gold prices is not expected to endure. The good news is that rising price trends may stimulate investment in explorations and strengthen our output prospects in the future.
42. Mr. Speaker, the implications of these global developments and commodity price trends on our development efforts can be far reaching and merit attention. They decrease the income of exporters, weaken our trade balance, diminish our ability to build up reserves, and government revenues suffer.
43. Our challenge is to develop a broad-based strength in exports to insulate ourselves from fluctuations in the global economy. This has been the thrust of the NPP Government’s export development and export promotion policy agenda and the major driving force behind the PSI. The strategies as noted in the Ghana Poverty Reduction Strategy include diversifying the production base of the economy: ? adding value to our exports; ? the range of products or the composition of exports in which Ghana is globally competitive; and ? the external markets for Ghana’s products. 44. While these measures, including better marketing strategies for the country’s non-traditional exports and cocoa beans, will not insulate Ghana completely from the unpredictable fluctuations in the world economy, they hold the prospects to minimize the negative impact of such shocks on export revenues, on personal incomes, on government revenues, and on the balance of trade and international reserves. But these measures take time to yield fruits.
45. Strengthening the internal management of the economy is the key and immediate avenue to minimize the adverse effects of global economic slowdown on the domestic economy. For one thing, countries with strong management of domestic finances, sound monetary and fiscal management policies stand a greater chance of minimizing the adverse effects of the global trends on the lives of their citizens.
46. Mr. Speaker, we are also mindful of the ever-increasing competition to attract Foreign Direct Investment (FDI). The competition is even more urgent in the light of global investor nervousness. Despite our rich natural resources, many factors continue to make the sub-region, an unattractive host to FDI. We will do the best to make Ghana a favoured destination of FDI.
48. We emphasised improved public expenditure management to ensure that the budget was implemented as envisaged. 49. Notable progress was made in 2002 on a number of fronts: ? domestic revenue mobilisation was quite robust on the account of enhanced tax administration; ? in spite of larger-than-anticipated payments relating to wages and salaries, the overall expenditure ceiling was respected, that is, keeping within the Appropriations Act; ? year on year inflation which had been cut by about half in 2001 to 21.3 per cent, continued to fall to 15.2 per cent at end-2002; and ? the Bank of Ghana strengthened its gross international reserve position from the equivalent of 1.5 months of import cover at end-2001 to 2 months of imports at end-2002. 50. Mr. Speaker, considerable progress was made on our programme to modernise the legal framework for Ghana’s financial sector. The divestiture process also began to move forward in late 2002, with the offer for sale of 40 per cent of the Government’s shares in the Cocoa Processing Company (CPC), and substantial completion of the preparatory work for the sale of other “targeted” assets. 51. Mr. Speaker, during the year, government experienced several challenges in the management of the economy. These challenges included: ? higher-than-expected expenditures on wages and salaries; ? accelerated payments of arrears relating to both non-statutory and statutory payments; ? higher-than-anticipated subsidies to utility companies; ? higher expenditures to safeguard security in some sections of the country; and ? substantial shortfalls in expected foreign inflows.
48. The net effect of these challenges was a higher amount of government borrowing from domestic sources than was anticipated.
49. In spite of these challenges, however, government was able to maintain reasonable level of macroeconomic stability.
50. Mr. Speaker, with your indulgence, I would like to discuss developments in specific areas of the economy in more detail. Overall GDP Growth
51. Provisional figures for fiscal year 2002 showed an overall GDP growth rate of 4.5 per cent, indicating the achievement of the target of 4.5 per cent set for the year. This compares with the real growth of 4.2 per cent achieved in 2001. This was accounted for by the strong out-turn in production of crops and livestock. The estimates indicate an expansion of 4.4 per cent in output for the broad Agricultural sector, compared to the 4.0 per cent growth rate in 2001. The Industrial sector output grew at 4.7 per cent compared to 2.9 per cent recorded in 2001 fiscal year. The Services sector showed a lower growth rate of 4.7 per cent compared to 5.1 per cent level achieved in 2001. Sectoral Growth Agriculture 52. The Agricultural sector grew at a rate of 4.4 per cent compared to 4.0 per cent targeted for the year. The Crops and Livestock sub-sector performed better than expected, accounting for the biggest contribution of 5.2 per cent in the growth rate for the sector. Cocoa Production and Marketing continued to record a negative growth rate. The growth in 2002 was negative 0.5 per cent, compared to the growth of negative 1.0 per cent in 2001. Thus, there was some improvement in 2002, partly attributable to the mass spraying exercise undertaken during the course of the year.
53. The Forestry and Logging sub-sector recorded 5.0 per cent growth as against the 5.8 per cent target. This was an improvement over the 2001 growth of 4.8 per cent. The Fisheries sub-sector grew at 2.8 per cent against 2.0 per cent in 2001. Industry
54. The Mining and Quarrying sub-sector recovered from a low level of negative 1.6 per cent growth in 2001 to 4.5 per cent in 2002. The Manufacturing sub-sector grew by 1.1 percentage points from 3.7 per cent in 2001 to 4.8 per cent in 2002. Electricity and Water sub-sector grew at 4.1 per cent which was slightly lower than the 2001 growth of 4.2 per cent. The Construction sub-sector achieved a growth rate of 5.0 per cent as against 4.8 per cent in 2001. Services 55. The Services sector achieved a growth rate of 4.7 per cent during the year under review. This compares with the growth of 5.1 per cent recorded in 2001. The low growth rate in 2002 is mainly attributable to a decline in Government Services sub-sector.
