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Business News of Thursday, 5 February 2004

Source: GNA

Govt would make substantial progress in 2004

Accra, Feb. 5, GNA - The Government would make substantial progress in revenue generation to make room for increased poverty-related spending and accelerated development.

Mr Yaw Osafo-Maafo, Minister of Finance, said this in Accra on Thursday while presenting this year's budgetary statement to Parliament.

Outlining the Government's macro-economic framework for the year, Mr Osafo-Maafo said Government would strengthen public expenditure management and use an optimum mix of appropriate fiscal and monetary policies to deliver on its inflation and other macroeconomic targets.

"Looking forward, the policies set out in this year's Budget Statement and Economic Policy, together with continued implementation of the broader policy agenda in the GPRS, will aim at solidifying these gains in the period ahead, " he said.

He said the GPRS, which was finalised in February 2001, defined Ghana's medium-term economic objectives and policy agenda for 2003-2005 period.

"The implementation of this strategy is receiving broad-based support from the international community, and we hope that with the implementation of those policies, this country will reach the completion point under the enhanced HIPC Initiative during the course of this fiscal year."

He said the fiscal objectives for 2004 would be consistent with the Ghana Poverty Reduction Strategy (GPRS) and its underlying medium-term economic framework.

Mr Osafo-Maafo listed the key macroeconomic targets for 2004 as:

-a real GDP growth of at least 5.2 per cent;

-a commitment to bringing the 12-month CPI inflation rate down to under 10 per cent by the end of December, 2004;

-maintaining our goal to build up the stock of gross international reserves to no less than three months of imports cover;

-a domestic primary surplus of 1.7 per cent of GDP; and a budget deficit of 1.7 per cent of GDP.

Mr Osafo-Maafo, who outlined the country's growth prospects, said the Government was targeting a real GDP growth rate of at least 5.2 per cent for the 2004 fiscal year, while the agricultural sector would continue to spearhead this growth with 6.0 per cent growth rate.

"The crops and livestock sub-sector is projected to grow at 5.4 per cent, while cocoa production and marketing is targeted to grow at 13.1 per cent. Forestry and logging and fishing are expected to grow at 6.3 per cent and 3.5 per cent, respectively, higher than their growth rates in 2003.

Mr Osafo-Maafo said industry was projected to grow at 5.2 per cent against the rate of 5.1 per cent recorded in 2003, adding that all the sub-sectors are expected to record rates higher than the provisional growth rates achieved in 2003.

He said the mining and quarrying sub-sector was expected to grow at 4.9 per cent, manufacturing at 4.7 per cent and Water and Electricity at 4.3 per cent.

He said growth in the construction sector would continue to be robust at 6.2 per cent in 2004 in view of the several construction projects being undertaken in the road sector.

Mr Osafo-Maafo said the services sector was projected to grow at 4.7 per cent on account of the expected new investments in public transport and telecommunications during the year.

"Transport, Storage and Communication sub-sector is expected to grow at 5.7 per cent.

"Wholesale/Retail Trade and Restaurants and Hotels sub-sector would grow at 4.6 per cent, while Finance, Insurance, Real Estate and, Business Service and Government Services sub-sectors are projected to record growth rates of 4.8 per cent and 4.4 per cent, respectively.

Mr Osafo-Maafo, dwelling on the outlook for the year's fiscal policy, said the medium-term framework underlying the GPRS aims at halving the domestic debt/GDP ratio by end-2005 from the level prevailing at the end-2002.

"To achieve this, 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 budget subsidies were given to TOR and the utility companies with VRA receiving government assistance totalling 272.5 billion cedis to clear part of the Authority's external arrears owed to La Cote d'Ivoire.

"Further payments totalling 392 billion cedis will be made to utility companies in 2004.

"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." Mr Osafo-Maafo said the targeted ratio of revenues (excluding grants) to GDP in 2004 remained in line with the GPRS, at around 22.5 per cent.

"Budgetary subsidies to public enterprises in 2004 will be limited to 92 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 will increase by about 0.7 per cent of GDP in 2004, to 6 per cent of GDP.

"The 2004 budget will incorporate a further increase in poverty-related expenditure as a share of GDP," he said.