This will immediately increase the national generation capacity from the current 2,000 megawatts and position the national vision of 5,000 megawatts by 2015 in reach.

The combined cycle gas turbine power plant by name – Kpone Independent Power Project, will be the largest privately owned power plant facility in Ghana. It is located in Tema, adjacent to the West African Gas Pipeline landing point and located some 600 meters from the Atlantic Ocean, enabling the use of sea water for direct cooling.

The plant will make use of gas from West African gas pipeline, which has began flowing as well as from the Jubilee field, once pumping begins.

The US$450 million project is being financed by 30 percent equity and 70 percent debt. The agreement signed on Monday between AFC, Cenpower and a special project development company called Infraco had AFC acquiring 46 percent stake, Cenpower 30 percent stake and the rest acquired by Infraco and other smaller stake strategic partners.

AFC is also the debt finance arranger, which will be provided by a consortium of private sector local and international commercial banks, development finance institutions, institutional and export credit agencies.

The project falls in line with the Least-Cost Power Generation Expansion Plan for Ghana. Part of its objectives is to promote increased use of indigenous resources for electricity supply, and private sector investment in the development of new production capacity.

As a pan African finance institution owned by governments and private Africans, AFC sees the landmark investment as a forward match on its mission to developing bankable power projects in order to address Africa’s critical infrastructural gap.

“We decided to be part of this project because as per the mission set for AFC, we saw that the project would help ease the power deficit in Ghana, reduce the cost of electricity from self generation, both to individuals and industrial consumers alike, and more broadly to assist and support the Government of Ghana realize its vision to accelerate economic development.

 “As a pan-African financing institution, with a focus on financing infrastructure, industry and financial assets in the continent, AFC is committed to helping Africa bridge the power infrastructure gap and address the commercial imperative necessary for the development of its industrial and infrastructural assets, to drive economic growth,” Andrew Alli, CEO of AFC said  at the signing ceremony.

He was excited about their engagement in Ghana so far, as the Kpone Independent Power Project becomes AFC’s third. AFC previously was the lead investor in the US$240 million African led submarine Main-One Fibre Optic Cable System, which will provide much needed telecommunications capacity in West Africa with a scheduled landing in Ghana in April, 2010. AFC is  also the main African participant in the seven-year US$750 million syndicated reserved base lending facility, to develop the landmark Jubilee Oil Field, which at the moment is West Africa’s largest offshore deepwater find in over a decade.

Chairman of Cenpower, Mr. Samuel N. Brew-Butler was glad AFC came on board, stating: “AFC is just like the World Bank and its private sector arm the IFC. But this is Africa led.”

“The power plant will make a significant improvement in power generation in Ghana when it comes on line. We are enthused to work alongside our dedicated partners in furthering this initiative. What Cenpower hopes to achieve is to be the cheapest sources of electricity in the whole country,” he said.

In his comment, Mr. Keith Palmer, Chairman of Infraco noted that the agreement is an important contribution to accelerating urgently needed power supply in Ghana, adding: “we we are pleased it will provide competitively priced electricity for the lowest income consumers in the country.”

Director of Power of the Ministry of Energy, Mr. Gabriel Quain who represented the Minister of Energy said the project is a major milestone on Ghana’s journey to power sufficiency and affordability.

“The power reforms recognize the importance of the private sector in achieving the national vision. Part of the vision is to produce in excess so that the nation can become a comfortable exporter to other West African countries,” he added.

The forecast performance would represent a marked turnaround for the local currency, having depreciated consistently against these trading partners over the past many years.

It should be good news for exporters, and people who want inflation checked, like bank borrowers. It also brings real insurance to foreign investors’ profiting, in all sectors of the economy.

Tracing over the last five years, the cedi depreciated against the US dollar by 0.6% in 2005; by 1.3% in 2006 and by 4.1% in 2007. The depreciation rate galloped, amid the global financial and economic crunch, and unmatched electioneering spending in 2008 to 20.9%, and just slipped slightly to a depreciation rate of 15.9% in 2009.

The story was similar in the case of the euro and the pound sterling over the period.

Just as in 2008, the depreciation in 2009 was caused by the heat of inflation and food crisis which saw inflation rise consecutively every month, reaching 20.7% peak in June 2009.

According to a Ghana Economy Report, released by Databank last week, the average cedi-dollar exchange rate which deteriorated the whole of last year and into the beginning of this year is expected to stabilize around GHC1.4120 per dollar in 2010.