56. The Transport, Storage and Communications sub-sector recorded 5.7 per cent growth in 2002, compared to 5.5 per cent in 2001. Government Services sub sector grew by 3.6 per cent compared to 5.0 per cent in 2001. Wholesale and Retail Trade, Restaurants and Hotels sub-sector recorded 5.6 per cent growth compared to 5.1 per cent in the previous year. The Financial, Insurance, Real Estate and Business Services sub-sector grew at 5.5 per cent as against 4.5 per cent in 2001. Fiscal Developments Receipts
57. Total receipts for 2002 amounted to ?15,447.0 billion. This fell short of the target of ?16,359.7 billion by ?912.6 billion (5.6 per cent). Tax revenue amounted to ?8,547.5 billion. This was higher than the budget target of ?8,336.5 billion by 2.5 per cent on account of better-than-programmed performance by all the major tax sources, namely, direct taxes, value added taxes and import duties. 58. Direct taxes collected by the Internal Revenue Service (IRS) amounted to ?2,795.4 billion, exceeding the budget estimate of ?2,520.0 billion by 11 per cent. Provisional data indicate that all the tax sources under direct taxes performed better than projected. 59. Policy implementation and strategies which aided the Internal Revenue Service to exceed the target included limitation on the period for accumulated capital allowances, carry over of losses, disclosure of foreign exchange gains and losses, acquisition of depreciable assets, and intensive fieldwork.
60. Value Added Taxes yielded ?2,308.8 billion, exceeding the target of ?2,207.7 billion by 4.6 per cent, while Excise amounted to ?368.3 billion against an estimate of ?334.6 billion, an over-performance of 10.1 per cent. 61. In spite of these achievements, there are, admittedly, pockets of businesses that should have registered for VAT by law but have failed to do so. It is also recognised that some VAT registered businesses, especially in the hotel and restaurant industry and the retail sector, have been selective in charging the tax, in contravention of the VAT Act. A lot more fail to issue official VAT invoices. 62. The VAT Service employed various methods for dealing with the problem, including educating the public to insist on their VAT invoices. 63. Taxes on Petroleum fell short of the expected receipts of ?1,118.7 billion by ?38.7 billion or 3.5 per cent below target.
64. Under international trade taxes, Import duties recorded an outturn of ?1,626.1 billion compared with a programme target of ?1,313.1 billion, indicating an over performance of 23.8 per cent. Export duties comprising cocoa duties and levy on lumber exports fell short of target by ?23.0 billion with an outturn of ?364.6 billion. 65. The impact of measures introduced during 2002 for revenue enhancement reflected in higher import duty collections, despite lower import volumes and faster depreciation of the cedi. The measures included reducing the range of items admitted at either concessionary rates or exempt from import duty, re-categorisation of warehouses, the upward review of registration and renewal fees and a review of penalties and fees, all of which had become outdated with time.
66. The outturn for Non-Tax Revenue (NTR) of ?252.4 billion was below the budget estimate of ?449.1 billion. This apparent shortfall was as a result of a re-classification of items that constitute non-tax revenue. Under an exercise to clean up the composition of non-tax revenue, most of the revenue items, which hitherto were classified as NTR, were found to be unspent deposits and hence re-classified accordingly.
67. Divestiture receipts were lower than programmed in 2002. The annual outturn of ?10.9 billion from divestiture was far below the target of ?386.9 billion because of the inability of government to expedite action on the divestiture of some targeted assets. The delays in the divestiture programme were to allow for better asset valuations and to achieve greater transparency and efficiency.
68. Programme loan disbursements amounted to ?159.6 billion, while programme grants were ?558.3 billion, compared to the budget estimates of ?724.8 billion and ?588.3 billion respectively. The outturn for project loans was ?1,185.1 billion as against the budget estimate of ?1,999.4 billion. Similarly, out of the expected project grants disbursements of ?922.8 billion, only ?466.4 billion materialised.
69. Thus, overall, external programme support fell short of the expected amount by about ?595 billion. 70. The low inflows of both project and programme loans and grants largely accounted for the substantial shortfall in total receipts in 2002.
71. Net domestic financing of the budget was ?2,331.7 billion compared with the budget target of ?139.0 billion. This was made up of government borrowing of ?1,035.5 billion from the banking sector and ?1,296.3 billion from the non-banking sector. To the extent that disbursements of foreign inflows did not materialise, government was compelled to over-rely on domestic financing of the budget.
72. Inflows from HIPC assistance in the form of grants from multilateral creditors amounted to ?499.2 billion. This was higher than the programmed inflows of ?471.0 billion.
