... Not much help from HIPC, MCA, MDI
Government is submitting a supplementary budget this month to its development partners for additional funds to support its development programmes. The search is now on for additional funding of more than $2 bn (¢18,329,200,000,000) to fill its budgetary gap for up to 2009.

“After taking into account the domestic fiscal efforts with respect to revenue enhancement and expenditure realisation as well as the relief funds from HIPC and Multilateral Debt Initiatives(MDI), a resource gap of $2.04 bn still remains to be financed,” Deputy Finance and Economic Planning Minister Anthony Akoto-Osei said.

According to the Deputy Minister, out of the total amount of $12.7 bn projected to finance the second phase of the Growth and Poverty Reduction Strategies, Government intends to raise about $2.7bn from domestic sources while relying on the $4.5 bn pledge from the development partners including the $544m grant from the Millennium Challenge Account.

This, the Old Tafo Member of Parliament said this leaves a gap of $5.5 bn out of which government intends to mobilise about $3.5 bn from the private sector, debt relief from HIPIC and Multilateral Debt Initiatives.
Though the Deputy Minister did not say exactly how government intends to raise from the private sector, highly placed sources at the ministry say the amount is expected to be realised from the proposed offload of some government shares in some state-owned enterprises including Ghana Telecom, Goil, Westel and the State Insurance Company.

At the opening of a workshop on the Ghana National New Financing Strategy Analysis in Accra, the minister said there is currently a marked improvement in the country’s debt situation.

He said the external debt stock which stood at $6.3 bn at the end of 2005 is expected to decline significantly to $1.9 bn as a result of the positive effect of the Multilateral Debt Relief International which provides stock cancellation from the Bretton Woods.

Debt owed to these international financial institutions constituted about 80 percent of the country’s debt stock as at 2005. The IMF has cancelled Ghana’s debt of $381m. Domestic debt as a ratio of GPD is expected to decline further to 8.7 percent in 2006.

Dr Akoto-Osei asked participants at the workshop to take adequate stock of on-going development regarding the domestic debt portfolio and the financial sector reforms that would facilitate the development of the country’s domestic capital market.

He said the maintenance of long-term debt sustainability has become a matter of great global interest especially for post HIPC countries like Ghana and tasked participants to put in enough efforts to achieve the ultimate aim of producing a new financing strategy document for Ghana that adequately reflects the conditions of the economy, the objective of meeting the MDGs and also achieving the 8 percent growth rate with optimum level of financing.

The focus of the country’s fiscal and monetary policy framework since 2001 has been to engineer a switch from high inflation, high interest and unstable exchange rate regimes. This means a general shift from in macroeconomic policy from fiscal relaxation and monetary stringency. The significance of this, he said, has been a dramatic reversal in economic trends.

Inflation rate for instance is now 10.2 percent (as at May 2006) and the cedi exchange rate has remained virtually unchanged against the US dollar over the last eighteen months.
Domestic debt and fiscal deficit as a ration of GDP have both recorded a downward trend from about 22 percent and 9 percent in 2001 to about 10.8 percent and 2 percent respectively in 2005.