The average cedi-dollar exchange rate was GHC0.9599 per dollar in 2007, the year the cedi was redenominated.  The average exchange rate deteriorated to GHC1.2134 per dollar in 2008 and further to GHC1.430 per dollar in 2009.

While these developments in the exchange rate is expected to provide the platform for the attraction of long-term foreign portfolio investment for the country, the Researchers warned that currency managers must watch to ensure  that the expected oil revenue the country is bound to make does not lead to over valuation of the local currency.

 “Characteristically, the major threat of the oil sector to the structure of the economy will be to effect a change in the currency dynamics in a way that will hurt the country’s traditional exports,” the Researchers observed.

In a jurisdiction where the local currency is overvalued, exports of the economy may suffer, as they become dearer to importing countries. Where the export products are not competitive enough, the local economy stands to lose export revenue caused by falling volumes.

The Economic Researchers said crude oil production is likely to result in significant structural changes for Ghana over the medium to long term. They estimate that the oil revenue inflows will account for close to 15% of total government revenue by 2015.

“After 2010, we expect gross domestic product growth (GDP) to increase above 8.0% mainly on the back of commercial production of crude oil. The revenue from the oil and gas sector is likely to hasten infrastructural projects which are critical for the development of the services and the industrial sectors.

“In our view, Ghana’s relatively small (but efficient) private sector could expand significantly on the back of the oil and gas industry. Our average GDP growth forecast for the next five years to 2015 is within the range of 9.5% and 10.5%,” the Ghana Economic Report says.

The Economic Researchers were optimistic that oil production could also improve the present fiscal situation of government. They observed that domestic tax revenue at present accounts for over half the total planned expenditure of government with an estimated 52% of tax revenue spent on financing public sector wage bill. With the projected annual average oil revenue inflow of US$1.0 billion between 2011 and 2012 (and projection of US$3.0 billion by 2015), the Researchers said fiscal space will likely improve over the medium term.

During the week-long offer for the first issue which closed on January 14, 2010, the offer of GHË200 million was oversubscribed by 97.7 percent for which GHË310.89 million was allotted, representing 55.4 percent more than the target.

The overwhelming response coupled with the interest expressed by foreign investors in the first issue, the Treasury Department of the Bank of Ghana (BoG) observed that investor confidence was being restored in the economy, especially in comparison to a year earlier.

On this second issue, the Treasury Department has said that investor confidence is paving the way for liquidity in the bonds market.

The offer which was issued to yield 14.97 percent attracted bids, ranging between 12% and 19%, from both local and foreign subscribers. For the relatively low bids received, officials of the Treasury Department explained that it was an indication of the much more liquid bonds market now, as compared to last year.

“Because we received so many bids, someone who bided too high was not likely to be honored. The market is now liquid. It is not like last year that it was hard to get enough for government,” officials of the Treasury Department told the B&FT.

High inflation and depreciating local currency diminished investors’ interest in the economy last year of which the bonds market was no exception. The market therefore lacked competition, which was needed to beat yields downwards and contribute to reducing the perceived risk profile of bank borrowers.

In the latest auction results, the yield distribution has assumed normal shape, first time in more than two years, corroborating that macroeconomic stability is taking root while liquidity, a very rare situation in Ghana’s financial markets is beginning to deepen.

The current yield on the 91-day Treasury bill stands at 15.44%, the 182-day bill is at 16.19%, one-year note is at 16.50% while the two-year fixed rate note stands at 17.50%.

Normally distributed yields quote lower interest rates on shorter-term dated securities and higher interest rates on longer-term dated securities.

Earlier than now, the yield distribution was not only contra-normal but the interest rates were also higher, causing many of the banks to slow down on lending to the public while increasing provision for bad and doubtful debts.  Just at the beginning of the year, yield on the 91-day bill stood at 20.64%, the 182-day bill 23.29%, the one-year note 20.0% while the 2-year fixed note stood at 22.0%.

Compared to a year ago, the yield quotations were 25.49% on the 91-day bill, 27.29% on the 182-day bill, 20.0% on the one-year note and 21.0% on the two-year fixed note.

The Treasury Department pointed out that one of the factors contributing to the normalizing yield on the government securities is the rising interest of investors in the long-term dated securities as against the short-term dated securities; an indication of investors’ confidence in the future prospects of the economy.

The short-dated securities (91-day treasury bill and 182-day bill) in the outstanding stock of Government securities fell to 56.7 per cent in January 2010 after rising consistently and peaking at 66.2 per cent in August 2009. Long-term dated securities (one-year and above) therefore rose to 43.3 percent share in January 2010.