73. Exceptional financing of the budget amounted to ?1,242 billion. This was made up of traditional debt rescheduling of ?1,451 billion, HIPC relief from non-multilateral development partners of ?252.0 billion, less the clearance of external payment arrears of ?461 billion. Payments
74. Provisional data indicate that total payments for 2002 amounted to ?15,447.0 billion, compared with the target of ?16,359.7 billion. This was made up of statutory payments of ?6,676.0 billion and discretionary payments of ?8,771.0 billion. Statutory payments fell short of the estimate by ?218.6 billion and discretionary payments were also below estimate by ?694.1 billion.
75. Under statutory payments, external debt service payments of ?2,915.0 billion and domestic interest payments of ?2,210.0 billion were made. These were higher than the budget estimates of ?2,888.1 billion and ?2,136.1 billion for external debt service and domestic interest payments, respectively.
76. On an accrual basis, external debt service due was ?2,915 billion, while actual payments amounted to ?1,677.0 billion. The difference of ?1,238.0 billion corresponds to savings resulting from debt relief received under the HIPC initiative.
77. With regard to domestic interest, the apparent higher-than programmed payments was the result of the accrued interest resulting from the restructuring of the Tema Oil Refinery (TOR) debt into government bonds.
78. Transfers to households over the period amounted to ?688.1 billion compared with the programmed amount of ?713.3 billion. Out of the total amount, ?311.3 billion went to pensions, ?77.2 billion to gratuities and 302.6 billion as government contribution to social security, respectively.
79. A total payment of ?332.4 billion was paid to the District Assemblies Common Fund (DACF), out of which ?74.2 billion was in respect of previous year’s arrears. The Ghana Education Trust Fund (GETF) also received a total of ?336.9 billion including payments for previous year’s arrears of ?172.3 billion.
80. A total amount of ?312.1 billion was transferred into the Road Fund, while ?128.1 billion went to the various petroleum-related funds, namely Energy, Exploration, and Strategic Stocks.
81. Discretionary payments in respect of Personal Emoluments (PE), Administration and Service exceeded their respective budget estimates. The outturn for PE was ?4,195.1 billion, against the budget estimate of ?3,122.2 billion, indicating an overrun of ?1072.9 billion and constituting about 47.8 per cent of total discretionary payments. With regard to Items 1-4 (Personal Emoluments, Administration, Service and Domestically-financed Investment), which are the appropriation allocated for direct use by Ministries, Departments and Agencies (MDAs), wages and salaries constituted 70.5 per cent.
82. Among the factors contributing to the wage bill overrun were: ? unbudgeted wage increases to staff in the Ministries of Health and Education, in part to stem mass exodus of staff and service disruption; and ? Ministries, Departments and Agencies (MDAs), particularly, some subvented organisations, did not universally apply the established procedures for controlling wage and salary expenditures.
83. Expenditure on Administration and Service was above the estimate of ?1,115.0 billion by ?337.4 billion. The reasons for the overrun include unbudgeted increases in allowances, mostly to health workers.
84. A total payment of ?209.6 billion was made for the clearance of certified road sector arrears. Payments for non-road arrears (excluding DACF and GETF), amounted to ?428.6 billion. These include arrears owed to suppliers of goods and services to MDAs. 85. An amount of ?449.9 billion was used to subsidise utility companies, including large unplanned payments to the Volta River Authority for oil imports, and partly for the settlement of cross-public enterprise liabilities between Ghana Water Company Limited (GWCL), the Electricity Company of Ghana (ECG) and the Volta River Authority (VRA).
86. An amount of ?175.1 billion was disbursed to finance poverty reduction activities under the HIPC initiative. Overall Balance
87. The provisional outturn shows that the overall budget recorded a deficit of 6.3 per cent of GDP, better than the budget estimate of 6.9 per cent of GDP. The domestic primary balance, however, registered a surplus, equivalent to 2.1 per cent of GDP, which was lower than the budget target of 3.1 per cent of GDP. Monetary Developments
88. Monetary policy for the year under review aimed at achieving price and exchange rate stability as key elements in creating the environment conducive to the achievement of sustainable economic growth. Towards this end, the Bank of Ghana maintained the pace in the active pursuit of open market operations and reverse repurchase agreements.
89. To enhance the overall effectiveness of monetary policy, in January 2002, His Excellency the President signed into law the Bank of Ghana Act, which gave operational independence to the Central Bank. Under the Act, formulation of monetary policy has been assigned to a new Monetary Policy Committee, inaugurated in September 2002.
90. Early in the year, the Central Bank introduced the Prime Rate as an instrument to signal the Bank’s assessment of inflationary pressures and, therefore, monetary policy stance. In pursuit of the tight monetary policy of the Bank, the Prime Rate was kept unchanged at 24.5 per cent, which in the face of declining inflation, resulted in high real interest rates (about 10.0 per cent as measured by the effective yield on the 91 day Treasury bill). The high real interest rates helped to stem inflationary pressures in the economy.
