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13.05.2004 Business & Finance

Ghana boosts her credit rating

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Accra, May 13, GNA- Government said on Thursday that selection of Ghana as one of the 16 eligible countries to benefit from the first tranche of the Millennium Challenge Account (MCA), is a further boost to the country's credit rating.

Speaking at a press conference to explain the criteria for Ghana's inclusion in the list of beneficiaries, Mr Yaw Osafo-Maafo, Minister of Finance and Economic Planning said beside the monetary gain, the move would instil the necessary investor confidence in the country's economy. He said it was also a demonstration of good management of the country's economy, which was brought to bear on all aspects of development.

"The country can equally stand tall among its peer as far as good management of the economy is concerned," the Minister said. The MCA is a new initiative by the United States Government to channel development assistance to developing countries in the form of grants. The approach is borne out of the concern that development is best enhanced in an atmosphere of sound political, social and economic policies.

An amount of one billion dollars is currently available to be accessed by the 16 countries based on the approval of the compact agreement to be submitted by those eligible.

The Minister said the MCA would help reduce poverty, offer a rare opportunity to access additional funding at a very minimal cost for meeting development objectives and to inject massive foreign currency into the financial system which would support the Bank of Ghana's management of the foreign exchange market and the stability of the cedi. Mr Osafo-Maafo said Ghana acceded to the MCA by passing all but three of the 16 indicators for qualification.

The unsuccessful areas were budget deficit, number of days it took to start business and trade policy.

"The median deficit is -3.40 per cent of GDP for MCA countries, but Ghana's average deficit fixed at -6.52 per cent. Ghana failed this hurdle."

He noted that it was relevant to note that since 2002, the budget deficit, which was 5 per cent of GDP fell to 3.4 per cent in 2003. On Trade Policy Ghana scored, four out of a rating of one to five while it took 85 days to start a business instead of the MCA's target of 21 days.

The country, he said, passed all the six indicators under the ruling justly criterion, including civil liberties, political rights, voice and accountability and rule, as against the minimum requirement of three. Other criteria were investing in people, establishing economic freedom, regulatory quality and country credit ratings, in which Ghana scored high on immunization rate, primary education, completion rate and public primary education spending as percent of GDP.

Mr Osafo-Maafo said Ghana passing all the indicators on ruling justly provides a legitimate testimonial for political stability. To realize the full benefit of MCA, the Minister said, the country needed to present a good and well defined projects within the five priority areas as well as in line with the Ghana Poverty Reduction strategy.

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