BUDGET: Economy Made Progress In 2002

Finance Minister, Yaw Osafo-Maafo says the Ghanaian economy made notable progress in 2002. He said domestic revenue mobilisation was quite robust due to enhanced tax administration in spite of larger-than-anticipated wage and salary payments.

Mr Osafo-Maafo, who was presenting this year’s Budget to Parliament, stressed that notwithstanding the payments, the overall expenditure ceiling was respected and kept within the Appropriations Act.

The 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 of 2001 to 2 months of imports at the end of 2002.

He said considerable progress was made on the government's 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.

During the year, government experienced several challenges in the management of the economy, which 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 the substantial shortfalls in expected foreign inflows.

Mr Osafo-Maafo explained that the net effect of these challenges was a higher amount of government borrowing from domestic sources than was anticipated. In spite of these challenges, however, government was able to maintain a reasonable level of macroeconomic stability.

The provisional figures for fiscal year 2002 showed that the government achieved its projected GDP growth rate of 4.5 per cent. This was as a result of the strong out-turn in production of crops and livestock.

The estimates indicated 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 the 5.1 per cent level achieved in 2001.