91. Monetary developments in 2002 were however dominated by large injections of liquidity on account of the foreign exchange inflows from cocoa loan disbursements, particularly in the last quarter of the year and strong private sector credit growth. In the event, reserve money recorded a growth of 42.6 per cent, compared with 31.3 per cent in 2001. Broad money supply (M2+) also grew by 50.0 per cent, compared to 41.4 per cent in 2001. 92. Credit to private and public institutions by deposit money banks grew by ?704.0 billion (11.5 per cent) in 2002, compared to an increase of ?1,104.0 billion (21.9 per cent) in 2001. Significantly, credit to the private sector increased by ?1,494.2 billion (33.2 per cent) while that to public institutions declined by ?790.1 billion (48.0 per cent). The decline in credit to the public institutions was mainly on account of the conversion of ?1,421.0 billion of TOR debt into Government of Ghana bonds during the year.
93. One notable development during the year was the decline in nominal interest rates, which was generally in line with the decline in inflation and inflationary expectations. The weighted average interest rate on the 91-day Treasury bill declined from 28.9 per cent in December 2001 to 26.3 per cent at the end of the year. 94. The commercial banks responded to this development by lowering lending rates. The average lending rate, thus, declined from 44.0 per cent to 38.5 per cent. Savings deposit rates also declined from an average of 14.5 per cent to 13.0 per cent, while the three months deposit rate fell from 23.3 per cent to 18.0 per cent. The 12 months deposit rate, on the other hand, remained unchanged at 20.0 per cent. Consumer Price Developments Inflation 95. Prudent fiscal management and the tight monetary policy stance in the management of the economy initiated in 2001 continued in 2002. These measures, coupled with the slow pace of depreciation of the cedi led to a further deceleration in the year to year inflation rate from 21.3 per cent in December 2001 to 12.9 per cent in September 2002. Thereafter, the rate increased to reach 15.2 per cent in December. 96. The average yearly inflation, on the other hand, consistently declined from a level of 32.9 per cent in December 2001 to 14.8 per cent in December 2002. External Sector Developments
97. The policy objective for the external sector in 2002 continued to be the building up of external reserves to comfortable levels as a cushion against short-term external shocks. 98. To help achieve the reserve build-up, a vigorous policy of attracting foreign direct investment, as a means of promoting the development of exports was pursued, with the President of the Republic taking the initiative of marketing Ghana abroad. An Export Development and Investment Fund (EDIF), established by an Act of Parliament in October 2000 which became operational in July of 2001, deepened its operations in year 2002, to provide concessionary financing to exporters. Balance of Payments Developments in 2002
99. Provisional balance of payments outturn for the year showed that the external sector performance improved, and broadly met our expectations at the beginning of the year. This improved performance of the external sector over that of 2001 was, primarily, due to an improvement in the trade account during the year.
100. Estimated total exports receipts (f.o.b.) in 2002 amounted to US$2063.9 million slightly higher than the target of $2036.8 million. This was achieved on account of favourable international prices for Ghana's major exports. 101. Cocoa exports receipts amounted to $463.4 million, marginally falling short of the target of $469.0 million expected for the year 2002. The average price per tonne of cocoa beans went up from US$1,021 in the 2001 to US$1,266 in 2002. The volume of cocoa beans exported in the year however fell from 310,476 tonnes in 2001 to 305,000 tonnes. The lower volume is attributable to smuggling and the onset of Black Pod and Capsid diseases during the 2001/2002 crop season.
102. The faster depreciating rate of the cedi relative to the dollar curtailed demand for imports in the country. Non-oil imports were US$2,197.0 million in 2002 as compared to US$2,451.7 million in 2001.
103. As a consequence of the developments above, the trade balance recorded a deficit of US$641.2 million (equivalent to 11.2 per cent of GDP) as against a projected deficit of US$821.6 million (equivalent to 14.0 per cent of GDP). In 2001, the trade deficit was equivalent to 20.6per cent of GDP. Current Account Balance 104. The current account improved in 2002, due mainly to an improvement in the trade account. The current account, excluding official transfers, recorded a deficit of US$204.6 million (3.6 per cent of GDP), and including official transfers, there was a marginal surplus of US$15.6 million (0.3 per cent of GDP). The deficit on the current account (including official transfers) in 2001 was US$324.5 million (6.1 per cent of GDP). Capital Account Balance
105. The capital account showed a net deficit of US$47.6 million as against a projected inflow of US$247.3 million. The surplus recorded on the capital account in 2001 was US$392.2 million. Overall Balance of Payments
106. The developments in the current and capital accounts resulted in an overall balance of payments surplus of US$39.8 million compared with a projected deficit of US$145.9 million. The overall balance of payments in 2001 registered a surplus of US$8.6 million. 107. Exceptional financing in 2002 was estimated at US$118.0 million. Thus together with the surplus on the balance of payments, net external reserves were increased by US$157.8 million. Gross external reserves were enough to cover 2.0 months of imports of goods and services at the end of the year. Exchange Rate Developments 108. The rate of depreciation of the cedi increased in the review year on both the interbank market and the forex bureaux market as compared to 2001. 109. On the interbank market the cedi depreciated by 13.2 per cent from ?7,321.94 to the US dollar at the end of 2001 to ?8,438.82 to the US dollar at the end of 2002. This compares with the 3.7 per cent depreciation in 2001.
