Ghana’s government said it will use revenue from oil production to slash the budget gap by more than two-thirds by 2013, after missing the deficit target in its first two years in office.
The fiscal shortfall will narrow to 7.5 percent of gross domestic product next year, 4.7 percent in 2012 and 3 percent in 2013, according to a budget statement given to parliament today by Finance Minister Kwabena Duffuor. The deficit was about 9.7 percent of GDP this year, compared with the 7.5 percent target.
The West African country will become Africa’s latest oil exporter next month when it starts pumping from its Jubilee field, raising about 584 million cedis ($405 million) in fiscal revenue. At least 30 percent of that will be saved, according to a proposed oil law being debated by lawmakers. Oil output will help lift economic growth to 12.3 percent in 2011, Duffuor said.
“The new budget is sensible and realistic,” said Lisa Lewin, head of sub-Saharan Africa analysis at Business Monitor International. “Importantly, the projections of oil revenues look feasible and there is no expectation that this new revenue stream will be a silver bullet for the fiscal accounts.”
Government expenditures will rise 15 percent to 12.7 billion cedis next year, as income increases 19 percent to 10.6 billion cedis, Duffuor said.
The deficit forecasts as a percentage of GDP are based on calculations made before the statistics agency revised up the size of the economy by 75 percent last week. Given that revision, the fiscal deficits will be significantly smaller than those reported today.
The Jubilee field will initially produce about 50,000 barrels of oil a day, increasing to 120,000 barrels a day over the next three to six months, according to Tullow Oil Plc, the field’s operator.
Duffuor said the government will increase revenue by raising taxes on a number of goods and services including airline flights, plastic packaging, gasoline and cigarettes.
The government will also consider raising cash by transferring its shares in South African mining giant AngloGold Ashanti Ltd. and royalties from other gold miners to a new government-owned company that can sell bonds or issue stock, Duffuor said. Ghana is Africa’s second-largest gold producer.
Much of the new money will be spent on roads, railways and a salary increase for government workers, according to the budget.
Ghana, the world’s second-largest producer of cocoa after Ivory Coast, will also seek to boost output by spending 104.4 million cedis to combat disease and pests on cocoa farms, the finance minister said. The country produced 630,000 tons of cocoa in the 2009-2010 season, short of a government target of 700,000 tons.