Ghana plans to boost tax collection and sell local and foreign bonds to finance a widening budget deficit in one of Africa’s fastest-growing economies, Finance Minister Seth Terkper said.
“We are widening the tax net and have formulated new tax policies which will be sent to Parliament,” he said in an interview on Jan. 30 in Accra, the capital, after he was sworn in by President John Dramani Mahama. “We will also go to the bond market, both the domestic and international bond market, to get resources to implement our programs.”
Terkper, 54, was promoted from deputy minister earlier this month after Mahama won an election in December. The former tax agency official and International Monetary Fund economist faces a budget deficit that widened to 7.3 percent in the nine months to September from 1.9 percent a year earlier, according to the Bank of Ghana.
Bond sales “are going to be continued and will be enhanced in a qualitative way, but we also have in mind the deficit so we are maintaining a balance,” said Terkper.
Ghana’s fiscal gap is expected to be as much as 9 percent for the whole of 2012, Sampson Akligoh, head of research at Accra-based Databank Financial Services Ltd., said by phone on Jan. 30. The “government wage bill was over-stretched, fuel subsidy and election-related fiscal pressures” added to spending, Akligoh said.
The Finance Ministry raised its deficit projection for 2012 to 6.7 percent in July. A spending plan approved by lawmakers for the first quarter of 2013 put the gap at 1.2 percent. The 2013 budget will be presented to Parliament at the end of February or early March, Terkper said.
“We have to run programs that will fit into our status as a middle-income country,” he said. “This means we have to find new ways of collecting taxes and monitoring our projects to avoid wastage.”
Ghana’s $39 billion economy was designated as lower middle-income by the World Bank in 2009 after it revised measurement of output. Growth is forecast at 7.8 percent this year, faster than the sub-Saharan African outlook of about 5.3 percent, according to the International Monetary Fund.
Last month, Terkper said Ghana may sell an additional $750 million of debt to refinance its Eurobond, due in October 2017. The yield on the debt fell for the first time in eight days, dropping 4.5 basis points to 4.63 percent 1:42 p.m. in Accra, according to data compiled by Bloomberg. A basis point equals 0.01 percentage point.
In 2012, Ghana’s central bank began selling more domestic debt to remove excess currency from the market and support the cedi, which weakened 14 percent against the dollar in the first half of the year.
The action helped halt the slide and the cedi eased 0.6 percent in the second half. The currency gained less than 0.1 percent to 1.9025 per dollar. It has risen 0.1 percent this year.