Mr Yaw Osafo-Maafo, Minister of Finance, on Thursday said Ghana's economy showed an overall growth rate of 4.5 per cent as set for the year.

Presenting the government's financial statement for 2003 to Parliament in Accra, Mr Osafo-Maafo said provisional figures for fiscal year 2002 compares with the real GDP growth of 4.2 per cent achieved in 2001.

"This was accounted for by the strong out-turn in production of crops and livestock. The estimates indicate an expansion of 4.4 per cent in output for the broad agricultural sector, compared to the 4.0 per cent growth rate in 2001.

The Minister said the industrial sector output grew at 4.7 per cent compared to the 2.9 per cent recorded in 2001 fiscal year.

The Services sector which, had hitherto been a high performer, showed a lower growth rate of 4.7 per cent compared to the 5.1 per cent level posted in 2001.

On the macroeconomic front, Mr Osafo-Maafo said against a background of strong efforts in 2001 to stabilise the economy from the effects of its poor performance in 2000, the 2002 budget consolidated the gains of 2001 and achieved a continued reduction in inflation while strengthening economic growth.

The 2002 budget sought to strengthen Ghana's tax base, allocate resources (including HIPC relief) toward priority areas identified in the GPRS and reduce domestic debt burden.

He said government improved public expenditure management to ensure that the 2002 budget was implemented as envisaged.

"Notable progress was made in 2002 on a number of fronts, he said, adding that, "domestic revenue mobilisation was quite robust on the account of enhanced tax administration."

"In spite of larger-than-anticipated payments relating to wages and salaries, the overall expenditure ceiling was respected, keeping within the Appropriations Act."

Mr Osafo-maafo said year-on-year inflation which had been cut by about half in 2001 to 21.3 per cent, continued to fall to 15.2 per cent at the end of 2002 and the Bank of Ghana strengthened its gross international reserve position from the equivalent of 1.5 months of import cover at end-2001 to two months of imports at the end of 2002.

The Finance Mininster said considerable progress was made on the programme to modernise the legal framework for Ghana's financial sector.

"The divestiture process also began to move forward in late 2002, with the offer for sale of 40 per cent of the Government's shares in the Cocoa Processing Company (CPC), and substantial completion of the preparatory work for the sale of other 'targeted' assets."

He said government experienced several challenges in the management of the economy in the year under review including higher-than-expected expenditures on wages and salaries; accelerated payments of arrears relating to both non-statutory and statutory payments and higher-than-anticipated subsidies to utility companies.

Government also encountered higher expenditures to safeguard security in some sections of the country and substantial shortfalls in expected foreign inflows.

"The net effect of these challenges was a higher amount of government borrowing from domestic sources than was anticipated. "

In spite of these challenges, Mr Osafo-Maafo said, government was able to maintain reasonable level of macroeconomic stability.