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10.11.2005 Business & Finance

BUDGET: Cocoa prices may get a slight change

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Accra, Nov 10, GNA - Mr. Kwadow Baah-Wiredu, Finance and Economic Planning Minister on Thursday said very little changes would be seen in the current situation in cocoa prices because major manufacturers had built substantial stock of cocoa powder and cocoa butter.

Presenting the 2006 budget in Parliament, he said the future trend of cocoa prices was tied to the political developments in Cote d'Ivoire, which was still the leading world producer.

He said after reaching a 22-month high of 79.72 cents per pound in March this year, cocoa prices declined on the international markets in recent months, ending at about 67.22 cents per pound last August. The slow down in prices, the Minister said, was attributed mainly to expected over production during the 2005/2006 seasons of 70,000 tonnes, compared to a deficit of 100,000 tonnes in the 2004/5 seasons.

He said a related reason for the falling prices had been the downturn in consumption of cocoa products in the United States and Western Europe.

On gold price, the Finance Minister said it rose for most of the year, reaching an 18 year high of US$478.50 per ounce on October 12 this year, an almost US$80 up on the average prices of US$400 per ounce of November 2004.

He said this is attributed to the normal response to invest in Gold as a safe haven due to the uncertainties in the Global Economic outlook for much of this year from rising oil prices and related imbalances in the major commodity markets.

Mr Baah-Wiredu said despite the uncertainties, global Gross Domestic Product (GDP) is set to grow at a rate of 4.3 per cent in 2006, which should lead to a strong rebound in world trade, with annual growth projected at 8.75 per cent.

He said GDP growth in sub-Saharan Africa had been forecasted at 5.9 per cent for 2006 from this year's figure of 5.4 per cent.

"If this is achieved, it will put the growth trend in sub-Saharan Africa back above 4.5 per cent per annum for the first time in over a decade, reinforcing the view of Africa's resurgence as an attractive investment destination," the Minister said.

He said in an increasingly dependent world, developments in the wider Global Environment over the past two years had continue to have significant impacts on the performance of Ghana's economy. Mr Baah-Wiredu said Crude oil prices had more than doubled in the last two years, due mainly to rising global demand, especially from China and the United States.

He said the major reason for the sharp rise in oil price was the shortage of refining capacity to meet the rising demand for petroleum products noting that the effects of Hurricane Katrina and similar storms on the refineries exacerbated the problem.

The forecast, the Minister said, would be an increasing demand for crude oil in the coming years, with an average annual growth rate estimated at 1.5 million barrels per day, or 1.8 per cent per annum till year 2010.

On regional developments, Mr Baah-Wiredu described as unfortunate that in the 30th year of ECOWAS, Nigeria, the strongest economic power and the largest market in the region, felt compelled to ban the importation of foreign products.

He said this affected Ghanaian producers who felt the impact of the action on their businesses and profitability for some time. However, he announced that following amicable consultations within the ECOWAS community, the ban on export of Ghanaian goods into Nigeria was lifted recently.

"We expect this development to improve the prospects and profits of the Private Sector from substantial increases in exports to Nigeria". Mr. Baah-Wiredu said ECOWAS heads of State following an assessment of progress of integration in May this year, had decided to postpone the commencement of the monetary union to December 1, 2009.

However, he said it was decided that the WAMZ programme be broadened to include the creation of a Customs Union in 2007. The Heads of States also called on members to expedite action towards cross listings of stocks and trading of currencies on regional stock markets before the end of 2005.