Commenting on the yield curve, Economic Analyst of Databank, Mr. Sampson Akligoh said the stability of the cedi is playing a key role in stabilizing inflation, especially food inflation and interest rates on the market. “The cedi as at December 2009 had recorded depreciations of 14.8 percent, 22.4 percent and 16.2 percent against the US dollar, the pound sterling and the euro respectively. By the end of January 2010, the year-on-year depreciation had slowed down to 10.2 percent, 20.7 percent and 15.6 percent against the US dollar, the pound sterling and the euro respectively,” he pointed out.

He welcomed the second issue of the three-year fixed rate bond, saying it would help to lengthen the debt profile of government.

“This way, it creates a benchmark for the private sector to want to lend long-term,” he explained, adding: “commercial banks would be in the position to lend at lower rates as cost of funding for banks comes down.”

Banks’ lending rates now range between 26 and 45 percent, which the market considers as too high and the banks have blamed it on the high risk profile of short-term government debt.

Government’s total domestic borrowing as of end December 2009 was provisionally estimated at GH¢6.0 billion (US$4.2 billion), equivalent to 28.1% of gross domestic product (GDP). Combined with foreign debt, total provisional public debt stood at GH¢13.16 billion (US$9.2 billion), equivalent to 51.7% of GDP at the end of 2009.

As of now, all Government of Ghana securities,  Bank of Ghana bills and cocoa bills issued on the primary market can be stored electronically in the CSD. The CSD, however, has no online secondary trading  platform where investors could buy or sell these instruments.

Because of this lack on the part of the CSD, the bonds market at the moment makes use of the platform created by the Ghana Stock Exchange (GSE) to do secondary trading of both corporate and government bonds.

Since it was activated last year, the CSD as a computer-based data recording system, records the holdings of all securities in electronic form.

Physical certificates of investors are converted to an equivalent number of securities in electronic form and credited into investors’ account held with their depository participant (stock broker or investment advisory firm).

The secondary trading platform, when it begins would be used to trade the government bonds and the  Bank of Ghana bills.

Mr. Andoh noted that the platform would hasten the path towards the development of the bonds market in Ghana, just as it is done in developed markets.

“Government securities serve as a benchmark for the issue of corporate bonds. Both are needed to increase market activity in bonds. The market as we have it in Ghana is not deep basically because of the low activity.

“That is why government is making efforts to make more issues in a way that lengthen the yield curve, and to set up the secondary trading platform to promote and facilitate trade in bonds,” Mr. Andoh said.

Currently, only one government security is listed on the GSE – that is the Government of Ghana two-year fixed rate note. The three-year fixed rate note which was recently issued will also go on the market once compilation of issue results are completed.

The farmers said that the present provision in the Act of  “fair and adequate compensation,” is ambiguous, which gives room to the mining companies to cheat them, causing the everyday uprising   between communities and mining companies over compensations payments.

They made these statements during the first strategy meeting of the National Coalition on Mining  (NCOM), held in Accra on January 20, 2009.

With regard to resettlement of families and communities located within mining concessions, the farmers suggested that government should take over the role from mining companies by building new settlements for the people and communities affected while the mining companies are made to pay for them.

The farmers said this will help solve the problems where mining companies fail to provide proper resettlement facilities and sometimes opt to move people to locations where the people cannot have access to livelihood supporting activities such as farming.

“These issues are very serious for us because they have to do with our daily bread and weaning our families. The  alternative livelihoods the mining companies provide are never adequate to make-up for what we lose and the prospects are really low in comparison to the farming activities we do with our lands,”  the farmers decried.

Narrating  some ordeals they currently suffer under the hands of Newmont, a US mining company mining concessions within their communities, the farmers complained of air pollution caused by dust from the mines, waste water flowing from the mines to the communities and breeding mosquitoes from dams belonging to the mines.

Though two committees have been put in place, involving members of the community, one to decide on compensations and the other to negotiate resettlement whenever the need arises, the farmers  said Newmont has been manipulating the members so that all decisions taken turn out in its favour.

“For one matured cocoa tree,  Newmont pays less than GHË20 to farmers which compares with GHË40 paid by Bogoso Mines as far back as 2006,” they cited.

In a statement, Steve Donkor of Friends of Teleku-Dokazo, members of NCOM urged government to implement quickly its proposal in the 2010 budget to impose  the upper limit royalty tax of 6.0 percent instead of the lower limit of 3.0 percent that used to apply.