110. On the forex bureaux market, the rate of depreciation was higher, at 15.7 per cent. The cedi closed the year at ?8,681.82 to the US dollar. At the end of 2001 the exchange rate of the cedi to the dollar was ?7,322.73.
111. As a result of the increase in the rate of depreciation in the year, the differential between the inter-bank foreign exchange rates and the forex bureaux rates widened slightly.
112. Shortfalls in donor assistance and increased speculation on the part of market participants were the principal reasons why the rate of depreciation increased. Developments in External Debt Debt Stock
113. Ghana’s total medium and long-term external debt including obligations to the IMF was US$6,131.3 million at the end of year 2002. This was made up of IMF debt of US$331.6 million and US$5,799.7 million for other multilateral, bilateral and commercial creditors. Of the total debt stock, 68 per cent was owed to multilateral institutions, 26 per cent to bilateral creditors (Paris Club and Non-Paris Club) and 6 per cent to commercial creditors. New Loans Approved
114. During the year under review, 13 new concessional loans were approved by Parliament, amounting to US$176.76 million. On creditor categorization basis, 63.32 per cent came from multilateral institutions and 36.68 per cent from bilateral sources.
115. Of this amount 5.5 per cent was contracted for infrastructure development, specifically the road and water sectors and 44.5 per cent for other poverty related activities. This borrowing trend reflects H.E, President John Agyekum Kufuor’s five priority areas which are directly linked to the medium term priority areas and the GPRS.
117. Mr. Speaker, in the light of developments in 2002, the revised medium-term macroeconomic framework aims at reducing by half the ratio of domestic debt to GDP (from its end-2000 level) by 2005. In addition to updating the medium-term envelope for fiscal operations and poverty spending, this intended to provide a more direct link between the assessment of the poverty situation, the identification of key measures to address poverty, and the prioritisation and costing of government programmes, all of which were developed with broad public consultation.
118. This facilitates the establishment of a direct linkage between the GPRS and the budget, and the identification of those additional spending programmes that could be implemented, should additional resources become available.
119. As highlighted in the GPRS, Ghana’s basic infrastructure continues to remain in very poor shape. The building of roads, ports, and communication networks to open the country, and the provision of reliable energy to fuel the modernisation process and improve the lives of Ghanaians at a more rapid pace than was previously possible, have been the driving forces behind the NPP government’s efforts to secure a predictable flow of external financing for infrastructure development. Accordingly, it is hoped that domestic stakeholders as well as our international development partners will be supportive in raising the additional resources that will be needed to fund our poverty reduction strategy.
120. Mr. Speaker, in line with the medium-term objectives laid out in the revised GPRS, government’s economic programme for 2003-2005 is intended to:
122. Mr. Speaker, our government’s medium-term programme is designed to take concerted action in all of these areas.
123. It is envisaged that the medium-term measures described in this budget will be complemented by additional policy reforms to be supported under a Multi-Donor Budgetary Support (MDBS) programme, aimed at enhancing the effectiveness of the Civil Service, the budgetary process, public sector accountability, governance and decentralisation. Assistance is also being sought from the World Bank in the areas of power sector reform, financing for a strategic plan for agriculture, road construction, Civil Service reform, and implementation of a computer-based public sector financial management system. All measures defined under these programmes will be drawn from the GPRS, based on its broad objectives. Macro Economic Outlook and Financial Programme
124. Mr. Speaker, the main challenges for 2003 will be to encourage a continued strengthening in economic growth, while ensuring effective implementation of the poverty reduction programmes in the GPRS, and reducing inflationary pressures further. Macroeconomic Objectives
125. Consistent with the objectives of the medium term economic policy framework, the key macroeconomic targets for 2003 are the following: ? a real GDP growth rate of at least 4.7 per cent; ? a reduction in the rate of inflation from 15.2 per cent at end 2002 to 9.0 per cent by end 2003; ? an overall budget deficit equivalent to 3.6 per cent of GDP; ? a domestic primary budget surplus of 3.0 per cent of GDP; and ? the rebuilding of gross official reserve holdings equivalent to 2.3 months of imports of goods and services.
126. Key policies needed to deliver these outcomes, and to lay the foundations for further gains in subsequent years, include: ? stabilising and reducing domestic debt stock, by maintaining a domestic primary budget surplus, and using any unprogrammed receipts from divestiture or programme aid, as well as a portion of HIPC relief, to retire domestic debt; ? reinforcing effective monitoring, control, and transparency in public expenditure operations, in particular the tracking of poverty spending and the wage bill; ? containing the losses and indebtedness of the major parastatals; ? phased adjustments to achieve and maintain full cost recovery in utility pricing, implementation of the divestiture programme, and further restructuring of parastatal debt; ? removal of the source of quasi-fiscal financing of the debts of state enterprises; ? continued development of the financial sector, including improved banking supervision and policies to facilitate increased credit by the banking system in support of private sector development; and ? improvements in the quality and timeliness of the dissemination of economic statistics. Growth Prospects
127. Mr. Speaker, in the light of the deterioration in the outlook for the world economy, our projection for real GDP growth of 4.7 per cent in 2003, shows a downward revision, compared to an earlier GPRS projection of 5.0 per cent. Ghana’s economy is also subject to risks associated with the ongoing crisis in neighbouring Ivory Coast, and the uncertainties involved, strengthen the case for caution in projecting growth for the year ahead.
