BUDGET: Overall budget deficit equivalent to 1.7 of GDP projected for 2004

Accra, Feb. 5, GNA- Mr Yaw Osafo Maafo, Minister for Finance and Economic Planning, said on Thursday that Ghana's overall budget deficit equivalent to 1.7 per cent of GDP is projected for this year, while the domestic primary balance is expected to yield a surplus equivalent to 1.7 per cent of GDP.
He said that subject to this budgetary framework, a net domestic debt repayment of 1,732.2 billion Cedis, equivalent to 2.2 per cent of GDP in 2004 would be achieved.
Mr Osafo-Maafo, who was delivering the Government's Budget Statement to Parliament, said that this was in line with its objective to reduce domestic debt and free more resources to the private sector. Mr Osafo-Maafo said the Government remained committed to bringing 12-month CPI inflation down to below 10 per cent this year.
He said that to achieve the inflation objective, the Bank of Ghana (BOG) would keep the pace of monetary expansion consistent with the targeted inflation rate.
Mr Osafo-Maafo stated that this implied bringing the 12-month growth rate of broad money (excluding foreign currency deposits) down from 37.8 per cent at end-December 2003 to around 19 per cent by end the of December this year.
He said the intermediate goal of 18.8 per cent growth in reserve money (excluding banks' foreign currency deposits) this year would be pursued in support of this objective and that BOG would use open market and repurchase operations, and adjustments in its prime rate to achieve its monetary objectives.
The Minister said that in order to secure the desired build-up in international reserves of at least 3 months of imports cover, BOG's net domestic assets would be reduced further this year.
He said BOG would continue to allow the Cedi exchange rate to be market determined, limiting interventions to smoothing short-term fluctuations in the exchange market and ensuring achievement of the targeted build-up of international reserves.
On the balance of payments outlook, he said that this year, external sector policy would build on the achievements made last year, by further building up reserves which would serve as cushion to the economy against unanticipated external shocks.
"To achieve this, policies geared towards attracting foreign direct investment and increasing foreign exchange earnings substantially will be pursued", he stated.
He said that the balance of payments projections for this year indicate a bright outlook, comparable to 2003 and is derived from the general macro-economic stability experienced in the country in recent years as well as the policy interventions put in place to prop up the export sector.
Mr Osafo-Maafo indicated that export receipts are expected to grow by 2.3 per cent to 2.368 million Dollars, with Cocoa expected to contribute over 33 per cent of this growth by generating 784 million Dollars and Gold exports also expected to grow by 27.8 per cent to contribute about 32 per cent of total export earnings.
He said that the exports of timber and timber products are also expected to generate an amount of 188 million Dollars, equivalent to about 8 per cent of total export receipts.
Other exports, including non-traditional exports are expected to contribute 640 million Dollars, the equivalent of 27 per cent of total export proceeds.
The Minister said that imports are projected at 3,355.0 million Dollars in 2004, out of which oil imports are expected to account for 17 per cent amounting to 571 million Dollars.
The trade balance, is thus, projected to record a deficit of 987 million Dollars.
He stated that the Services account is projected to record a net deficit of 288 million Dollars.
Mr. Osafo Maafo said unrequited transfers are expected to record a surplus of 1,177 million dollars of which private unrequited remittances are projected at 841 million Dollars, and official transfer (net), 4336 million Dollars.
He said the current account balance (excluding official transfers) is expected to record a deficit of 434 million Dollars, which if the net official transfers are included reduces the deficit to 98 million Dollars.
The Finance Minister said that the capital account balance, which is projected at 26 million Dollars, is made up of official capital inflow of 65 million Dollars and private capital outflow of 39 million dollars.
He however said the surplus on the capital account would fall short of what is required to finance the projected deficit on the current account.
Consequently, the overall balance of payments is expected to record a deficit of 72 million dollars.
He told Parliament that exceptional financing is expected to amount to 221 million Dollars, out of which 72 million dollars will be used to finance the deficit in the balance of payments and the remaining 149 million Dollars used to augment the BOG's international reserves.
On debt outlook, the Minister said Ghana's total external debt stock for medium-term, long-term and IMF obligations is expected to decrease by 1.6 million Dollars this year when the country reaches Completion Point and bilateral creditors provide debt stock cancellation.
"It is, therefore, expected that there will be a significant change in the creditor category composition of the external debt stock, with over 75 per cent being owed to multilateral creditors", he said. On external assistance policy and strategy, Mr. Osafo-Maafo said the policy of contracting new loans with a minimum grant element of 35 per cent would still be pursued.
He said government would also continue to seek maximum grants and debt relief from its development partners in order to maintain long-term debt sustainability.