He welcomes such amendments to the Mineral and Mining Act  that will prevent surface  mining in forest reserves, empower Environmental Protection Agency (EPA) to regulate corporate practice in mining, enhance citizen’s participation in mining, protect community rights and remove stability provisions.

Called the Grid Code, it establishes requirements, procedures, practices and standards that govern the development, operation maintenance and use of high voltage transmission systems in the country.

Some of the power producers that would directly make use of the code are Volta River Authority, Tema 1 Plant, Tema 2 Plant, the Aboadze Thermal Plant, Tico and independent power producers like the Asogli Plant.

Dr. Ofosu Ahenkorah, Executive Secretary of the Energy Commission explained during the launch of the Code in Accra on Jnuary 21, 2009 that the code will see to it that the national interconnected transmission system (NITS) of high voltage electricity is maximised for the benefit of the nation.

He said its introduction is based on the provisions of section 24, 27  and 28 of the Energy   Commission Act 1997 (Act 541) that work together to ensure the coordinated operation of the NITS and empowers the Energy Commission to sanction any power producer that falls short of the requirements of the Code at anytime.

A Technical Director of Energy Commission, Mr. Francis Gbeddy indicated that the Grid Code though developed for power producers, holds benefits for power distributors as well such as the Electricity Company of Ghana (ECG).

“What is going to happen is that power producers can no longer continue to sell their inefficiencies to the ECG. This is because the Grid Code offers a benchmark against which ECG can measure efficient or inefficient power producers.

“ECG therefore would have options as to who to buy power from or not,”  he noted

Combined power loss during distribution in ECG’s system  currently stands around 25 percent against the tolerable rate of nine percent. Part of it is contributed from power producers who fail to upgrade equipment and transmission systems to required standards.

Mr. Gbeddy made known that the Energy Commission is supporting the ECG to reduce such losses to 18 percent by 2012.

Member of the Board  of the Energy Commission, Dr. Francis Bawana Dakura who is also Member of Parliament for Jirapa Constituency said this maiden version of the Grid Code will be subjected to test over the next 12 months during which comments would be welcome on its performance.

“At the end of the test period, an assessment would be made based on the comments and review proposals received from stakeholders and experts in the field.

“Review proposals should therefore be presented in the manner and procedure stipulated in clauses 5.24 to 5.3 of the National Electricity Grid Code,” He added.

The Head of Treasury at the Bank of Ghana (BoG), Mr. Francis Kwabena  Andoh who made this known in an interview with the B&FT said the overwhelming response was an indication of the gradual restoration of investor confidence, both domestic and foreigners in the local economy compared to  a year ago.

He said bid quotations received ranged between 15 and 28 percent, before drawing down to the 19 percent.

He disclosed that foreigners took the chunk of the offer, but could not state by how much since data is still being collated on that aspect of the issue.

The bond is to be listed on the Ghana Stock Exchange (GSE) for secondary trading which will bring to two the number of government securities trading on the market, the other being the 2-year Government of Ghana note.

The last time government issued a 3-year note was about one and a half year ago. Mr. Andoh said the re-introduction forms part of efforts to creating a benchmark for the Ghanaian bonds market which has been militated against by an unfavourable macroeconomic environment.

“Looking ahead into the medium-term, macroeconomic indicators point  in the favourable direction and that is why we think it is the right time to bring it back.

“As of now the yield distribution is not normal but we expect it to normalize getting to the end of the first quarter,” Mr. Andoh said.

Yield on the 91-day bill currently stands at 18.64 percent, the 182-day bill is 20.36 percent, the one-year note is going for 19.00 percent while the 2-year fixed note is going for 20.0 percent.

Normally distributed yields would see lower rates quoted on shorter-term dated instruments and higher rates quoted on the longer-term dated instruments.

The yield on the 91-day instrument is therefore expected to fall further while that of the 182-day bill falls to levels below what is quoted on the 1-year note as the yield distribution nears normal.

Mr. Andoh hinted of possible additional issues of the 3-year note every quarter, and a 5-year bond in June this year.

“The idea is to restructure government debt profile and reduce roll-over costs from continual issues of government bonds,” he explained.

Mr. Andoh who was confident about interest rates falling drastically in the year, dismissed any possibilities of government borrowing throwing the favourable expectations out of place.

“It is excessive government borrowing, that is borrowing not tied to the national budget that disturbs macroeconomic indicators. Borrowing that is tied to the budget does not cause harm.