128. The agriculture sector is projected to grow at 4.5 per cent. The Crops and Livestock sub-sector is projected to grow at 4.8 per cent, while Cocoa Production and Marketing is targeted to grow at 2.2 per cent. Forestry and Logging is expected to grow at 6.1 per cent, and Fisheries is expected to grow at 3.0 per cent.
129. Industry is projected to grow at 5.1 per cent, in line with infrastructure development programmes for the year. The Mining and Quarrying sub-sector is expected to grow at 4.7 per cent, and Manufacturing at 4.6 per cent. In view of the commissioning of the three big road projects, growth in the Construction sub-sector is projected to be robust at 6.1 per cent.
130. The Services sector is expected to grow at 4.9 per cent, on account of government support for public transportation, efficient communication management and their expected positive effect on commerce. Transport, Storage and Communication sub-sector is projected to grow at 5.7 per cent. Wholesale/Retail Trade, Restaurants and Hotels including Tourism sub-sector will grow at 5.6 per cent and growth in the Finance, Insurance, Real Estate and Business Services sub-sector is projected to stabilize at 5.5 per cent, while Government services sub-sector projected to grow at 4.0 per cent. Outlook for Fiscal Policy
131. Mr. Speaker, in 2003, the principal objective of fiscal policy is to stabilize and reduce domestic debt with a view to stemming the increase in interest payments and to achieve the desired easing in real interest rates. The budget is, thus, calibrated to achieve the elimination of reliance on net domestic financing. This, Mr. Speaker, is undoubtedly a challenging task given the racheting up of wages in 2002, the burden of servicing the accumulated debt at TOR, as well as the imperative of maximizing social and development spending.
132. Mr. Speaker, to give effect to the President’s vision of Ghana becoming a middle income country and, thereby, getting on the road to achieving its promise of well being and prosperity (through poverty reduction), aggregate poverty related expenditure is budgeted at 4.6 per cent of GDP, before the use of HIPC resources, or around 6 per cent of GDP including the use of HIPC resources. This compares with estimated poverty-related expenditures of 4.5 per cent in 2001, the year before Ghana became a beneficiary of the enhanced HIPC initiative.
133. Mr. Speaker, as a manifestation of the government’s commitment to providing a safety net to the poor, subsidies will be used to support low income consumers of electricity and water. 134. Mr. Speaker, in his State of the Nation address, H.E. the President assured the nation of an increase in public sector salaries and tasked me as Minister of Finance to ensure that there is some cushion for the people against the price increase in petroleum products and utilities. The President cautioned, however, that these upward adjustments in wages must neither be inflationary nor cause disequilibrium in the economy. As a first step towards fulfilling this promise, Government on February 21, increased the minimum wage by 26 per cent, effective February, 2003. Government will now intensify negotiations with public sector employees to determine the appropriate public sector wage bill.
135. Mr. Speaker, we wish to assure the nation that as the economy expands and the revenue base is enhanced, there will be room for higher and more attractive wage increases.
136. Mr. Speaker, in order to demonstrate to the nation, government’s preparedness to take the lead in the national effort to share the cost of ensuring a better future, there will be no increase in salaries and wages for the President, Vice President, Ministers of State, Deputy Ministers of State, Metropolitan, Municipal and District Chief Executives, as well as Special Assistants.
137. Mr. Speaker, to accommodate the expected increases in developmental expenditures and wages, while placing public finances on a permanently sound footing, we will introduce new revenue enhancing measures. These include: ? a debt recovery levy on petroleum products to help pay off the accumulated debt of TOR; ? an increase in the Road Maintenance Levy to help maintain the expected expansion of the road network; ? the extension of the National Reconstruction Levy to help fund venture capital projects; ? an increase in stumpage fees to support development projects in rural communities and preserve the environment; ? a National Health Premium to help fund the National Health Insurance Scheme; ? a Restructuring of the Department of National Lotteries; and ? public auctioning of timber concessions;
138. I shall discuss the details of the revenue enhancing measures later on.
139. Mr. Speaker, a number of measures will also be taken to further improve tax administration and enhance domestic revenue mobilisation. These include: ? the launching of the Large Taxpayers’ Unit (LTU) in June 2003; ? the introduction of the sticker system in the collection of income tax from commercial transport operations; ? the roll-out of the computerised clearance system (GCNET) to all custom collections points; and ? the judicious use of the retention fund by all the revenue collecting agencies to improve their operational efficiency. Fiscal Transparency
140. Mr. Speaker, the government is committed to the production of more timely and accurate statistics in support of transparency, to allow better assessment of developments in the economy. Towards this end, work is underway to review the calibration of the Consumer Price Index(CPI) from 1999 onwards and, related to it, the series on nominal GDP. Every effort will be made to expedite the revision of the CPI and the national income accounts series. 141. Mr. Speaker, last year, the Bank of Ghana completed an external audit of its 2001 financial statements and plans to conduct a similar audit for 2002 in conformity with International Accounting Standards. Efforts of the Bank of Ghana to strengthen its internal audit procedures are expected to be bolstered by a full Safeguards Assessment in 2003.
