Ghana, Africa’s newest oil exporter, raised its budget deficit target to 5.1 percent of gross domestic product for 2011 as higher crude earnings allow the government to boost spending.
The shortfall compares with a previous target of 4.1 percent, Finance Minister Kwabena Duffuor told lawmakers in the capital, Accra, today. The fiscal gap will narrow from 6.5 percent of GDP in 2010 as oil earnings help to boost revenue.
Ghana’s economy is forecast to expand 14 percent this year, the fastest in Africa, after oil production began in December, according to the International Monetary Fund. Duffuor’s supplementary budget today boosts government spending by 1.5 billion cedis ($989 million) to help build roads, schools and modernize farm production.
“In spite of the need for more fiscal space resulting in the increase in the fiscal deficit target for 2011, government is mindful of the importance of fiscal and debt sustainability,” Duffuor said.
The revenue target was raised by 1.37 billion cedis to 12 billion cedis for this year because of higher-than-projected oil earnings, the minister said. The supplementary budget assumes an oil price of $100 a barrel, up from $70 previously, resulting in estimated crude revenue of 1.3 billion cedis, he said. Oil production is expected to reach 84,737 barrels a day.
Tullow Oil Plc, operator of the Jubilee offshore oil field, expects daily production to 120,000 barrels per day by next month or September from 80,000 barrels per day at the start of July. The Finance Ministry last year projected oil revenue of 584 million cedis for 2011. About half of that will be channeled to the state-run Ghana National Petroleum Corp.
The government has to “balance higher spending as a result of the higher revenue with their broader medium-term fiscal consolidation plans,” Razia Khan, head of Africa economic research at Standard Chartered Plc in London, said in an e-mail. “Getting that balance right, especially with elections in 2012, is going to be key.”
The cedi fell as much as 0.4 percent to 1.5225 against the dollar today, paring its gain since Feb. 1 to 2.9 percent.