“That aside, inflation expectations are on the low side. BoG forecasts an average inflation of 10.5 percent for the year and an end period target of about 9.2 period. Looking at the level of commitment from government seen last year in staying within expenditure limits, all things being equal we should have a very comfortable year,” he pointed out.

Mr. Amissah-Arthur was said to have visited the Bank on several occasions where he met both staff and leadership, since his nomination by the President to take over the reins of affairs at the Bank.

 Being due to assume office from the beginning of October,  Mr. Amissah-Arthur was called to participate in the September  Monetary Policy Committee (MPC) meeting , a gruelling meeting he would be Chairing from now onwards.

Intermingling with other members of the Committee and staff of the Bank, one would notice Mr. Amissah-Arthur as someone who is already used to the way things go at the Bank.

“I introduce to you Mr. Amissah-Arthur who will be chairing the next Monetary Policy Committee press briefing,” Dr. Acquah simply told the media that were waiting to hear the outcome of the meeting, in a demeanour that he probably forgot  that the media were not used to Mr. Amissah-Arthur like he was.

Even though he would not make any comment to the effect of  a major shift in policy or administration at the Bank owing to his assumption of office, Mr. Amissah-Arthur seemed to be on top of current issues of concern.

Commenting on the TOR debt which Ecobank is leading a syndication to raise US$300 million to clear half of the debt, he noted that the intention is to enable Ghana Commercial Bank, the lender of the debt to have free room to give out more credit.

  “The debt has not only disabled GCB from giving credit for crude oil imports but also blocked the avenue for GCB to lend more money to  businesses and individuals,” he explained.

Asked what would be happening to the other half of the debt, “it is step by step,” he  said.

The assessment among media practitioners that have had access to interacting and sharing information with him is that nothing aggressive should be expected   when he begins his reins.

Mr. Amissah-Arthur is generally expected to take-off on a normal note; no major reform  to the MPC process, the minimum capital requirement for banks, nor the spread between lending and borrowing rates.

What he cannot run away from, however,  is the stand on inflation because the market wants a more aggressive stand.

Dr. Acquah was the brain behind the setting of the Monetary Policy Committee for the Central Bank in 2002, a framework which  asserted the independence of the Central Bank in making monetary policy.

 The framework operates an inflation-targeting framework, making use of the prime rate as the main policy tool. The MPC thus meets every two months to decide on what should be the prime rate, but the market is not satisfied in that the framework has not been able to bring inflation down to low range.

Once the prime rate is fixed, it is expected that lending rates, borrowing rates, exchange rates as well as inflation would respond for the objective in fixing the rate to be realized.

Dr. Acquah is leaving office with the prime rate pegged at 18.5 percent in September, a five-year high and headline inflation at 19.7 percent for August 2009.

The decision of the Monetary Policy Committee (MPC) of the Bank of Ghana reflects a general assessment by central banks in the region that further downward pressure on inflation is needed even as the year draws to a close.

While the Monetary Policy Committee (MPC) was deciding, three African central banks also kept interest rates on hold. Kenya’s central bank, which has cut four times since December, left its key lending rate unchanged at 7.75 percent last week Wednesday. It said headline inflation was a concern and that growth in the East Africa’s biggest economy should pick up for the year.

Although inflation in Mauritius has nearly halved in nine months to 5.2 percent in August, its central bank cited improved prospects for exports and therefore froze the cost of borrowing at 5.75 percent last Tuesday.

Similarly, South Africa’s Reserve Bank had been under some pressure to cut rates to curb the soaring rand and stimulate consumer spending, but it left the rate unchanged at 7.0 percent last Tuesday  saying  inflation still was outside a target range of 3-6 percent.

Addressing the media briefing in Accra last week, out-going Governor and Chairman of the MPC, Dr. Paul Acquah said maintaining the prime rate was necessary to keep the balance for growth and general price levels.

Even though headline inflation fell consecutively from 20.7 percent in June to 20.5 percent and 19.7 percent in July and August respectively, the Governor explained that the risks in the outlook relate to the speed with which oil prices might rebound, with recovery of global demand from the financial and economic crisis.

“Also, while fiscal consolidation is taking place, shortfalls in revenue and donor disbursements and payments of domestic arrears have meant that some payments in the pipeline would have to be settled that could add some stimulus to the economy,” he added.

Interest rates remained broadly stable in the third quarter. The benchmark 91-day Treasury bill rate firmed up marginally by 0.05 percentage point to 25.89 percent at the end of August compared with an increase of 0.35 percentage point in June.