142. In addition, Mr Speaker, government will complete its audit of State-Owned Enterprises (SOEs) by commissioning audits of VRA, COCOBOD, among others. A summarised version of all audited companies will be published through the public media, including the internet.
143. Mr. Speaker, as His Excellency, the President John Agyekum Kufuor intimated in his State of the nation address, this nation’s record on record-keeping is simply not good. Government has, therefore, approved legislation for the implementation of National Identity Cards by the end of 2003. Requests for bidders to submit proposals have been widely disemminated in the media, and the first phase covering persons of voting age is expected to be completed before the end of the year.
144. Mr. Speaker, in order to ensure that this august House is exercising its oversight functions, government will provide regular reports on the implementation of the GPRS and also provide additional resources to strengthen its capacity. Resource Mobilisation 145. Mr. Speaker, total receipts for 2003 are estimated at ?21,347.6 billion. The yield from tax and non-tax revenue is estimated at ?13,533.7 billion, out of which tax revenue is expected to contribute ?13,163.7 billion, and non-tax revenue ?370.0 billion.
146. Foreign grants disbursements are projected at ?2,878.1 billion, out of which ?642.6 billion will be HIPC assistance from multilateral development partners. This is in addition to traditional programme grants estimated at ?1,148.9 billion. Expected project grants amount to ?1,086.7 billion. 147. Other receipts are estimated at ?4,935.7 billion, including divestiture receipts of ?429.6 billion, programme loans of ?669.4 billion, and project loans of ?1,556.8 billion.
148. Total receipts incorporate exceptional financing of ?2,034 billion, comprising traditional debt rescheduling of ?1,478.3 billion and HIPC relief of ?423.7 billion from non-multilateral development partners. Also included in the exceptional financing is a gap of ?132.1 billion, for which we will seek concessional programme funding from our development partners. 149. Mr. Speaker, the 2003 budget is framed on the expectation of external programme support totalling 3.0 per cent of GDP, and a further 4.1 per cent of GDP in external debt relief. Taking these contributions into account, net domestic financing of the budget is projected to be zero in 2003, in line with our objective to reduce the stock of domestic debt, and reduce inflation to single digit. This indeed is an uphill task, but one that we are determined to achieve. Resource Allocation
150. Total Payments are estimated at ?21,347.6 billion, comprising Statutory payments of ?9,303.0 billion, and Discretionary payments of ?12,044.6 billion.
151. Statutory payments include external debt service of ?3,426.8 billion (on accrual basis), out of which ?837.7 billion is earmarked for external interest payments. 152. Domestic interest payments on accrual basis are estimated at ?3,108.1 billion, including accrued interest payments for the restructured TOR debt that has been taken over by Government through the issuance of Bonds.
153. The government will remain current on its statutory payments to the District Assemblies Common Fund and the Ghana Education Trust Fund. For 2003, the District Assemblies Common Fund (DACF) is programmed to receive ?577.4 billion, while an amount of ?489.7 billion is estimated to be transferred into the Ghana Education Trust Fund (GETF). It is expected that these transfers will be carried out faithfully during this budget year. 154. Transfers to Households, including pensions, gratuities, and government contribution to social security on behalf of workers, are programmed at ?1,011.1 billion. Also included in this expenditure item is an amount of ?210.0 billion to be allocated to a National Health Fund to complement start-up funding for the implementation of the National Health Insurance Scheme, the details of which will be made available to this House shortly.
155. The Road Fund will benefit from an amount of ?623.3 billion, while other Petroleum-related Funds receive ?66.6 billion. 156. Under Discretionary payments, Personal Emoluments (PE) are estimated at ?5,450.0 billion, and expenditures in respect of Administration and Service are programmed at ?1,871.2 billion. Total Investments are estimated at ?3,120.9 billion, out of which ?2,643.5 billion will be foreign-financed.
157. As we expect the utility companies to get close to full cost recovery with adjustments in utility prices, Subsidies to utility companies will be limited to ?50 billion. 158. Mr. Speaker, time has come for both sides of this House and, indeed, all of us to be realistic and deal boldly with the issue of arrears accumulated in respect of the DACF and the GETF. We believe that it is unfair and financially imprudent to utilise substantial amounts of current revenues to finance arrears on the DACF and GETF. On the other hand, the Finance Committee of this august House should ensure that the current liabilities of this year are fully discharged.
