18.09.2004 Business & Finance

Gov't spends 20% of HIPC Fund to reduce domestic debt

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Kumasi, Sept. 18, GNA - Mr Yaw Osafo-Maafo, Minister of Finance and Economic Planning said on Saturday that the government utilised 20 per cent of the HIPC Fund to reduce the country's domestic debt. To date, he said, HIPC resources used to retire part of the domestic debt amounted to 526 billion cedis.

Addressing the annual delegates conference of the ruling NPP at the Great Hall of the Kwame Nkrumah University of Science and Technology (KNUST) in Kumasi, he gave the breakdown as 80.6 billion cedis in 2002, 144.0 billion cedis in 2003 and 301.4 billion cedis in 2004.

He was speaking on the topic: The Performance Of The Economy: 2001-2004 - Our Track Records - Keeping Our Manifesto Promises". Mr Osafo-Maafo said this partly contributed to the reduction in the outstanding stock of government securities from 13,909.4 million cedis in 2002 to 12.591.2 million cedis in 2003.

He said domestic debt as a percentage of Gross Domestic Product (GDP) had fallen sharply from 28.9 per cent in 2002 to 17.0 percent in 2004.

"As the process of domestic debt reduction goes on, domestic interest rates will continue to decline and the private sector can access credit at low cost to spearhead job expansion, employment creation and economic growth," he said.

The finance Minister said in the realisation of the core objectives of the HIPC debt relief initiative, Ghana's actual external debt servicing had been reduced drastically.

From an annual average payment of 392 million dollars (3,550.36 billion cedis) over 1998 to 2000, the country's debt service payments had significantly declined to an average of 149 million dollars (1,346.07 billion cedis) per annum from 2001 to 2003, he said.

Mr Osafo-Maafo said the debt relief for 2004 alone was estimated at about 268.5 million dollars and over the next five years would amount to about 1.15 billion dollars, adding that these were significant savings.

He said the amount of HIPC resources released to Ministries, Departments and Agencies (MDAs) and districts amounted to 2,098.58 billion cedis and that together with the amount used for domestic debt reduction of 526 billion cedis, the total stood at 2,624.58 billion cedis.

The Finance Minister said the country's GDP had been largely positive since 2001, starting with a growth of 4.2 per cent and increasing consistently to 5.2 per cent by the end of 2003.

This compares rather positively to other Sub-Saharan African countries in which growth slowed down on the average from 4.3 per cent in 2001 to 3.2 percent in 2002 and negatively in 2003.

Mr Osafo-Maafo said the main source of this growth had been from the agriculture sector, which accounted for more than a third of the GDP and employed more than half of the active labour force.

Since the incidence of poverty was highest amongst workers in the agricultural sector, the significant increases in agricultural production had gone a long way to reduce poverty, especially in the rural areas.

The finance Minister said the achievements showed that the government had managed to put the economy on track within its first term in office.

"We have kept faith with our manifesto, we are kindly asking you to give His Excellency President John Agyekum Kufuor and the NPP another mandate".

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