Average base rate quotations of the banks were revised marginally upward by 0.37 percentage point between June and August to the range 25.8 percent and 32 percent, compared with increases of 1.6 percentage points in the second quarter and 1.7 percentage points in the first quarter.

Average lending rates remained unchanged at the second quarter level of 32.8 percent and were in the range 25.8 and 40 percent.

Between January and August 2009, the cedi depreciated, cumulatively, by 16.7 percent against the dollar, 24.7 percent against the Pound Sterling, and 17.5 percent against the Euro. In year-on-year terms, the comparative depreciations were 12.9, 5.4 and 12.5 percents respectively.

The depreciation however, slowed down after the first half of the year and the cedi actually appreciated by 1.7 and 0.5 percent against the US dollar and the pound sterling respectively in August.

The cedi’s turnaround was supported by appreciable increase in gross international reserves  in September 2009, standing at US$2.27 billion enough to cover 2.2 months of imports of goods and services, from US$1.77 billion in August  2009.

Dr. Acquah noted latest surveys point to a more positive assessment of the general macroeconomic outlook for the Ghanaian economy as well as a rebound in both business and consumer confidence.

The Bank of Ghana’s Composite Index of Economic Activity (CIEA) which had pulled back in the first quarter, increased by 1.4 percent in the three months to July after remaining flat in the preceding quarter.

Benchmark retail sales similarly showed an increase of 10.3 percent for the first seven months over same period of 2008.

Another indicator was energy supplied by Volta River Authority (VRA) over the period under review, which rose 10.5 percent to 5.25 million megawatt hours with supply to mines and industry (excluding VALCO) on an upward trend.

The developments, according to Dr. Acquah, show that output growth is much closer to the trend rate of some 6.0 percent, down from 7.3 percent in 2008.

He said if government  is deemed to be pursuing an austere budget, the reason is government is mindful of the implications of its spending activities for general credit conditions, where the government does not want to crowd out the private sector.

“The issue is that there are more arrears to be funded.  Some say government is not spending but government is actually spending above target,”

“Remember the government is not an anti-growth government. It is the same government that launched the structural adjustment programmes (in early 1980) that lifted the economy from negative growth and placed it on the path of positive growth ever since,” The Deputy Minister was speaking at a 2010 pre-budget forum of the PricewaterhouseCoopers in Accra last week Thursday.

The public’s criticism of government’s spending programme for the year and its decision to sign onto International Monetary Fund (IMF) bailout programme, heightened, when the Minister of Finance and Economic Planning, Dr. Kwabena Duffuor presented  a supplementary budget to parliament, seeking to raise GHC253 million just to meet expenditure arrears left unpaid by the previous administration.

The supplementary budget did not make mention of any additional project or programme to execute that would induce growth. This omission was deemed by segments of the public largely as part of the IMF policy prescriptions aimed at stabilization.

Three weeks ago, the Bank of Ghana also confirmed that government had sought assistance from the Bank to raise GHC1.5 million over a period “to augment its fiscal resource base so as to meet outstanding arrears that accumulated in 2008 and were not known at the time of preparing the 2009 budget.”

Mr.   Tekpeh, therefore, pointed out that the decision to go to the IMF for balance of payment support ought to be put in perspective, in that, if government were to address  the balance of payment problem from its own domain, it was going to come at some sacrifices such as growth inducing projecsts.

“Do not forget we inherited a budget deficit of 24.2 percent and current account deficit of 20 percent.  IMF lending comes  at zero percent  interest rate, over 25 years repayment term and five years grace period.

“Those who say the budget is an austere budget, is it really tighter than what the IMF would demand under normal circumstances” The Deputy Minister asked.

Government’s overall budget programme for the year targets an end period deficit of 9.4 percent of gross domestic product (GDP). Even though end period inflation target was reviewed from 12.5 percent to 14.5 percent in the supplementary budget, the budget deficit target was maintained.

In the latest report of the Monetary Policy Committee of the Bank of Ghana, released last week, overall budget operations for the first eight months of the year resulted in a deficit of GHC901.55 million, the equivalent of 4.2 percent of GDP. This compared with GHC1.43 billion, the equivalent of 8.8 percent of GDP recorded for the same period in 2008.

According to the Governor, Dr. Paul Acquah, the deficit was mostly financed on the domestic money market. He noted also that developments show that output growth is much closer  to trend rate  of six percent  from 7.3 percent in 2008.