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Business News of Thursday, 5 February 2004

Source: GNA

Domestic debt /GDP ratio to be reduced

Accra, Feb 5, GNA - Mr Yaw Osafo Maafo, Minister of Finance, on Thursday said the medium-term framework underlying the Ghana Poverty Reduction Strategy (GPRS) aimed at halving the domestic debt/GDP ratio by end of 2005 from the level that was prevailing at the end of 2002. To achieve this, he said the medium-term fiscal programme targeted zero net domestic financing in 2003, and net domestic debt repayments of 2.2 per cent and 2.6 per cent of GDP in 2004 and 2005, respectively.

He said that the budget subsidies were given to the Tema Oil Refinery (TOR) and the utility companies with the Volta River Authority (VRA) receiving government assistance totalling 272.5 billion cedis to clear part of the Authority's external arrears owed to La Cote d'Ivoire. He announced that further payments totalling 392 billion cedis would be made to utility companies in 2004.

He said, "the fiscal outlook for 2004 and the medium-term should allow our expenditure needs, as envisaged in the GPRS, to be met in full, while adhering to the GPRS target path for domestic debt reduction.

"The targeted ratio of revenues (excluding grants) to GDP in 2004 remains in line with the GPRS, at around 22.5 per cent", he stressed. Mr Osafo-Maafo said the budgetary subsidies to public enterprises in 2004 would be limited to 392 billion cedis, including 60 billion cedis needed to cover the cost of preferential utility tariffs for the poorest consumers - the lifeline consumers.

Consistent with spending plans under the GPRS, domestic capital expenditure would increase by about 0.7 per cent of GDP in 2004, to six per cent of GDP, he said.

The Minister said the 2004 Budget would incorporate a further increase in poverty-related expenditure as a share of GDP. On resource mobilisation, Mr Osafo-Maafo said the total receipts for 2004 were estimated at 24,853 billion cedis while the contribution from tax revenue was projected at 16,854.8 billion cedis and non-tax revenue, estimated at 517.0 billion cedis.

Foreign grants disbursements were projected at 3,053.8 billion cedis of which HIPC assistance from multilateral development partners was 995.1 billion cedis.

This, he said, was in addition to the traditional programme grants estimated at 1,188.0 billion cedis and project grants of 870.7 billion cedis.

The Minister said the revenue from other receipts was estimated at 4,427.3 billion cedis, which included divestiture receipts of 426.8 billion cedis, project loans of 1,621.5 billion cedis and programme loans of 980.0 billion cedis.

"The total receipts include exceptional financing of 2,950.7 billion cedis, comprising traditional debt rescheduling of 1,472.4 billion cedis and HIPC relief of 512.9 billion cedis from non-multilateral development partners. A gap of 965.4 billion cedis is included in the exceptional financing for which we will call upon our development partners to provide additional concessional programme funding."