159. Mr. Speaker, in order to manage these arrears efficiently, and ensure the optimum absorption of these funds even as we remain current on 2003 obligations, we are proposing and, seeking approval from this House, to ring-fence all outstanding arrears of the DACF and GETF to be paid over a period of time. Accordingly, provision has been made for the clearance of end-2002 cumulative arrears to these funds in five equal parts during 2003-2007. The provision for 2003, in this respect, amounts to ?97.0 billion for both the DACF and GETF (?53.9 billion for the DACF and ?43.1 billion for the GETF). 160. Mr. Speaker, the 2003 budget includes an allowance for the clearance of expenditure arrears in the roads sector totalling ?220 billion, and ?100 billion for other domestic non-road expenditure arrears, in respect of construction and supplies to MDAs. 161. Poverty reduction activities will benefit from an allocation of ?853.0 billion through HIPC relief. Budget Balance
162. It is estimated that the revenue and expenditure projections elaborated in this budget will result in an overall budget deficit equivalent to 3.1 per cent of GDP. The domestic primary balance, which shows the extent of our own domestic adjustment efforts, however, is estimated to yield a surplus equivalent to 3.0 per cent of GDP. Monetary Outlook 163. Mr. Speaker, the overall stance of monetary policy in 2003 will underscore the vital need to further reduce the rate of inflation and exchange rate volatility. At the same time, policies will be pursued to ensure that adequate bank credit is available to support the growth of the real sector. 164. The Bank of Ghana will continue to use indirect monetary policy instruments, namely open market operations and repurchase agreements to control the growth in its net domestic assets and hence in reserve money. Consequently, reserve money growth for 2003 is targeted at 20.5 per cent while broad money is expected to grow at 24.3 per cent. This is expected to help government to achieve the end year inflation target of 9.0 per cent. 165. Given the support of a strengthened fiscal position, the targeted slowdown in money growth is expected to result in a decline in real interest rates during 2003. This will help promote expansion in bank credit in real terms to the private sector. Exchange Rate Outlook 166. Mr. Speaker, in 2003, the flexible exchange rate policy will continue to provide incentives for increased production of exportable goods, and enhance competitiveness on international markets. 167. Monetary and fiscal prudence in 2003 are expected to play a complementary role to slow down the rate of depreciation of the cedi and make the economy more stable for productive activity to flourish. The Bank of Ghana will continue to supervise the banks and foreign exchange bureaux and enforce compliance with relevant regulations to ensure the development of an orderly, efficient and effective foreign exchange market. Balance of Payments Outlook 168. Mr. Speaker, in 2003, and in the medium-term, external sector policy will focus on building reserves to more comfortable levels. This will not only serve to cushion the economy against short-term external shocks, but also provide a basis for meeting sub-regional economic convergence criteria. To this end, technical, financial and other incentives will continue to be provided for increased production for export. 169. Balance of payments projections for 2003 show a brighter outlook than the outturn for 2002. The optimism is derived from the current stability in the general macro-economy, as well as the specific incentives, financial and otherwise, being provided by government for the export sector.
170. Export receipts are expected to grow by more than 10 per cent to US$2310.0 million. Cocoa is expected to contribute 27.0 per cent of this growth by generating US$613.5 million. Gold exports are also expected to grow by 10.0 per cent to contribute a third of total export earnings. Timber exports are also expected to amount to US$184.8 million, equivalent to about 8 per cent of total export receipts. Other exports including non-traditional exports are expected to yield US$750.8 million in 2003, and thus account for 30 per cent of total exports.
171. Merchandise imports are projected at US$3,156.3 million in 2003, out of which Oil imports are expected to account for 18 per cent amounting to US$559.3 million. The trade balance, consequently, is projected to record a deficit of US$846.3 million (13 per cent of GDP). 172. The services account is projected to record a net deficit US$297.8 million. 173. Unrequited transfers are expected to record a surplus of US$985.1 million, of which private unrequited remittances are projected at US$630.0 million, and official remittances US$355.1 million.
174. The current account balance (excluding official transfers) is projected to record a deficit of US$514.1 million, while including net official transfers, this deficit will reduce to US$159.0 million.
175. Total medium and long term capital inflows are projected at US$99.0 million. With an expected short term capital out flow of US$41.0 million the balance on the capital account amounts to US$58.0 million.
176. The surplus on the capital account will, however, not be enough to finance the projected deficit on the current account. Consequently, the overall balance of payments is projected to record a deficit of US$101.0 million.
177. It is, however, expected that exceptional financing in 2003 will amount to US$254.0 million. Of this, US$101.0 million will be used to finance the deficit in the balance of payments and the remaining US$153 million to beef up the country's external reserves. External Debt Outlook Debt Stock
178. Mr. Speaker, Ghana's total external debt for long and medium term including obligations to the IMF is expected to increase to about US$6,193.6 million for year 2003. This is made up of IMF obligations of US$382.0 million and US$5,811.6 million for other creditors.
179. Of the total debt stock, about 71.0 per cent will be owed to multilateral institutions, 25.0 per cent and 4.0 per cent to bilateral and commercial creditors respectively. New Loans in 2003 180. The policy of contracting new loans<