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09.03.2009 Politics

Spain To Provide $44.36m Debt Relief To Ghana

By David Adadevoh -
Spain To Provide $44.36m Debt Relief To Ghana

The government of Spain will this year pro-vide additional debt relief in the form of debt-for-develop-ment to Ghana.

The debt relief esti-mated at US$44.36 million is expected to contribute to the socio-economic development of the country.

Dr. Kwabena Duffuor, Minister of Finance and Economic Planning who announced this on Thursday in his 2009 national budget to parliament said, “The money will be provided over a seven-year period, and will be deposited in a Ghana-Spain Debt for Development Swap Trust Fund”.

The use of funds and selection of projects the minister said, would be agreed on by a Joint Government of Ghana Spanish Committee to be set up.

On plans to manage domestic debt, Dr. Duffour said the issue would be one of the critical aspects of the government's economic programme during this fiscal year and in the medium term.

“The increasing size of the domestic debt and its debt service burden, points to an urgent need for Government to pursue sound and effective strategies to reduce the domestic debt to sustainable levels,” he said.

Over the medium term Dr. Duffuor said, “It is envisaged that debt management strategies will be supported by continuous fall in interest rates, a stable exchange rate environment and a reduction in fiscal deficit.”

Debt management strategies over the medium term, the minister said were intended to achieve four broad objectives of satisfying the government's annual financing requirements.

“Minimising borrowing and debt service costs; achieving a balanced maturity structure of debt; and deepening a well-functioning Government of Ghana securities market by providing key pricing and hedging tools, are the four broad objectives,” he said.

On the external sector, he said “the overall objective for the sector will be to build up adequate reserves to cushion the economy from external shocks”.

“The reserve build up in 2006-2007 served the economy well and allowed it to withstand the oil and food price shocks in 2008 to a large extent,” he said.

The balance of payments projections for 2009, Dr. Duffuor said indicated that exports would decrease by 7.6 per cent to US$ 4874.06 million.

“Cocoa exports, are expected to decline by 2.8 per cent to US$1459.58 million, reflecting a price decline of about 9 per cent,” he said.

Gold exports receipts, according to the minister, were expected to decline by 11.78 per cent due to a significant decline in gold export prices by 16.0 per cent.

Private inward transfers, he said, were projected to decline by 7.5 per cent to US$ 1.7 billion as most Ghanaians abroad had lost their jobs due to the global financial crisis.

“It is anticipated that imports will also slowdown in 2009 by 16 per cent to US$8605.2 million reflecting a 15 per cent slow down in non oil imports and a 20 per cent slow down in oil imports.

The slowdown in oil imports, is due to a 41 per cent drop in oil prices to a projected $60 per barrel for 2009,” he said.