that this year marks the 100th birthday anniversary of Dr. Kwame Nkrumah, an illustrious founder of our nation. His Excellency the President mentioned that this anniversary would be commemorated as an African event in an appropriate and fitting manner. Arrangements are far advanced for this activity.
Non-development capital expenditure:
As a contingency measure to ensure that the budget deficit target of 9.4 percent of GDP is achieved, Government has instituted expenditure reduction measures in domestic-financed capital expenditure by GH¢45 million. This reduction will mainly affect non-developmental capital expenditures, including the purchase of official vehicles and office equipment such as furniture and air conditioners.
Mr. Speaker, you may recall that we received an amount of US$535 million from the World Bank for budget support (US$300 million), transport sector support (US$225 million), and Natural Resource and Environmental Governance Support (US$10 million). Out of the budget support which this House approved from the World Bank, we have US$300 million and we expect to have the other 150 million very soon.
As a result of the additional budget support from the World Bank, the net domestic financing of the budget has been reduced to GH¢1,032.8 million, while programme loans have increased to GH¢611.7 million.
Mr. Speaker, we successfully negotiated
a three-year loan from the International Monetary Fund (IMF) to the tune of US$602 million for balance of payments support. This is expected to increase the foreign exchange reserves of the Bank of Ghana. The G-20 decision is to increase the IMF's Special Drawing Rights (SDR) allocation by US$250 billion to member countries. It is expected that Ghana will receive US$ 425 million before the end of 2009 without any conditionalities. It is not a loan, it is a grant.
Mr. Speaker, I would like to say that the contagion effects of the global financial crisis pose a threat to Ghana's economy through a possible demand for our products. As a result, real economic growth may slow down a bit. We will therefore continue to maintain prudent and flexible macroeconomic policy management in order to adjust to the global crisis and achieve the growth target for the year.
It is projected that inflation will fall to 14.5 per cent by the end of the year given the ongoing fiscal consolidation, slow down in the pace of monetary expansion, increased stabilization in the value of the cedi and the expected good harvest season this year.
Mr. Speaker, the Bank of Ghana has begun to accumulate significant stock of foreign exchange reserves, to provide a buffer for our balance of payments. Expected cocoa-related inflows and disbursements from our development partners will contribute to sustain the level of reserves for the rest of the year.
The liquidation of the stock of arrears and commitments that have been identified, could pose a challenge to the attainment of our fiscal objectives. We are however, determined to pursue policies
that will help to sustain aggregate demand in the economy without jeopardizing fiscal sustainability, the control of inflation, and external stability.
SECTION 8: CONCLUSION
Mr. Speaker, I would like to say that the economic challenges that the NDC Government faced when we took over the administration of the country was to deal with the imbalances in the economy to restore macro-stability and fiscal sustainability. The 2009 Budget therefore sought to gradually adjust and conso-lidate public spending to reduce the pressures on inflation, and spending to reduce the exchange rate volatility and the balance of payments. This, we believe, was necessary to pave the way for a sustainable economic growth, job creation, and improvement in the livelihood of the citizens for a better Ghana.
Mr. Speaker, the record in the first half of the year points to significant successes in a number of areas:
we have managed to achieve the budget deficit at 4.5 per cent of the projected GDP;
the inflation pressures built up in late 2008 have reduced significantly and the rate has stabilised in recent months, and the inflation rate even started dropping in July;
the rate of depreciation of the cedi is down significantly, and there is imminent convergence of the interbank rate and forex bureau market exchange rates; We are achieving this stability.
there has been a sharp drop in the trade deficit causing the current
account to register a surplus in many years;
by end June this year, the gross which came down in March as a result of the pressure on the bonds floated in 2007, we have come up again and we have almost met the two month's imports.
we have also successfully managed to secure respective budgetary, project and balance of payments support from our development partners over the past 6 months or so and I am glad to say that -
confidence and stability in the economy is rapidly being restored due to the positive impact of the government's fiscal and macro policies being implemented.
Mr. Speaker, the continuation of the fiscal adjustment and consolidation in the second half of the year is imperative in propelling the economy onto a sustainable growth trajectory. We need to do this to ensure that we have a robust economy in place before the oil revenues are generated. With a solid macro-economic foundation, and a careful management of the expectations of the oil economy, we will succeed in laying a firm basis for accelerated and shared growth for a better Ghana.
Mr. Speaker, I hereby request the Honourable House to approve the supplementa ry es t imates o f GH¢252.790,947 in compliance with article 179 (8) of the Constitution of the Republic of Ghana and Standing Order 143 of this House.
Mr. Speaker, the Appropriation Bill covering this Supplementary Estimates will be submitted to this august House in conformity with article 179 (9) of the